10 YEARS OF ADVERTISING INNOVATION: Click here - 10 years of online advertising

Heading into 2004, the 10th anniversary of the first banner ad, Charlotte Goddard takes a look back at the first decade of online advertising.

It all started back in 1994. While the UK public was transfixed by the idea of becoming instant millionaires thanks to the new National Lottery, Americans were following OJ Simpson's dramatic car-chase live on TV and the world in general was glued to Brazil winning the World Cup (some things don't change), an agency called Modem Media was busy inventing online advertising. Launched in 1987, the firm was already involved in interactive advertising, but in 1994 it created what is known as the first internet banner ad.

"Advertising didn't exist on the internet, but the internet existed," comments GM O'Connell, founder and chairman of Modem Media. "We had been working with two clients, AT&T and Coors Brewing Company, on other interactive platforms and started looking into how they could advertise online."

Most histories of internet advertising cite HotWired, the online version of Wired magazine (now owned by Lycos.com) as the very first web site to carry a banner ad, in October 1994. However, O'Connell says the honours should actually go to Global Navigator Network, since bought by AOL and then closed. "The one that got all the news coverage was HotWired, but the GNN banners actually ran two to three weeks before HotWired," he says.

Modem was involved in creating and placing both sets of banners, which advertised AT&T and Coors beverage Zima, a clear malt drink. "The PR value of being the first to advertise online exceeded the actual reach of the ads," comments O'Connell. "In the case of Zima, Coors wanted to associate the brand with new trends, things on the emerge, and at the time only people in the know knew about the internet - your Mum had no idea what it was."

David Bryant, creative director at Modem Media, agrees that early internet advertising was about PR, not reach. Bryant was involved in digital advertising early on, working on online ads for Levi's at BBH in 1995 (see box, p36).

"Back then the internet was a PR opportunity, and to say you had a web site made you cool and funky, and good-looking," he points out.

The first internet banners didn't appear out of nowhere - closed networks such as Prodigy in the US were already taking banner-shaped ads with rudimentary graphics, although these were at the bottom of the screen rather than the top. The very first banner campaign attracted 42 per cent clickthrough, according to O'Connell, a figure that would probably cause fainting fits among today's online marketers who are dealing with an average clickthrough rate of 0.17 per cent.

"It was the novelty factor; the fact that you could click through these ads and be taken to another place," continues O'Connell. "Back then, even hyperlinks were the subject of fascination. We would show clients the internet and say 'when you see these blue things, they are called hyperlinks and you can click on them and be taken to another page'."

Back then, even the most simple navigation had many people stumped, so early banners tended to say 'click here'. "Everything you now take for granted, such as Flash and Java, wasn't happening," says Bryant (see box, p35). The first banner ads aroused interest, but though it now seems digital advertising has come a long way since 1994, at the time not much seemed to be happening. "Just as things appear to look closer in the rear-view mirror, looking back it seems things developed really quickly, but at the time it seemed very slow," says O'Connell.

Other sites such as Yahoo! started carrying internet advertising and in mid-1996 AT&T carried out the first 'roadblock', again through Modem Media, which involved placing interactive banners on the home pages of the top 50 US web sites. Also in 1996, ABC Electronic was founded in the UK to audit both sites and internet ad campaigns. Meanwhile ad-serving companies and networks such as Real Media launched in the UK to help advertisers plan and buy their online campaigns. However, most firms were more interested in getting sites up and running than online advertising per se, with only a few innovators like Levi's and Vauxhall taking the plunge in the UK.

Then came the dotcom boom when start-ups dominated the landscape with their talk of revolutionising existing business models, mainly through e-commerce. "In 1997, everyone suddenly went e-commerce mad and advertising sank quietly into the background, as it had done when everyone was concentrating on putting up their web sites," says Bryant. However, Kevin Ryan, chief executive of digital advertising technology firm DoubleClick, thinks e-commerce was a necessary development for the growth of web advertising.

"The key thing that was necessary to make internet advertising work was e-commerce," he states. "If people aren't buying online, you cannot reach them."

According to O'Connell, the period during and after the dotcom boom was lacking in innovative online advertising because, "at first, everyone was trying to make money, and then came the crash. The industry was also set back by the increasing amount of abuse of users, with annoying, intrusive advertising, some of which actually tried to fool you into clicking on it."

However, DoubleClick's Ryan believes "the biggest misperception is that people tend to think the boom of the late 90s and subsequent crash got in the way of the normal growth of internet advertising. When we were raising money in 1996, we were telling people that we thought the online ad market would be worth $3 billion by 2001 and they were throwing us out of their offices, saying that it's impossible to get there that quickly," he says. "If you told me then that, not only would the market be worth $6bn, but that people would be very depressed about it, I would have been very surprised."

During the dotcom boom, says Tim Brown, managing director of Real Media UK, advertisers' aims were different to what they are now. "When a lot of venture capital was being pumped in, the goals of advertisers were about spending marketing money, driving traffic to their web sites, and getting brand association by appearing on the right sites," he says.

"There was a lot of thinking along the lines of 'I must do that AOL deal at whatever price because I need to stay on the right side of investors'." Now, according to Brown, there has been a fundamental shift in client objectives. "They're looking at the medium more carefully and are much clearer about what they're trying to achieve, whether that's a sale or a brand-awareness drive."

Andy Hobsbawn, managing director Europe of Agency.com, believes that the growth of viral marketing has also been important to the development of internet advertising. "The concept of viral marketing was definitely a key point at which marketers understand what works online," explains Hobsbawn, citing both Hotmail and Netscape early proponents of the tool.

The early years of this century saw a raft of ad formats being developed as advertisers wanted to go beyond the banner and run branding campaigns online, as well as direct response. The Eyeblaster platform was launched in 2001, with the first US campaign in May, for the release of the film Moulin Rouge. Eyeblaster enabled firms to run dhtml floating ads, which pass over the screen and come to rest in a banner or a button. Other formats included Tangozebra's Toast pop-ups, which One2One was the first advertiser to use, and expandable banners used by companies such as NTL. Yahoo!, MSN and others were creating their own ads like Yahoo!'s page tear.

All this rich-media innovation was great for the more cutting-edge online advertisers, but those who just wanted to dip their toes in the water could be put off by so many formats. Two factors worked to encourage these advertisers to step online: the development of paid listings and sponsored ads on search engines like Overture, Espotting and Google (which were highly trackable and affordable); and the IAB's standardisation of ad formats. Last month, the IAB unveiled a toolbox of six standard formats, including the banner and the Skyscraper.

Donald Hamilton, managing director of ad network and development company AdLINK, believes that the IAB's rationalisation of formats is important for the development of online advertising. "You'll always get individual sites doing different things," he comments. "But with print, with TV, you can buy X format - a half-page ad or a 30-second slot - at Y price, and that's what the online offering needs to look like."

Brown agrees: "We went jargon-crazy and did everything we could do to confuse the hell out of advertisers," he says. "We need to push towards talking the same language as advertisers in other media. Forget impressions or clickthroughs, we need to talk about reach and frequency. However, we shouldn't play down the benefits and differences of this medium."

Digital agencies are also coming to resemble their offline counterparts.

Paul Banham, creative director at itraffic, is keen to introduce the traditional ad agency structure of creative teams in his offices. "This is an absolute necessity if we are to improve the current mediocre state of the majority of online advertising," he says. "When new media was booming, we had the problem that agencies hired designers and the concepts were driven by them, but designers are not marketers. There is no reason why the traditional, creative team shouldn't work online as it does for TV."

The rise in the number of digital agencies appointing non-executive directors from the traditional ad industry, such as John Bartle and Ken New, may have something to do with the move towards a more traditional structure.

Today, digital agencies are also more likely to get involved in developing marketing campaigns from the start, rather than being brought in at the last minute and asked to do something interactive. Firms are also starting to divide up the marketing budget according to need, rather than allotting an amount to digital just for the sake of it.

Both Peter Ebsworth, marketing manager at Heinz, and Joe Sikorsky, digital marketing manager at BA UK & Ireland, agree that digital budgets could fluctuate, depending on the role that the medium is expected to play in an individual campaign. Digital will have to fight for its own share of the marketing budget alongside TV, press, sales promotion and other channels.

"The online budget is now being allocated at the same time as the offline budget, so it can be given whatever sum is needed for that particular campaign," explains Sikorsky. "In the past, it was more like 'here's £50,000, so go off and do whatever you need to do', but that attitude has really changed now," he adds.

"Online advertising has gone through a huge peak, and then a tremendous valley, and now it is starting to level out," concludes Modem's O'Connell. "But what has been fairly constant is people's growing use of and dependence on the internet to get things done. In the last two or three years, some of the larger formats that we've seen, combined with greater bandwidth and users' growing acceptance that they can get stuff done online has advanced the industry dramatically." ONLINE ADVERTISING TECHNOLOGY

After 1994's banner, the first technology to fundamentally change the face of internet advertising was Java, a programming language that delivered 'applets' - small, executable programs - to web browsers. Designed by Sun Microsystems, by 1996 Java became established as the language of choice for programmers developing early multimedia ads.

Early Java interactive ad banners let users enter email addresses or data and delivered basic animation. "The use of Java in online advertising heralded the advent of rich media," says James Booth, founder and managing director of digital marketing agency Tangozebra. "Often cumbersome, the ads excited many and set up the mindset for when Macromedia's Flash appeared."

The birth of an enhanced version of html, the standard language for creating web pages, was the key catalyst in the take-up of Flash. Dhtml, which emerged at the start of 2000, gave control over the layers within a page - cue expanding banners, pop-ups, Skyscrapers and Overlays.

After the appearance of Dhtml, Flash soon stole Java's crown as the internet ad language of choice. Flash had many more creative possibilities as file sizes were smaller, mainly thanks to the use of vector graphics.

Flash-based applications were not run by the browser, as happens with Java, but by a downloadable plug-in, which didn't encroach on the browser's memory usage.

"We were die-hard Java supporters until we realised that we were unable to deliver what we wanted to deliver," remembers Booth. "Suddenly, rich-media advertising took on a magical quality."

Flash and Dhtml may have revolutionised advertising formats, but the advent of broadband and better computers are bringing even more possibilities to the table, as file sizes increase and streaming video ads become possible.

A whole new range of online ad formats is on its way.

By Josh Brooks

LEVI'S EXPERIMENTS TO ENSURE IT STAYS AT THE CUTTING EDGE

Fashion brand Levi's has always been at the cutting edge of online advertising. In 1996 ad agency BBH worked with digital agency Obsolete (which became Lateral) on two full-page online ads - a 3D DNA spiral and a pair of randomly generated snowflakes - the idea that each pair is unique.

"At that time the mindset was 'let's get a site up'", says David Bryant, then copywriter at BBH and now executive creative director at Modem Media.

"Advertising on the web was a weird idea. But Levi's was really into it."

The ads appeared on Alpha World, a virtual community that launched in 1995, and were 3D sculptures that became full-page ads when they were clicked on.

Levi's went on to run other innovative promos via Lateral, including a pan-European dhtml campaign using the Flat Eric icon in Spring 1999; a 'parasite' push in 1998 where Levi's hijacked sites with new content and links; and media placement involving buying all of Yahoo!'s 404 'Page not Found' error pages.

"The formats we looked for were about building the Levi's brand, and they tended to be loud and out there," says Jon Bains, chairman of Lateral.

"Our brand has been most successful when we have been innovating," says

Helene Venge, direct-to-consumer marketing manager at Levi Strauss Europe. "We want to be the leader in the digital medium."

BA SCORES WITH SOME PIONEERING FIRSTS IN THE INDUSTRY

As one of the UK's internet advertising pioneers, British Airways has notched up a number of firsts.

From being the very first advertiser to use the Unicast Superstitial format in Europe, at the end of 1999, to being the first to use the full-page peel execution in the UK at the end of 2003, BA has always been at the cutting edge of digital marketing.

Other landmarks for the airline include the first use of a transitional interstitial in the UK (2000), first use of the point-and-roll format in Europe (2001) and the first use of Connextra's real-time contextual unit (2002).

"There is a PR value in being the first to use a particular format, as well as using it to get a message across," points out Joe Sikorsky, digital marketing manager at BA UK & Ireland.

The airline has changed the way it approaches online advertising over the years.

Initially, the company ran all its online advertising from a separate department within its e-commerce team. This later developed into a more global approach, with BA employing e-commerce managers around the world to look after the digital side of things. Then, a year and a half ago, responsibility arrived at the door of the marketing department.

"We are now able to run campaigns that are far more integrated, and our online media and creative agencies work closely with our offline agencies," explains Sikorsky.

He believes that companies are now paying much more attention to results, with search-engine marketing playing a much greater role than it has done previously in the marketing mix.

"We didn't pay that much attention to search engines before, but now we have a search-engine strategy," adds Sikorsky.

10 YEARS OF PLANNING AND BUYING

"In the early days of internet advertising, there was no DoubleClick or Real Media," says David Bryant, creative director at Modem Media.

"You phoned up whoever owned the web site and did a deal with them." Then along came the ad networks and technology companies, offering media networks selling aggregated inventory for a range of sites, allowing advertisers to run ads over several different properties and technology to serve those ads.

Ad networks were subject to the vicissitudes of the market. Real Media, which launched in the UK in 1996 and was acquired by Nasdaq-listed 24/7 in 2001, grew from a handful of staff to over 1,000 all over the world, but has now shrunk to 300.

DoubleClick, a spin-off of digital agency Poppe Tyson (now Modem Media), was launched as an internet sales group in 1995. In 2001 it served its trillionth ad and a year later it decided to focus on technology rather than media by selling its media network to AdLINK in Europe and MaxWorldwide in the US.

"A big change from the technology point of view is that ad agencies used to give you the creative and you'd run it on an ad-management tool, which was a lot of work from an admin point of view," says Tim Brown, managing director of Real Media UK. "Now agencies have their own ad-serving tools which gives them more control over the delivery of a campaign."

Today, advertisers can choose between single-site deals, running a campaign across a themed network of sites or going for reach with volume buys.

They have more payment options, not just cost-per-thousand but cost-per-action and clickthrough. The likes of ValueClick and the paid-for search engines have highlighted the options.

"Publishers have grown up and won't take every pop-up or interstitial in the market," says DoubleClick chief executive Kevin Ryan. "Advertisers are more concerned with demographic and lifestyle."

VAUXHALL DRIVES SALES WITH AN INNOVATIVE ONLINE STRATEGY

Car manufacturer Vauxhall has been an active online advertiser almost as long as the medium has been around.

The firm, which launched a brochure-style corporate web site (www.vauxhall.co.uk) in 1996, was already running banner ads in 1995 to back a microsite promoting its Frontera brand. Innovation followed thick and fast.

In June 1996, Vauxhall's parent, GM, sponsored The Guardian's Euro 96 soccer site in a £400,000 deal via Lowe Digital, supporting it with an online ad promo that included Java-based banners. And, in 1998, the firm ran an exclusive competition to win a Corsa SXi on Lycos, created by BMP interAction.

However, early activity was heavily based around branded sites rather than advertising as such, according to Stuart Sims, relationship marketing manager at Vauxhall.

"We really started ramping up on online advertising towards the tail-end of the 1990s," explains Sims. "That's when we started to include online advertising in our overall media buys."

Nowadays, the car firm's integrated take on digital media means that its above-the-line ad agencies are instructed to shoot extra footage specifically for the internet. "We would never have been prepared to invest that kind of money a few years ago," admits Sims.

"The advent of broadband lets us do so much more in terms of streaming ads."

Sims believes it's important for Vauxhall to continuously invest in new formats on the internet. "A brand like Vauxhall will be trying to appeal to a younger audience, which is impressed by companies that innovate online," he explains. "For us, it is not just about advertising online, but about choosing innovative ways of doing it."

This focus on innovation is paying dividends. A recent campaign for the sports car VX220 Turbo, which aimed to get people to pay £175 for a test drive, exceeded targets by 300 per cent, according to Sims.

An online movie, which was designed to convey the excitement of driving the roadster, was shown on a specially built microsite, along with video, sound clips and technical information.

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