History of Online Advertising

Instructor: Danielle Reed

Danielle works in digital marketing and advertising. She holds a bachelor's degree in English and an MBA.

In this lesson, we cover the history of online advertising, which began in 1994 with the world's first banner ad. Learn about the start of click-through rates, keyword-based ads, cost per thousand impressions, and more in this lesson.

Online Advertising History

Look at your Facebook page. You'll see advertisements on the right of your feed, you'll see ads built in to your home page, and when you click away from Facebook, you'll definitely see ads on every site you visit. The history of online advertising began not too long ago, but the industry is simply booming. Online advertising is marketing that involves using the internet to get new customers, deliver marketing messages, and bring in website traffic.

A Timeline of Events

The advent of the internet meant everything sped up in the world of advertising. In just a few years, online ads went from the first banner ads ever to organized sales, standard sizing, and CPM. So, how did it all begin?

The First Advertisements

On October 27, 1994, the first online ad was posted. It was a banner advertisement added to a web page. The website that posted the first ad was a precursor to today's tech site, Wired. And so began online advertising. A banner advertisement is a rectangular, graphic display that stretches the length of a website at the top or bottom of the page.

AT&T paid the website $30,000 for the banner ad to be placed at the top of the site for three months total. The click-through rate of the advertisement was 44% (today's average for the same type is about .05%)! Click-through rate is the percent of people that visit a web page and click on a particular advertisement.

An example of a banner ad
banner ad

1995 Introduces a New Pricing Model

In 1995, large companies started to get into the online game and spend on keyword-based advertisements. AT&T and Saturn purchased banner ads, media sites (like CBS) started launching their websites, and the Internet Advertising Council was assembled.

A new advertising model came out in 1995. Netscape and Infoseek (two popular search engines) converted to a pricing model of cost per thousand impressions (CPM), which is pricing per 1,000 advertisement impressions on one webpage. The ''M'' in CPM actually stands for the roman numeral for 1,000.

Organized Advertising Takes Over in 1996, Pop-ups Pop in 1997

The biggest thing that came about in 1996 was the emergence of Doubleclick. This company allowed for companies to track how many times their ads actually were seen and how often they were clicked. Now, companies could see if their money was being spent well. Some would call Doubleclick advertising the first internet marketing company.

In 1997, pop-up ads were invented, but they quickly became a serious annoyance to users. Some even call them the internet's most hated advertising technique. Pop-ups are still used, but browsers often stop them from being shown.

1999 Through the Dotcom Bust

Advertisers noticed that search engines were the aggregators of all data and information online. In 1999, search engines connected with companies to generate paid search advertising and pay per click. The first company to introduce paid search advertising was GoTo.com, and just like today, advertisers bid on keyword prices to be shown at the top of search engine results. This led to pay per click in which a company pays for each ad click generated on an advertisement.

Google AdWords was introduced in 2000, and not long after came the quality score model. Google rates ads based on quality score, and those with a higher score are more likely to be shown. Some aspects of a Google quality score include the click-through rate, relevance of keywords, your historical performance of previous ads, and more. (The quality score model is still used today).

Because of the dotcom bust, a number of prominent internet companies went down in 2001. Progress halted for a bit because companies didn't have time to innovate when simply trying to survive.

2005 and Beyond: Ad Targeting Develops

As the market for ads and the number of ads placed throughout the internet began to grow, companies couldn't get away with a standard banner ad on a website. Advertisers found a way to integrate ad content to appeal to users of the website. Social media sites were the right way to do this.

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