This content originally appeared on DEV Community and was authored by jestevesv
The Evolution and Future of Online Advertising: An Analytical Perspective
In the early 2000s, the internet felt cutting-edge and advanced. It was a time of transition from Web 1.0 to Web 2.0, with businesses facing a fundamental question: should users pay to access content, or should content be free and supported by advertising?
My curiosity about the history of online advertising arose from a desire to understand the current revenue model of the internet and where it might be headed. This article explores the evolution of online advertising, its impact on the internet, and its future trajectory.
The Birth of Online Advertising
The rapid growth of the early World Wide Web, originating from scientific academia, gave us the cookie technology in 1994. Initially designed to manage shopping cart lists for early e-commerce applications, cookies became part of the Mosaic Netscape browser's beta versions. Before cookies, the internet was a private space, but they introduced a way to monitor user activity (1).
Privacy concerns soon arose. Experts worried that third-party components on websites could place cookies to track users' activities. This capability laid the foundation for the internet advertising industry, which promised lower costs compared to traditional advertising and limitless expansion opportunities (2).
The Dot-Com Bust and Recovery
A 2001 New York Times article described the dot-com era as over, with early internet entrepreneurs viewed as failed rock stars to be replaced by more conservative and intelligent entrepreneurs (3). The decline in online advertising due to the dot-com bust began to recover around 2004 with the emergence of Web 2.0, which facilitated the buying and selling of advertising on websites. By 2004, U.S. advertisers spent $10 billion on website ads, making up about 14% of all advertising spending (4).
Web 2.0 and Revenue Models
During the early 2000s, discussions on how to generate revenue from internet services were rampant. Emerging services like Facebook prompted debates on whether users should pay for online services. Some users were willing to pay to support service evolution and stability, while others believed services should remain free, supported by advertising revenue, and were hesitant to use credit cards online (5). Business implications at that time suggested that user willingness to pay for content would not be a sustainable revenue source unless the content was rich and special, leading users to appreciate its value (6).
The Rise of Programmatic Advertising
Traditional offline media initially saw online advertising as a complement, but it soon became a significant competitor. For the first time, online ad spending surpassed television ad spending in 2018 (7). Innovations like programmatic advertising in the late 2000s revolutionised the industry by automating the buying and selling of ads. Platforms like Google Ads and Facebook Ads created an ecosystem that required advertisers to learn complex analysis skills to interpret campaign results (8).
GDPR and Privacy Concerns
The General Data Protection Regulation (GDPR) has significantly impacted online advertising. Google's transition to Google Analytics 4 aims to address GDPR compliance issues, but concerns about user data privacy persist. The use of Google Analytics has been criticised for potential security holes that could share user data with third parties without consent (9).
Ad-Free Services and User Preferences
As of 2024, skepticism remains about customers' willingness to pay for ad-free services. Some streaming services, like Netflix, have experimented with lower subscription fees, while others explore ad-supported models. Consumers generally prefer targeted ads over irrelevant ones, but this raises significant privacy and security concerns (10).
The Challenge of Targeting Audiences
The effectiveness of targeted advertising is a contentious issue. An Austrian experiment demonstrated that while targeting is generally more effective than no targeting, excessively narrow targeting can lead to higher costs and lower reach (11). Apple's recent emphasis on tracking transparency has further complicated audience targeting by requiring user consent for third-party cookies (12).
The Role of Artificial Intelligence
Artificial Intelligence (AI) is poised to transform online advertising by enhancing data analysis, copywriting, and video production. AI can create adaptable advertising concepts tailored to different contexts, platforms, and devices. However, this raises questions about the ethical boundaries of advertising and the potential for AI to balance effectiveness with user privacy (13).
Conclusions
The online advertising industry has rapidly evolved into a sophisticated field dominated by tech giants like Google and Meta. However, regulatory actions and privacy concerns are shaping its future. More research is needed on the impacts of advertising on the public, the consequences of ad-skipping, and the perceived value of free services supported by advertising. The effects of regulation and legal cases will soon become evident, influencing the industry's trajectory.
Sources
(1) Dean Donaldson (2008): Online advertising history
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Consulted on 24/06/2024
(2) Karrie Chen et al. (1999): The history of advertising
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Consulted on 24/06/2024
(3) John Schwartz (2001): When the internet was, um, over?
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Consulted on 24/06/2024
(4) Masoud Nosrati et al. (2013): Internet Marketing or Modern Advertising! How? Why?
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Consulted on 24/06/2024
(5): L. Richard Ye et al. (2004): Fee-Based Online Services: Exploring consumers' willingness to pay
Link
Consulted on 24/06/2024
(6) Cheng Lu Want et al. (2005): Subscription to fee-based online services: What makes consumer pay for online content?
Link
Consulted on 24/06/2024
(7) Lucian Blaga (2022): Online advertising - History, evolution and challenges
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Consulted on 24/06/2024
(8) Charles R. Taylor (2024): Ad skipping, the "ad free internet" and privacy: a call for research
Link
Consulted on 24/06/2024
(9) Iman Ahmadi et al. 2024): Overwhelming targeting options: Selecting audience segments for online advertising
Link
Consulted on 24/06/2024
(10) Maria Rigou et al. (2023): Online Ads Annoyance Factor: A Survey of Computer Science Students
Link
Consulted on 24/06/2024
(11) Eyice Başev, S. (2024): The role of artificial intelligence (AI) in the future of advertising industry: Applications and examples of AI in advertising
Link
Consulted on 24/06/2024
This content originally appeared on DEV Community and was authored by jestevesv
jestevesv | Sciencx (2024-06-24T16:21:59+00:00) The Evolution and Future of Online Advertising: Balancing Innovation with Privacy. Retrieved from https://www.scien.cx/2024/06/24/the-evolution-and-future-of-online-advertising-balancing-innovation-with-privacy/
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