Digital Advertising: The Evolution and Revolution

Business

Today, digital ads are everywhere. But just two decades back, they were rare and not as easy to customize.

The digital advertising market is segmented by platform into mobile ad (in-app and mobile web), desktop ad, digital TV, and other platforms. According to Statista, an estimated $566 billion will be spent on digital ads worldwide in 2022. This number is set to grow exponentially in the coming years, and reach $1.25 trillion by 2030.

Facebook ads
Digital advertisements connect users with what they want, after studying their behavior. (A group of people check ads on a tablet and a laptop; Image Credit – Freepik)

A Brief History of Digital Ads

The global digital advertising market reached a value of nearly $486.0 billion in 2021, having grown at a compound annual growth rate (CAGR) of 18.5% since 2016. Digital ads are shown across online channels like websites, streaming services, social media and more. It is also presented in different media formats, including text, image, audio, and video.

The First Digital Ads

The first digital ads appeared in 1994, when HotWired started selling space for banner ads on its website. American telecommunications giant AT&T picked up the ad specie for $30,000 for three months. The digital ad saw a click through rate of 44%, whereas today the average click-through rate hovers just around 0.06%.

The shift in digital advertising was initiated by Facebook, as the social media site set its eyes on monetization. With access to an unprecedented amount of data, Facebook ads could experiment with how to present ads to users.

Facebook Ads enter the arena

Facebook ads reconfigured the digital advertising industry. The company launched its first ad revenue project called Flyers in 2004.

Flyers allowed students and businesses to place Facebook ads, aimed at specific campuses. As Facebook was in its nascent stage, it was still trying to find a foothold in the etch world.

With the success of Flyers, Mark Zuckerberg launched the ad service called Flyers Pro, which had an auction-based model. It was the start of a new era.

By 2005, big companies like Apple and Partypoker had started investing in Facebook ads, as the social media platform’s popularity skyrocketed.

The launch of the Facebooks Ads platform in 2007 made it the king of digital advertising, as it offered targeting options while amassing user data.

The Growth of Digital Ads

The unprecedented success of Facebook ads pushed other companies like YouTube and Twitter.

eBay founder Pierre Omidyar said, “We have the technology, finally, that for the first time in human history allows people to really maintain rich connections with much large numbers of people.”

In 2007, Google’s acquisition of DoubleClick set the ball rolling for the transformation of the digital landscape. Soon after, iPhones became popular and the digital ad industry started looking into mobile advertising.

The term digital agency was first coined in 2008, as it combined the functions of branding, marketing and PR, along with social media. Customized digital experiences were now sought after by brands and businesses, with social media driving the change.

The highly targeted nature of social media ads meant that businesses were now built to collect more in-depth data about their customers.

While social media sites often warn users that data will be collected, there is usually no explicit statement that assures them that data will not be sold to third-parties.

Smartphones and Social Media Ads

As smartphone usage increased, the social media landscape grew with entrants like Instagram, Pinterest, Snapchat, and LinkedIn, amongst others.

A very late entrant to the game is TikTok, owned by Chinese company ByteDance, that is extremely popular amongst youngsters. TikTok ads, albeit a recent addition, have quickly snapped up a major share of the US ad market.

According to figures released by eMarketer and Insider Intelligence, TikTok ad revenue is expected to account for 2.4% of digital ad spending in 2022, compared to just 1% in 2021. Total revenue is projected to hit more than $11 billion by 2024 and take up 3.5% of digital ad spending.

Although TikTok is growing exponentially, it is yet to beat the likes of industry giants Facebook and Instagram. But all that could change in the blink of an eye.

Despite calls for a TikTok ban by US lawmakers, due to data privacy issues, it seems unlikely that the app will be banned.

TikTok is currently the third-largest social media app in both the US and the world, and appears to have cracked the code in appealing to a younger audience. Nearly 47% of its users fall in the 18 to 24-year age group.

According to DISQO research, two out of three TikTok users chose a positive word to describe ads on the platform, such as “fun and engaging,” “trendsetting,” and “inspiring.” It remains to be seen how the digital ads market will go from here.

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