Today, digital ads are everywhere. But just two decades ago, they were rare and not that easy to customize.
The digital advertising market is segmented by platform into mobile ads (in-app and mobile web), desktop ads, digital TV, and other platforms. According to Statesmanan estimated $566 billion will be spent on digital ads worldwide in 2022. This number is expected to grow exponentially in the coming years, reaching $1.25 trillion by 2030.
A Brief History of Digital Ads
The global digital advertising market was worth nearly $486 billion in 2021, having grown at a compound annual growth rate (CAGR) of 18.5% since 2016. Digital ads are displayed on online channels such as websites, services streaming, social media and more. It also comes in different media formats including text, image, audio, and video.
The first digital ads
The first digital ads appeared in 1994, when HotWired began selling ad space on its website. US telecommunications giant AT&T picked up the ad for $30,000 over three months. The digital ad saw a click-through rate of 44%, whereas today the average click-through rate hovers around 0.06%.
The change in digital advertising was pioneered by Facebook, as the social networking site set its sights on monetization. With access to an unprecedented amount of data, Facebook Ads could experiment with how to present ads to users.
Facebook ads enter the scene
Facebook Ads reshaped the digital advertising industry. The company launched its first ad revenue project called Flyers in 2004.
The flyers allowed students and businesses to place ads on Facebook, targeting specific campuses. As Facebook was in its early stages, it was still trying to find a foothold in the world of printmaking.
With the success of Flyers, Mark Zuckerberg launched the ad service called Flyers Pro, which had an auction-based model. It was the beginning of a new era.
By 2005, big companies like Apple and Partypoker had started investing in Facebook ads, as the popularity of the social media platform skyrocketed.
The launch of the Facebook Ads platform in 2007 made it the queen of digital advertising, offering targeting options while accumulating user data.
The growth of digital ads
The unprecedented success of Facebook ads pushed other companies like YouTube and Twitter.
eBay founder Pierre Omidyar said: “We finally have the technology that, for the first time in human history, allows people to actually have rich connections with large numbers of people.”
In 2007, Google’s acquisition of DoubleClick set in motion the transformation of the digital landscape. Soon after, iPhones became popular and the digital advertising industry began to investigate mobile advertising.
The term digital agency was first coined in 2008 as it combined the functions of branding, marketing, and public relations, along with social media. Brands and businesses were now looking for personalized digital experiences, and social media was driving the change.
The highly targeted nature of social media ads meant that companies were now designed to collect more detailed data about their customers.
While social networking sites often warn users that data will be collected, there is usually no explicit statement reassuring users that the data will not be sold to third parties.
Smartphones and social media ads
As the use of smartphones increased, the social media landscape grew with entrants such as Instagram, Pinterest, Snapchat, and LinkedIn, among others.
A very late entrant to the game is TikTok, owned by the Chinese company ByteDance, which is extremely popular among young people. TikTok ads, although only recently added, have quickly taken over a significant part of the US ad market.
According to figures released by eMarketer and Insider Intelligence, TikTok ad revenue is expected to account for 2.4% of digital ad spend in 2022, compared to just 1% in 2021. 3.5% of ad spend digital.
Although TikTok is growing exponentially, it has yet to beat industry giants like Facebook and Instagram. But all that could change in the blink of an eye.
Despite calls for a ban on TikTok by US lawmakers, due to data privacy concerns, it seems unlikely that the app will be banned.
TikTok is currently the third largest social media app in both the US and the world, and it seems to have cracked the code to appeal to a younger audience. Almost 47% of its users are in the 18-24 age group.
According to DISK In research, two out of three TikTok users chose a positive word to describe ads on the platform, such as “fun and engaging,” “trendsetter,” and “inspirational.” It remains to be seen how the digital ad market goes from here.