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


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