Define advertising and identify its key elements. explain the different types of advertising.

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Your company’s product is so good that you’re sure customers will clamor for it the moment they learn of its existence. How do you cut through all the noise and competition for their attention to tell them about it? In a word, advertising.

Businesses have been advertising for as long as there have been businesses:

• The oldest record of advertising is a scrap of papyrus dated to 3000 B.C. in which an ancient Egyptian named Hapu the Weaver claimed to offer “the best cloth … woven to your desires.” The pitch was added to a plea by the weaver for the return of a runaway slave.
• The walls of the ancient Roman city of Pompeii were covered with thousands of “billboard” ads that promoted various gladiators, although most were in the form of graffiti.
• The first recorded print ad was a handbill published in England in 1472 that announced a new prayer book.

Most of today’s innovations in advertising take digital form; yet the traditional ad media of print and broadcast continue to find new ways to raise consumer awareness of brands and products that companies of all sizes from around the globe offer. The six types of advertising highlighted in this guide illustrate the growing complexity of ad campaigns that combine the advantages of digital advertising approaches with new takes on old standbys.

The future of advertising is taking form today as ads on traditional and digital platforms become more personalized, more informative, and more finely targeted at niche audiences.

What Is Advertising?

Advertising encompasses all the actions an organization takes to bring its products, opinions, or causes to the attention of the public or a specific audience. The goal of advertising is to convince people to respond in a certain way, whether to buy the product or service, or think or act a certain way, such as public service announcements encouraging people to stop smoking, vote for a specific candidate, or support a cause.

Today’s advertising industry arose in the late 19th century when the first advertising agencies were established. These companies brokered sales of ads that appeared in newspapers, eventually expanding into providing editorial copy and artwork for the advertisements. By the 1920s, these companies were preparing full advertising campaigns for corporate brands such as Coca-Cola and Ford Motor Company.

Digital technologies that reach people via internet platforms and smartphone apps are transforming modern advertising. Revenue from internet advertising in the U.S. increased by 12.2% in 2020 to $139.8 billion, according to the Internet Advertising Bureau (IAB), and internet ad revenues are forecast to top $200 billion annually by 2025.

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Pay-per-click (PPC) is a popular form of online advertising that places ads, usually in text form, above or next to search engine results based on the advertiser’s bids for keywords that are relevant to its products and services. According to HubSpot, these are the components of a PPC advertising strategy: cost per click (what the advertiser pays for each click on the ad); ad rank (where the ad appears on the search engine result page); quality score (the ad’s score based on the click rate by position); maximum bid (the most the advertiser is willing to pay per click on the ad); keywords (the words the advertiser wants to associate their ad with in searches); and landing page (where users will be directed to after clicking the ad).

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Traditional vs. Nontraditional Advertising

Newspapers, magazines, and other print media were the primary outlets for advertising until the arrival of radio and television broadcasting. Those traditional advertising sources continue to generate billions of dollars in ad revenue annually, but digital ad platforms such as Google, Facebook, Instagram, and YouTube are challenging them.

These are among the most common traditional advertising methods:

• Handouts are flyers or printed brochures that promote a product, a business, an event, or a sale. They introduce the business to the public and are one of the most straightforward means of advertising.
• Billboards come in many sizes and are placed in high-traffic areas so the widest possible audience can view them. Their images and text are designed to grab the public’s attention and impart information quickly, simply, and clearly.
• Direct mail is sent in the form of letters or postcards to potential customers who live in a specific area. The messages help build awareness of a business and its products.
• Print ads that appear in newspapers and magazines bring a company’s message to a publication’s readers. The higher the publication’s circulation, the wider the potential audience for the ad (and the higher the likely cost of the ad).
• Event marketing distributes printed or digital material about a business and its products at trade shows, conventions, conferences, fairs, festivals, and other industry and consumer events. It relies on banners and signs to attract event attendees’ attention.
• Broadcasting gets the business local or national recognition via commercials that run on radio and television. The goal of the ads is to intrigue listeners and viewers so they make an effort to find out more about the advertised product.

Digital ads differ significantly from their print and broadcast counterparts, but their purpose remains to raise awareness of what’s being advertised and motivate some change or action on the part of the target audience. Examples of digital advertising follow:

• Display advertising is typically in the form of banner ads that appear on websites and in some smartphone apps. They can include video, audio, and interactive elements in addition to static graphics and text.
• Paid search advertising appears in the results that Google, Bing, and other search engines serve up. These text ads include a headline, short text description, and link to the advertiser’s site.
• Video advertising often appears before or during playback of videos that appear on YouTube and similar sites. Tremendous growth is expected for video ads that run on mobile phones.
• Social media advertising places ads on Facebook, Twitter, Instagram, Snapchat, LinkedIn, and other social media. These ads benefit from social media users’ ability to share, comment on, and otherwise interact with the ads.
• Native advertising is online content that matches the look and feel of the sites the ads appear on. The ads are often in the form of reviews or product placements that blend smoothly with other site content.

Advertising Campaigns That Blend Traditional and Nontraditional Media

Distinctions between traditional and nontraditional advertising continue to blur as cross-channel advertising becomes more popular. Cross-channel advertising coordinates campaigns across digital and traditional media in a way that leverages the strengths of each channel and resonates clearly with the target audience. These are some examples of companies that have merged aspects of traditional and digital advertising in their campaigns:

• Coca-Cola leveraged its traditional Santa-themed ad campaign in 2021 by partnering with the fan connection app Cameo to give people a chance to receive a custom video greeting from the man in red himself.
• Not to be outdone by the competition, Pepsi took advantage of the ghost kitchen phenomenon by opening a virtual restaurant called Pep’s Place that paired whichever drink guests chose with an appropriate dish.
• Whiskey distiller Crown Royal ventured into the metaverse by creating a hybrid world that hosted a block party where real people were digitized using 3D printing technology and interacted in ready-to-print digital environments.
• Chipotle teamed with the popular Roblox gaming platform in October 2021 to extend its annual Boorito campaign to the virtual space. The restaurant chain provided player skins, a virtual corn maze, and $1 million in free burritos for participants.

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Nearly every form of human communication has been used to convey advertising at one time or another. Ads are now featured in podcasts, mobile phone apps, and movies and television shows in the form of product placements. These are among the top trends in advertising in 2022:

• Conversational marketing relies on chatbots and voice assistants to answer consumers’ questions about a company’s products and services. This approach enhances engagement, builds trust in the brand, and improves the customer experience.
• Highly personalized content tailors the material that appears on streaming services to the interests and demographics of each viewer. This improves the relevance of ads and increases the chances of consumers responding to the ad.
• Programmatic advertising automates the process of purchasing digital ads by applying real-time data analysis and audience targeting. Google claims that this technique allows its display ads to reach 90% of worldwide internet users while targeting a specific audience with the right message at the right moment.

The six types of advertising profiled in the following sections represent the approaches that are most popular with businesses and that have the broadest reach in attracting the eyeballs of consumers.

Paid search advertising is a marketing approach in which advertisers pay search engines to place their ads in the search engine results pages (SERPs). When someone enters a search term in Google or another search engine, the results that appear are a mix of organic results that are returned because they’re deemed the most relevant to the search term and paid results that typically appear in a box at the top of the results page and are labeled as ads.

How Paid Search Ads Appear in Search Results

Paid search ads are served to people in the results of their searches on Google and other search sites based on their relevance to the keywords entered in the search box. Businesses bid on keywords in an auction setting based on the keywords’ relevance to the product being advertised and the target audience for the ad.

Three types of ads appear in Google search results:

• Text ads are found at the top and bottom of the SERP. As many as four text ads may appear at the top, and several more may be shown at the bottom of the page. They consist of a URL, a link in the form of a headline, and a brief text description that’s one to three lines long.
• Local ads allow businesses with physical locations to purchase ads that show their names, addresses, and phone numbers, along with a star rating, a link to the company’s site, and a link to directions to the business. The location of the business is shown on a clickable map that accompanies the ads.
• Shopping ads are called product listing ads by Google; they feature images in addition to text that shows the product price, vendor name, reviews, and special offers. Based on the keyword entered, these ads may appear in a scrollable carousel near the top of the SERP on mobile devices or on the right side of the page in desktop browsers.

Paid Search Auctions, Pay-Per-Click, and Advertiser Return on Investment

Businesses bid on search terms via an online auction that identifies searches with a commercial intent and puts those terms up for bid by advertisers who meet certain eligibility requirements. Qualified advertisers set a maximum bid, or maximum cost per click (CPC), for each keyword they’re interested in. Businesses can also bid on groups of related keywords at the ad group level.

Ads receive a Quality Score based on how likely a consumer who enters the selected term is to click on the ad. The search engine is paid only for ads that people click, or pay-per-click (PPC). The Quality Score is determined based on three factors:

• Expected click-through rate (CTR)
• Ad relevance to the search term
• Landing page experience, which means the page people are led to after clicking has useful information they’ll find relevant to their search

In Google AdWords, for example, the CPC that a business is charged is calculated based on a formula that considers the ad rank: the maximum CPC bid times the Quality Score. The ad rank determines how high in the list of ads a specific ad will appear.

The return that advertisers realize from the money they spend on paid search ads is expressed in a formula called return on ad spend (ROAS): total ad revenue divided by total ad spend. For Google Ads, the average ROAS is 200%, which means a business earns $2 for every $1 it spends on the ads. However, it’s difficult to estimate the ROAS for specific industries because companies tend not to share how much they spend on the ads and how much revenue they realize from them.

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More than 80% of the $183 billion in revenue that Alphabet, Google’s parent company, generated in 2020 was from online ads. The Google Ads service accounted for almost 29% of all global digital ad spending in 2021, compared with 24% for Facebook. These are the steps in launching a Google Ads campaign according to CNBC, eMarketer, and Google: 1. Define your objective. 2. Choose the type of campaign (search, display, video, etc.). 3. Set your budget. 4. Select your bid type and focus based on your campaign goal. 5. Apply extensions to your ads for links, phone, etc. 6. Group related ads around identical targeting. 7. Choose your targeting: keywords, demographics, location, devices. 8. Track your ad conversions to measure the campaign’s effectiveness.

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Resources on Paid Search Advertising

Businesses and organizations use ads delivered via Facebook, Twitter, Instagram, and other social media platforms to target specific demographics. Social media advertising is a form of digital advertising that attempts to take advantage of the heightened engagement of people on social media and the wealth of information advertisers have about the people they’re targeting with their social media ads.

How Companies Monitor Social Media for Marketing Purposes

Statista reports that 92% of companies worldwide are active on social media. In addition, a Harris poll on behalf of Sprout Social found that 80% of consumers expect the businesses they deal with to have a social media presence for customer service. A key operation for marketing departments is to monitor social media for mentions of their products and services, referred to as social media listening and engagement.

Companies use social media analytics tools to measure their reach, engagement, and sales to a specific subset of the social media audience. Key features of analytics products include audience segmentation, behavior and sentiment analysis, clustering analysis, and share of voice (the prevalence and intensity of conversations about the product, brand, or company).

By collecting data from social media platforms, advertisers can measure the results of their decisions based on the number of likes, shares, follows, retweets, previews, impressions, and other metrics. These are among the goals of social media analytics for advertisers:

• Quickly identify trends related to brands and products.
• Track how the target audience is responding to ads and other marketing efforts in real time.
• Gain greater insight into customers’ opinions about the products.
• Discover new high-value features and enhancements for the offerings.
• Find out how the messages of competitors are being received.

The Growing Importance of Social Media to Ad Campaign Success

Social media provides businesses with the largest potential audience for their messages, combined with an unprecedented ability to target people with specific characteristics. Each of the major social media platforms has a unique audience and purpose, so companies must focus on the social media their customers use most often.

• Facebook has about 2.9 billion monthly users. A Facebook business account includes numerous advertising tools and data analytics functions. Facebook gives businesses an opportunity to engage with customers directly and to save money on marketing.
• Instagram had about 1.1 billion active users in 2021 and continues to grow. The service is primarily for sharing images and videos, making it popular with young people. Instagram’s marketing tools for businesses include Instagram Live and Instagram Stories, which let a company advertise its products to audiences it couldn’t reach previously.
• Twitter was used actively by about 211 million people in 2021. The service lets businesses share images, videos, links, polls, and short text messages (240-character limit) to their followers. Using Twitter business accounts requires knowing how to use hashtags, post images and polls, and use direct messaging to handle problems.
• TikTok is a relatively new platform that’s especially popular with people in their teens and 20s, and sometimes as young as 10. TikTok for businesses lets companies share short videos, but to break through, clips need to resonate with a young, discerning audience. The five types of advertising on the platform are in-feed native content, TopViews, brand takeovers, branded hashtag challenges, and branded effects.

Resources on Social Media Advertising

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Display advertising is a form of digital advertising that uses banners and other visual ad formats on webpages, on social media, and in applications. The most important networks for display advertising are Google, Facebook, Twitter, and Instagram. Ads appear on specific sites when visitors meet the criteria the advertiser sets:

• Keywords entered in search fields
• Demographic characteristics of the site visitor, as gleaned from data contained in browser cookies and other sources
• The page topic or interest as determined by scanning its content and metadata

Display ads are used primarily to promote brand awareness rather than to prompt a specific reaction. They’re also used for retargeting, which places a company’s display ads on pages that site visitors subsequently go on to. People rarely make a purchase the first time they visit a company’s site, but they’re more likely to do so the more often they return to the site.

Targeting Display Ads to Specific Online Audiences

The power of display advertising is its ability to show ads only when a receptive audience is most likely to see them. The advantages of display ads that are targeted to groups meeting preset criteria include being able to create a range of custom ads quickly and inexpensively, reach a greater number of potential customers, and clearly measure the effectiveness of specific ads.

Nearly all display advertising is now programmatic: The ads are purchased and optimized automatically, rather than being bought directly from publishers.

• In the past, display ads were marketed just as print ads were, so they appeared at a set time and place no matter who visited the site.
• Programmatic advertising uses machine learning and other artificial intelligence techniques to make possible real-time bidding on the ad space. This allows companies to have their ads appear only when the visitor meets specific criteria, such as having visited the vendor’s site in the past.
• Other forms of programmatic advertising for display ads are programmatic direct, which ensures the ads are shown a set number of times on selected sites, and private exchanges, which are invitation-only auctions that publishers offer for their available space.

Why Display Ads Are So Effective in Engaging Consumers

Despite dating back to the dawn of the internet, display ads continue to be an effective way for companies to advertise their products and themselves. Four reasons in particular explain the enduring popularity of display ads:

• The ads demonstrate the power of high-volume distribution combined with a high level of consumer engagement. Advertisers rank display ads as their fourth most important channel, trailing only video, search, and social media.
• The ads are inexpensive enough to be available to small businesses. They have low production costs, and their pricing structure is flexible enough to accommodate nearly any ad budget.
• The ads are effective on mobile phones, increasing their range and potential audience. This is especially important as people spend more time viewing content on their phones and other mobile devices.
• The capabilities of audience targeting and retargeting continue to evolve, which promises even more effective ways to engage customers and help build a company’s brand.

Resources on Display Advertising

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Native advertising is a form of digital advertising in which ads have the look and feel of editorial content on a webpage or in an application. The ads are effective because they’re “nondisruptive”: They integrate seamlessly with the non-ad content that appears on the site or in the app. While print media has long included ads in the form of articles, the first native ads appeared in digital media in the early 2010s. In recent years, this type of ad has grown tremendously in popularity.

An Effective but Less Obtrusive Form of Online Advertising

The recommended articles and other promoted material that compose native ads are designed to be non-intrusive, in contrast to standard web ads in the form of popups and banners. The most popular forms of native advertising include:

• In-feed ads are placed in social media feeds and appear to be organic posts. They’re usually labeled as promoted content at the top of the post. These ads are typically found in content feeds from news sources such as CNN and Forbes, as well as product feeds from commerce sites such as Amazon and eBay.
• Sponsored content includes articles, posts, and other advertising content that appears in a separate section of a site and is distinguished from the site’s own content. Consumers tend to put more trust in these ads because they look like standard content rather than ads.
• In-app reward videos combine an ad with streaming content that serves as a reward for watching the ad. This format is popular with music services such as Pandora and with game vendors that offer virtual currency for use in the game or playing tips as rewards for viewing ads.

How Native Advertising Benefits Viewers and Advertisers

Native advertising benefits ad viewers by making content available that they may otherwise have to pay for. It also eliminates many of the bandwidth-hogging forms of digital advertisement, so they have a better overall experience on the site or using the app. In addition, advertisers benefit from native ads by realizing enhanced viewer engagement with the ads and the companies’ brands.

• Native ads avoid the ad blockers that nearly 40% of internet users in the U.S. use.
• They improve the appearance of a company’s site and branded app by ensuring all content has a uniform appearance.
• When hosting the ads on a company’s own servers, rather than relying on third-party ad networks, the ads avoid the malware that can sometimes infect ad networks. This also enhances user privacy because it does away with third-party cookies.
• By eliminating ad tags, the native ads speed up page loads and improve app performance.

Resources on Native Advertising

• Publift, Best Native Ads Platforms for Publishers in 2022 — Profiles native advertising platforms Outbrain, Taboola, Yahoo Gemini, Nativo, TripleLift, Revcontent, and MGID.
• Native Advertising Institute, Native Advertising Resources — The Europe-based institute offers case studies, ebooks, market reports, podcasts, and interviews with native advertising executives.

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The newest forms of digital advertising are finding innovative ways to complement one of the oldest of advertising media: print. While overall spending on print advertising is expected to continue to decline in coming years, nearly $30 billion was spent on print ads in 2021, according to FinancesOnline, and nearly that much is forecast to be spent on the ads in 2022.

The Benefits of Print Advertising Over Online Ads

Print ads remain as effective as ever, and they offer benefits that digital and broadcast ads can’t match, such as the higher trust that people place in print ads, better recall of print ads than digital ones, more permanence compared with the ethereal nature of digital ads, and the greater engagement that people experience with print ads. Print media’s sustained popularity comes despite the rise of digital information sources, as figures compiled by FinancesOnline indicate:

• 95% of people younger than 25 read print magazines.
• 82% of consumers trust print ads most when making buying decisions.
• Print readers typically spend 20 minutes or more reading a print publication when they pick it up, while people on digital news sites usually are there for less than 5 minutes.

In addition, consumers are much more likely to act on direct printed mail advertisements than on digital advertisements (80% versus 45%), and people who have viewed a company’s print ad are increasingly likely to visit the company’s website (27% in 2020 versus 12% in 2009) and to have an intent to purchase (22% in 2020 versus 7% in 2009).

Innovations in Print Ads Enhance Their Effectiveness

The best way for advertisers to maximize the effectiveness of their print and digital ads is by creating campaigns that integrate both media. A study by Top Media Advertising found that online campaigns that combine print and digital ads are 400% more effective.

One of the biggest trends in print advertising is the increased focus on storytelling that highlights the experiences of everyday people with the company’s products (as opposed to celebrity endorsements, for example). Nike’s “Play New” ad campaign of 2021 showed people trying out a new sport, and often failing, to illustrate that the company’s products aren’t just for elite athletes. The ads also encouraged people to try their hand (or foot) at a new sport.

Print ads benefit from the personalization made possible by use of subscription data and other sources of personal information. Something as simple as adding a subscriber’s name to a print ad increases the person’s engagement with the brand and likelihood of remembering the ad. Other ways to personalize print ads include mentioning a favorite sports team, using the person’s pet’s name, supporting the person’s favorite charities, and offering custom limited editions and loyalty tiers.

Resources on Print Advertising

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Advertising revenue for traditional television and radio will continue to be affected by the continuing shift of consumers from linear TV and radio — over the air (OTA), cable, and satellite — to streaming digital broadcasts, which are referred to as over the top  (OTT). However, advertising broadcast over television and radio continues to grow, albeit at rates lower than their streaming counterparts.

• Linear TV will continue to generate more ad revenue than OTT in 2022, according to the Radio and Television Business Report. Combined worldwide revenue from linear and OTT ads will increase by 3.3% in 2022 to $184.7 billion following an increase of 5.5% in 2021.
• Global ad revenue from broadcast radio is forecast to grow by 3.5% in 2022 and 1.5% in 2023, when it will reach $34.3 billion. Broadcast radio ad revenue increased by 8.8% in 2021.
• Ad spending on podcasts and other online audio rose by a third worldwide in 2021 to $5.4 billion. Podcast ad revenue increased by 50.9%, and streaming audio was up 28.4%. By 2023, online audio ads are forecast to reach $8.3 billion.

New Technologies Increase Consumer Engagement with Broadcast Ads

Broadcast advertising will be transformed by the arrival of such innovations as NextGen TV, an internet protocol-based technology that allows advertisers to increase their engagement with broadcast audiences. NextGen TV allows advertisers to personalize their messages to viewers based on their location, lifestyle, income, and other demographic measures.

NextGen TV broadcasts arrive free over the air like traditional TV, but they require a built-in or an external tuner. Similar to the ads that Facebook, Google, and other online networks display, NextGen TV collects information about viewers and sends it to broadcasters and advertisers. This includes viewing habits, income level, and ethnicity in many cases.

Another advertising technology that’s expected to be a hit with broadcasters and viewers alike is ShoppableTV, which lets viewers purchase some of the products that appear in a TV show by using their phone’s camera to scan an on-screen QR code.

Digital audio advertising has gotten a big boost from online broadcast radio in the form of AM/FM simulcasts, streaming music services, on-demand audio, and audio content aggregators. Podcasts are a particular bright spot for this segment:

• Weekly podcast listeners play an average of seven podcasts each week.
• The number of podcasts available now exceeds 700,000; podcasts are recorded in 100 different languages.
• More than half of podcast listeners (55%) report that they’ve purchased an item they learned from a podcast.

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The Advanced Television Systems Committee (ATSC) developed ATSC 3.0, or NextGen TV, to enhance broadcast television. A primary benefit of NextGen TV to advertisers is the ability to target the ads they broadcast to specific categories of consumers. These are the top trends in television advertising in 2022 according to Digital Media Solutions, MAZ Systems, and TVNewsCheck: dynamic ad insertion (DAI), which supports both targeting and interaction; over the top (OTT), which delivers TV and film content directly rather than via multicast; advertising video on demand (AVOD), which includes services such as Hulu and Tubi; and subscription video on demand (SVOD), which includes Netflix, Amazon Prime, and Apple TV.

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How Broadcast Ads Mix Old and New Approaches

Advertising video on demand (AVOD), such as Hulu, as well as subscription video on demand (SVOD) that YouTube and similar sites offer continue to bite into the market share of broadcasters. However, many companies are finding that the most effective use of their advertising budgets comes by combining old and new technologies in their campaigns.

• The information that companies collect about their customers and potential customers by tapping online sources can be applied to make their ad spends on traditional broadcast media more effective.
• Adding a QR code to a broadcast allows customers to make purchases from their phones quickly and simply.
• The same people who respond well to direct video pitches will appreciate receiving the information via email.

Resources on Broadcast Advertising

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Helping Companies Capitalize on a New Era in Advertising

Companies owe it to themselves to take advantage of new advertising technologies that provide more avenues and techniques for reaching current and prospective customers. However, they may be leaving money on the table if they neglect to leverage the benefits of print, broadcast, and other traditional media. Consumer attitudes about and responses to various types of advertising change rapidly, but the need to attract and interact with customers in helpful, welcoming, and unobtrusive ways remains as important as ever.

Infographic Sources

CNBC, “How Google’s $150 Billion Advertising Business Works”

Digital Media Solutions, “What Is AVOD?”

eMarketer, “Google, Facebook, and Amazon to Account for 64% of US Digital Ad Spending This Year”

Google, “8 Steps to Prepare Your Campaign for Success”

HubSpot, “The Ultimate Guide to PPC Marketing”

Maz Systems, “What Is SVOD? A Beginner’s Guide to Subscription Video on Demand”

TV News Check, “Targeted Ads Lead NextGen TV’s Revenue Chase, Execs Say”