Advertising Agencies
SIC 7311
NAICS 541810
Advertising agencies produce promotional campaigns and individual advertisements in all media, including print, broadcast, and the Internet. Besides creative work (written copy, artwork, graphics, and Web design), they have expanded their services to include public relations, marketing strategy, and interactive (Internet-based) advertising and market research.
After suffering what ADWEEK dubbed "one of the worst industry downturns ever" during the early 2000s, the advertising industry began to stabilize in 2003 along with the rest of the U.S. economy. In addition to the aftermath of the September 11 terrorist attacks, the global industry weathered other storms, including the U.S.-led war with Iraq and outbreaks of severe acute respiratory syndrome (SARS), and was looking forward to better times. Revenue results from 2004 showed that the industry was continuing on its upward trend, although few agencies had yet to reach pre-2001 levels. Forecasts for the industry's performance were positive. Growth was expected to be steady and measured, with Asia being the region where most growth was expected, particularly in China.
During the early 2000s, cost-conscious advertisers began focusing on more-targeted advertising approaches, including customer relationship management (CRM), to ensure more of a return on their advertising dollar. CRM is a process that attempts to bring together many fragments of information about customers, sales, marketing effectiveness, responsiveness and market trends to help businesses use technology and human resources to gain insight into the behavior of customers and the value of those customers. Buying decisions have become more influenced by the availability of purchase-related information and major purchases, such as automobiles, can be carried out interactively, over the Web. As a result, the specifics of customer wants and needs became key to the industry. The era of tailored customer engagements had begun.
In an attempt to compensate for a dearth of new accounts and worldwide cutbacks by advertisers during the early 2000s, new technologies and outlets were used. New business models such as program repurposing, the use of multiple media platforms and the emergence of interactive TV began to reshape the focus of advertising. Broad-based mass marketing was replaced by more highly focused campaigns designed to target specific consumers. New technological developments allowed advertisers to use e-mail alerts to market directly to pre-selected audiences. By gathering specific data about the particular interests and buying habits of segments of the consumer population and then directing pitches to them, advertisers began to shift from a shotgun approach to a narrower, and supposedly more efficient, strategy.
More demands were made on advertising agencies with the introduction of digital video recorders that gave viewers the ability to fast-forward through television commercials at will. Unlike VCRs, digital recorders store programs on a hard drive instead of a videotape. Initially, analysts projected that such devices would doom television advertising. In some instances, however, such as the Super Bowl of 2002, TiVo, the leading maker of digital video recorders, found that its viewers used the replay option more often for commercials than for the game itself.
High usage of technology pushed Goodby, Silverstein & Partners into the digital age. The 2006 ADWEEK U.S Agency of the Year was representative of award-winners who preferred working with pencil and pen but changed how they do business. The agency successfully met its challenge to prove to former and potential clients that there was a capability for keeping up with changing times. Key to that effort was hiring talent with a wider skills set plus adding digital production and animation studios in house.
In a 2007 interview with ADWEEK, ad industry legend Hal Riney observed that roles of computers and MBAs had relegated advertising to middle management. As a result, ads had become retail and lacked continuity. Riney believed that restricting creatives by focusing on bean counter issues and strategic briefs hurt the advertising industry.
According to Scott Goodson, Strawberry Frog founder and CEO plus 2007 Global Future Marketing Summit Chair, there are three key components for the new agency model. They are ideas, value and talent. Uniting these components results in a more significant culture where "great ideas create value" then end up commanding a premium price."
Advertising is one of the basic components of marketing. Advertising agencies promote their clients' products, services, and/or ideas through a variety of media outlets, including newspapers, magazines, television, radio, cinema, and billboards. The use of advertising and advertising agencies has spread from a concentration in consumer goods and retailing to virtually all business sectors. Modern full-service agencies provide a wide variety of services to advertisers, including strategy formulation, copywriting, artwork preparation and acquisition, booking of reproduction services, production of television and radio broadcasts, Internet campaigns and research, media selection and buying, market research, trade merchandising, and public relations. Larger agencies may add market research, sales promotion, direct marketing, and public relations to their services, whereas smaller agencies may employ outside specialists for these tasks.
Media advertising is known in the industry as "above-the-line" marketing. Although activities such as direct marketing and sales promotion are often derisively called "below-the-line" advertising because they often employ no creative element, full-service agencies became increasingly involved in such practices in the latter decades of the twentieth century.
The National Advertising Division of the Council of Better Business Bureaus was created by the advertising industry in 1971 to provide a system of voluntary self-regulation and as a pre-emptive measure to minimize government intervention in the industry. In the United States, the Federal Trade Commission is responsible for monitoring and regulating advertising.
This combined voluntary and government imposed regulation restricts or bans advertising of particular products, such as tobacco, alcoholic beverages, medicine, and drugs in some or all mediums. In Europe, an EU Directive banning tobacco advertising throughout the European Union became law on 30 July 1998. The tobacco industry and the German government challenged the legality of the law, arguing that the European Union could not regulate single-market issues, an assertion with which the European Court of Justice agreed. The Court acknowledged that advertising crosses national boundaries, for example, in printed publications. The Commission revised a draft directive to prohibit trans-border tobacco advertising and promotion. Tobacco advertising on television is banned in the European Union by a separate law, the Television Without Frontiers Directive, which also prohibits the sponsorship of television programs by tobacco companies. The following eight EU countries ban tobacco advertising: Belgium, Denmark, Finland, France, Ireland, Italy, Portugal, and Sweden. The United Kingdom and the Netherlands have announced plans to introduce national legislation to ban such advertising. In 2000, the United States Supreme Court ruled against further government restrictions on cigarette advertising and upheld a ruling that the Food and Drug Administration lacked explicit authority to regulate tobacco.
Li Fang Wu, assistant secretary general for the Chinese Advertising Association, observed "that Chinese ads have to deal with social and government restrictions. Ads can't make fun of some social problems or the government." Punishment for inappropriate ads may be just to pull them but a fine can also be calculated at five times the cost of media time.
Several economic and social factors contributed synergistically to the proliferation of advertising agencies in the nineteenth century. As the Industrial Revolution resulted in expanded production, advertising was used to sell the increased output. The idea of people being content with what they needed was slowly and inexorably replaced with the psychological and sociological concept that a need could be created in the minds of the consumer through advertising. Once that need was established, manufacturers could produce a supply of goods to meet the perceived, and yet very real demand, of a consumer society driven to fulfill its wants as well as its needs.
The democratization of the press and the explosion of both the number and circulation of magazines combined with an increase in the educational level in the Western world to further expand the value of agencies. Early ad copy was typically verbose and used typography for emphasis because of technological limitations. Catchy slogans and jingles—often coupled with artwork, including trademarks and logos—proliferated as companies competed to secure customers for their products. The early twentieth century brought an increased emphasis on graphic, as well as conceptual, content.
Until the early nineteenth century, all advertisers arranged their own promotions. Rynell and Son, established in 1812 in London, was one of the earliest advertising agencies. Volney Palmer, a newspaper editor, founded America's first advertising...
To continue reading
Request your trial