How the Internet Has Changed Advertising in the U.S.

Abstract This paper seeks to examine the ways in which the increased presence of the Internet has changed the advertising industry in the United States in recent years. Some different types of internet advertising methods will be presented, as well as how some consumers view these types of advertising and their overall effectiveness. Many companies today take advantage of the online technologies that are available, and this has caused a great change in advertising platforms and messages.

This paper will explore the advantages Internet advertising has to offer and changes that have occurred in the world of advertising because of the presence and expansion of the Internet and what is has to offer. Introduction The development and growth of computer technologies has transformed the way in which companies have traditionally approached advertising. The huge presence of the Internet has dramatically transformed the face of advertising and its effectiveness.

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The seemingly endless amount of information that is available to users and the amount of time that is now spent on the Internet has made it a prime way to advertise and reach consumers. Because of the flexibility and control over advertising materials that is possible through the use of the Internet, it has become a widely used marketing communications tool. Before the Internet really came on the scene, the most popular means of advertising were through television, newspapers, radio, and magazines. These are still used today, but do not have the same capabilities that come with using the Internet.

This fact has caused most companies to change their marketing plans and has allowed them to more effectively reach their target market. The range of the Internet is greater than most traditional means of advertising and it offers some targeting methods that help to make sure a company’s ads are seen by the people who are most likely to end up making a purchase. Another advantage of advertising on the Internet is the ability to track effectiveness, and usually this can be done in virtually real time.

Things such as the number of impressions an ad receives and how many visits a business’s website gets – and from what source – can be viewed and used to increase effectiveness. Also, being able to determine which ads led someone to a company’s website makes it easy to figure out the conversion rates of different internet ads. The affordability of advertising on the Internet is another great advantage and allows even very small companies to be able to use this as a way to reach customers.

It allows these smaller companies to be able to compete with larger and more established companies by successfully connecting with target customers. Literature Review According to a report by the Interactive Advertising Bureau (IAB), which is called the IAB Internet Advertising Revenue Report, Internet advertising reached over $26 billion in 2010 in the U. S. , representing about 15% of all advertising. This is up 15% from the $22. 7 billion that was spent in 2009 and a $16 billion increase over the amount spent in 2005. It has become the second largest advertising medium, closely behind TV Distribution.

This research is conducted by PricewaterhouseCoopers LLP (“PwC”) on a continuous basis, and the report was initiated by the IAB in 1996. It uses data and information that is reported directly to PwC, such as corporate data that can be publicly accessed online and information that is offered by companies that are actually selling the online advertisements. The results that are shown are considered to be the most precise measurement of Internet advertising because the numbers come from the online ad selling companies. The breakdown of amount spent on advertising in the US for 2010 is as follows: $28. billion on TV Distribution, $26 billion on Internet, $22. 8 billion on newspapers, $22. 5 billion on cable TV networks, $17. 6 billion on broadcast TV networks, $15. 3 billion on radio, $11. 5 billion on directories, $10. 2 billion on consumer magazines, $7. 4 billion on trade magazines, and $6. 1 billion on out of home advertising (www. IAB. net 2011). There are several different types of Internet ad formats that are available for companies to utilize. “Search” is largest online advertising revenue format, as it makes up for 46% of 2010 4th quarter revenues.

Display/Banner ads were not far behind accounting for $3 billion or 40% of total revenues during the 4th quarter of 2010. Other formats include Classified Lead Generation, which totaled $697 or 9% of 4th quarter 2010 revenues, Digital video, Rich media, Sponsorship, and Email advertisements (www. IAB. net 2011). Social media has played a huge role in the amazing growth online advertising has experienced. Some reports say that social media ad spending could hit $8. 3 billion in 2015, up from $2. 1 billion last year. BIA/Kelsey, a media consultancy, has predicted that by 2015, $7. billion of that $8. 3 billion will be from display ads, and most of that will belong to Facebook. com, though the report didn’t show Facebook’s exact share. A representative for BIA/Kelsey says the figures were determined by “third-party and public company reports” as well as BIA/Kelsey’s knowledge of the social media advertising market. Revenue from Facebook ads were believed to have reached $1. 68 billion last year and prices for ads have been increasing. Its business is expanding at a more rapid pace than was previously predicted. Taking hat information into account, with the assumption that Facebook will continue to dominate the segment, $8. 3 billion is a feasible estimate and may even be somewhat conservative (www. mashable. com 2011). Initially, online advertising was thought of as a kind of extension of traditional advertising because most websites were just considered an online presence that sometimes led visitors to make a telephone call to the company or to visit the business in person. Most people did not have the imagination to foresee the interactive possibilities that the internet has to offer.

These interactive possibilities are what make the Internet different than any other advertising platform in existence. Now consumers are quick to post their opinion of products, services and brands on online forums, blogs, and social media sites, which are all good ways companies are able to gain exposure online. “Branding” is almost a thing of the past and it is now all about getting a measurable return on investment. Traditional advertising is a good way to build brand exposure if a company has a big advertising budget. Smaller and newer companies use online advertising because of its many benefits.

The fact that advertising online allows companies to get a daily measurement of how much traffic is turning into business is a major benefit for using the Internet in a company’s marketing efforts. This allows them to make immediate business decisions, as opposed to having to wait a certain period of time if a TV commercial, newspaper ad, or radio commercial were used. Because the internet allows information to be conveyed in instantaneously, companies do not have to wait for an extended period of time to launch a product or service.

Information can be published immediately and there are no geographical or time limitations. Another positive aspect of Internet advertising is usually the exposure consumers get is quality exposure. If someone drives by a billboard or sees a TV commercial, there is no way to know whether or not that person is interested in a product or service. If someone sees an ad online and they click on it, then that shows interest and in turn a company can more narrowly define and reach their target market. Cost effectiveness is one of the other huge benefits to advertising online.

Companies can bid for ads on Google and Overture on a performance basis; meaning they can pay for each “click” they receive (Pay-per-click or PPC). This is something that really helps smaller companies or companies that are just starting out because they can just pay for the traffic they receive, instead of buying a TV spot or newspaper ad that may or may not be seen by their target customers. Search Engine Optimization (SEO) is also very cost effective in the long run because companies can gain quality exposure for a relatively small financial investment.

SEO can also provide prime position for companies advertising on the Internet by helping them to rise in the search engine results pages for relevant searches, making sure they are being seen by people who seeking their type of product or service. Long term exposure is something else that makes advertising in the Internet superior to traditional advertising. An advertisement placed on TV usually lasts only a few weeks, but with good SEO a company can maintain the same site for years. Brand engagement has been shown to be best achieved through online marketing.

Studies indicate that among customers, particularly “non-techie” females with children under the age of sixteen have more brand engagement due to the internet than from print media, TV, and outdoor advertisement. Brand engagement is something that helps to create loyal customers, which is very important for most companies to be successful. It has also been shown that website users buy more online than average newspaper users. In Germany, Internet users do a great deal of online shopping and most of the time they research a product online before making a purchase either online or in an actual store.

In 2005 online buyers rose by 7% and made the total number of online shoppers 27. 4 million. Online marketing also provides insight and other interactive mediums. There have been studies to signify that the Internet plays an important role in the propagation of indirect experiences of brands through customer reviews pages. A good example of interactive advertising on the Internet is online video directories for brands. Customers have the ability to choose to visit the brand’s website or make contact with the company through email, chat or phone.

This way customer response to brand communication is immediate and the conversion rates are high. The ability for customers to be able to do product research through the Internet is another reason that advertising online can be extremely effective. Product information is readily available with the click of a button and people can make decisions they feel better about (Internet Marketing Research Blogs 2011). While Internet advertising has become the second most used advertising method, there are some negative aspects to it as well.

In the early days of Internet advertising, ads were found to be effective in generating brand awareness and positive attitudes. More recently, the development of pop-ups, pop-unders and banner ads have caused Internet advertising to sometimes be described as uninformative, ineffective, and intrusive. Consumer’s first impressions, and ultimately their loyalties, are made in the first few seconds of visiting a website. The techniques such as pop-ups, pop-unders and banner ads can be intrusive and viewed as annoyances.

There are studies that have been done regarding consumers feelings toward these things, and some show that consumers despise these advertising techniques and even feel violated and molested by their presence (McCoy 2007). It has been reported that online consumers are goal oriented and judge the online advertisements more harshly than they do for traditional forms of advertising. It was also found that the negative feelings consumers have toward these online ads lead to the decision to not return the advertiser’s website (Li 2002).

There is also some research that suggests that users find information helpful when presented in an enjoyable context, but when the ads are seen as intrusive consumers will avoid them whenever they possibly can. These negative feelings are thought to affect brand perceptions, and ultimately leading to consumers completing avoiding a company’s ads (McCoy 2007). Conclusion The growth and development of the Internet in recent years has dramatically changed the way companies advertise and how consumers view the different products and services that are offered.

The capabilities the Internet has to extend the function of advertising beyond what is offered from traditional forms of advertising make it an invaluable tool in the advertising industry. The ability of customers to click on a banner ad for an e-book, view the table of contents and also read other user’s reviews, then place an order and download the book their computer all through the internet make it so much more effective than TV or radio commercials, newspaper ads, billboards, magazine ads, etc.

The expanded function of internet advertising is due to the horizontally integration of three key marketing channel capacities (communication, transaction, and distribution) and vertical integration of marketing communications, such as advertising, public relations, sales promotion, and direct marketing. The Internet provides the means for interaction between buyers and sellers that is different than any other form of advertising. It has changed the way companies are able to reach their target audience and the way customers view these companies.

It has been constantly evolving since its debut in the early 1990’s. Philport and Arbittier (1997) foresaw at the beginning of the development of Internet advertising, “With respect to the Internet, we may have the first advertising channel that is not only a medium in and of itself but also a valuable extension of traditional channels” (Philport 1997). Research of the effectiveness of advertising is gradually moving beyond just its effectiveness, but into the function of various formats in combination and integration with other advertising and marketing methods.

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