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The Evolution of Online Advertising

Have you ever thought about how advertising has changed over the years? Just a few years ago, a company would have to invest millions of dollars in TV and radio advertising in the hopes that their commercials would reach the right audience and translate into sales and profit. However, this all dramatically changed with the introduction of online advertising. The article:

http://www.inc.com/magazine/20050801/future-of-advertising.html

talks about this exact phenomenon and how it has evolved into what it is today. It discusses how for decades marketers have been spending more and more to try to get their message out, only to have it drowned down by the hundreds other countless advertisements that were doing the same exact thing. This led to millions of pointless and untargeted dollars spent that were just ignored by the consumers. However, in today’s modern world, this is no longer the case. With the internet’s constant evolution over the last few years, search engines have now allowed for these companies to do a better job of targeting prospects and measuring their results, which has made it easier to link a potential advertiser with a specific group that it wants to target.

For example, imagine there is a new small company that sells shoes and it wants to target anyone who is in need of a new pair of shoes. Before online advertising, the company would only be able to advertise locally and would not be able to compete with large companies (Nike, Adidas, etc.) who have more money to spend on advertising. But search engine advertising along with the ability to link consumers with companies makes it possible for this shoe store to advertise online without having to spend so much money.

This example also brings up an interesting point about competition. The big advantages in advertising technology once favored-traditional giants (Proctor & Gamble, etc), which could spend millions on mass-market advertising. The new online advertising process is more affordable and precise which allows smaller companies to compete which in turn benefits the consumer.

Now how is online advertising so efficient and a evolution from the past? Well, many companies (Google,Yahoo,etc.) are able to measure the impact that the location of an advertisement has on its success based on the click through rate. Then they are able to sell these advertisement spots to companies based on the company’s revenue per click. This allows the companies with more money to be in a better location, while also allowing smaller companies to also compete. Additionally, this process allows matching up between what a consumer searches to what advertisements he or she sees.

Therefore, overall the search engine is making a profit, the companies are saving money from not having pointless advertisements, and the consumer is getter the right advertisements. This new process of online advertisements has allowed Internet advertising to increase to $9.6 billion in 2004, a 33% jump from 2003.

But this is not the end of improvements in advertisements. Search engines are now introduction new powerful “behavioral targeting” services that can track what an individual clicks on and looks at across a range of sites over the course of weeks and months, making it possible to build a detailed profile of that person’s interests, purchases, and preferences. This will allow companies to improve advertising even more and match better with potential customers.

So what does all this mean for the consumers and advertisers? Well it means that there will be reduced prices for consumers (based on competition), less random advertisements that consumers do not like, and a lower cost of advertising for these companies.

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