Wednesday, May 24, 2006

The Media Era

(continued from In the beginning..., see 5/19/06 below)

In case you just joined us, we’ve been reflecting on the history of the advertising business in order to gain a historical perspective to better understand the significant changes that are taking place in advertising today. In every period, there are leaders, entrepreneurs, who “think different”, who see opportunities and capitalize on them or find a better way of doing business. When others see the value of what they’ve done, they copy it. And that’s how business practices change.

We’re talking about an era in advertising that I call the Media Era, from 1841 to 1903. It was a time when media buying was the advertising business. Creative services, if provided at all, were provided as added value. No agency saw the need to have a full-time Creative person on staff.

Three important media entrepreneurs of the period were Francis W. Ayer, George P. Rowell, and J. Walter Thompson.

Francis Wayland Ayer founded N.W. Ayer and Son in 1868 (he named the agency after his father). Ayer pioneered the concept of the “open contract” which made the commission rate that agencies earned a set standard, at first 12.5 percent, then later 15 percent of the publishers’ rates. The 15 percent commission stayed the norm for the advertising business for many years to follow and provided stability in what was until then an untamed business environment.

George P. Rowell, mentioned in our post of 5/19 as the originator of the “space wholesaler” agency, also became the first media researcher. In 1869, he introduced Rowell's American Newspaper Directory, the first annual guide to over 5,000 American and Canadian newspapers. It later merged with a directory published by N.W. Ayer, and became known as Ayer’s Directory of Publications, which was published until 1982 when it became the Gale Directory of Publications and Broadcast Media which, to my knowledge, is still published to this day.

Then there was J. Walter Thompson. When we think of the founders of agencies today, they’re usually Creative Directors. Thompson, of course, was not. The role of Creative Director hadn’t been invented yet. In the same year that N.W. Ayer was founded, Thompson (then 20 years old) was hired as a young bookkeeper and assistant of the small agency of Carlton & Smith, which bought and sold space in popular religious journals. Thompson’s innovation was that he recognized the potential for advertising in the high class magazines of the period. At the time, these magazines took no advertising; they considered advertising offensive to their affluent readers.

Thompson managed to get two of the leading women’s magazines, Godey's and Peterson's, to take ads for asbestos roofing. These women's journals seemed an unlikely medium for a product bought, presumably, by men. Yet the ads sold more roofing than any promotion in the company's history. He repeated this success with advertising in Peterson’s for a game called “jackstraws”. Within 20 days, the merchant received over $3,000 worth of orders in sums no larger than 35 cents. Following these successes, Thompson eventually acquired a monopoly over advertising in the leading magazines of the period. In 1878 he bought out his employer, paying $500 for the business and $800 for the office furniture, and renamed the agency after himself.

And the rest, as they say, is history….

(to be continued....)

Sources and additional reading:
Stephen Fox, The Mirror Makers, William Morrow and Co., New York, 1984
John O'Toole, The Trouble with Advertising, Times Books, div. of Random House, Toronto, Canada, 1985

Friday, May 19, 2006

In the beginning....

(continued from The Times They Are A-Changin', see 5/18/06 below)

Advertising has been around for hundreds of years, of course, but as an industry it’s not that old. It started in 1841 when a man named Volney B. Palmer opened the first agency in Philadelphia. Palmer did not create advertising. He was an independent newspaper sales rep. He represented a list of newspapers and sold space in them to advertisers, earning commissions of about 25% from the newspapers for the extra business he brought in.

Before Palmer came along, newspapers sold space directly to advertisers. But this was a period of expansion and growth, and as the landscape became more crowded with potential advertisers, newspapers found they needed to expand their sales efforts. Entrepreneurs like Palmer stepped in to fill the void.

The “sales rep agency” started by Palmer evolved into “space jobbing”, whereby agencies sold space to advertisers first, then turned around and bought space from the newspapers to fill their orders. The important change is that now the agency represented its own interests and not the interests of the newspapers.

Immediately after the Civil War a new type of agent appeared called a "space wholesaler". The space wholesaler purchased space in bulk from publishers, as cheaply as possible, and resold it to advertisers and other agents in small lots for more money. A man named George P. Rowell initiated this plan in 1865 and was the most influential advertising agent for many years. Space wholesalers could earn commissions sometimes as high as 50%. They dominated the period between 1865 and 1880.

The practice of space wholesaling eventually disappeared. Publishers today won’t let you buy space and resell it…that is, until just recently (August 2005) when Google purchased ad pages in PC Magazine and Maximum PC and resold them as classified ads to smaller advertisers. They did it again in November with Budget Living magazine, buying a page of advertising and reselling it in smaller units to seven other advertisers.

So, you see, history does repeat itself…. And now, a group of advertisers led by Wal-Mart's Julie Roehm seeks to build and test a new online auction platform for buying and selling tv advertising. If successful, what new form of media buying agency will come out of that?

(to be continued....)

Sources and additional reading:

Dorothy Cohen, Advertising, Scott, Foresman & Company, 1988

Kenneth H. Myers Jr., SRDS, Northwestern University Press, Evanston, 1968

Thursday, May 18, 2006

The Times They Are A-Changin'

Media placement, i.e. media planning and buying, gets a lot of attention these days, and having been in media for many years, I’m happy to see that. For most of my career, media planning and buying was an afterthought. Creative was everything. What’s changed? What’s brought media to the forefront again? I say “again” because, believe it or not, there was a time when media placement– not creative – was the main business of advertising agencies.

The ad business is going through some wrenching changes, but it’s not the first time that major change has occurred. To better understand the present and future of advertising, it pays to take a good look at its past. To that end, I’d like to share with you a few stories of the people and events that helped shape the advertising business, and highlight some of the significant changes that occurred over the years as a prelude to our ongoing examination of where we are now and where we are headed.

(to be continued....)

Thursday, May 11, 2006


Welcome to "Smarter Ideas", a new blog for the exchange of information and ideas about the advertising business with an emphasis on media planning and buying.