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Advertising Agencies

Richards, Barry, MacRury, Iain, and Botterill, Jackie (2000). The pers, on posters, and in handbills (Wells, Burnett, &
dynamics of advertising. Amsterdam: Harwood Academic. Moriarty, 2000). Because it was difficult to reproduce
Semenik, Richard J., and Bamossy, Gary J. (1995). Principles of illustrations, most of these ads were simple text-based
marketing: A global perspective (2nd ed.). Cincinnati: South- items.
Western.
By 1900, the first specialized magazines had begun to
Special report: Leading national advertisers. (2002, June 24). appear in the United States. Magazines such as Field &
Advertising Age.
Stream (in 1895) and Good Housekeeping (in 1900) estab-
Tellis, G. J. (2004). Effective advertising: Understanding when, lished niche markets, which allowed for mass marketing
how, and why advertising works. Thousand Oaks, CA: Sage.
to consumers with varied interests. Also, print technology
had evolved considerably, making full-color illustrations
Allen D. Truell possible. Advertising agencies began to use the new tech-
Michael Milbier nology to create more attractive advertisements for the
new niche markets, thus becoming creative centers rather
than merely space brokerages.
The late nineteenth and early twentieth centuries
ADVERTISING were also times of public concern about unethical business
AGENCIES practices. Many professions formed their own organiza-
Advertising agencies are independent businesses that tions to create ethical standards of operation. The Amer-
evolved to develop, prepare, and place advertising in ican Association for Advertising Agencies (AAAA) was
advertising media for sellers seeking to find customers for founded in 1917 to represent the agencies, partially in
their goods, services, and ideas (American Association of response to these ethical concerns.
Advertising Agencies, 2000). Advertisers use agents when Newspapers also set their own ethical standards con-
they believe the agency will be more expert than they are cerning rates charged for advertisements. By 1917, pub-
at planning and creating advertisements or at developing lishers had agreed to set a flat rate of 15 percent as the
an advertising campaign. As businesses have become standard commission an advertising agency would receive
more complex and diversified, many of them have con- with the exception of local advertising, for which there
sulted agencies to help them carry out their marketing was generally no predetermined commission (Lane et al.,
communication efforts. 2005).
The modern advertising agency provides a variety of In addition, two laws were passed to alleviate con-
important services to clients, including media planning cerns about unethical advertising practices. The Federal
and buying, research, market information, sales promo- Trade Commission Act of 1914 was originally designed to
tion assistance, campaign development and creation of make all unfair methods of competition unlawful. It was
advertisements, plus a range of services designed to help not until 1922 that advertising was legally regulated under
the advertiser achieve marketing objectives. The first this act. The case that set this legal precedent was FTC v.
advertising agency in the United States was opened in Winsted Hosiery Company (1922) (Lane et al., 2005). The
Philadelphia by Volney Palmer in 1841 (John Hartman Pure Food and Drug Act of 1906 was the first act that lim-
Center, 2000). At this time, advertising agents were ited the advertising of patent medicines—drugs that were
largely space brokers agents who solicited ads from busi- advertised using exaggerated claims of effectiveness—for
nesses and then sold them to newspapers that had diffi- use by children.
culty getting out-of-town advertising (Lane, King, &
Russell, 2005). EVOLUTION OF THE ADVERTISING
AGENCY FROM 1920 TO THE EARLY
EVOLUTION OF THE ADVERTISING 1950S
AGENCY FROM THE 1870S TO THE During the first part of the twentieth century, agencies
EARLY 1900S expanded their role from one largely comprised of selling
While the invention of printing paved the way for the space to one of “full service” to clients—involvement in all
development of modern advertising, the influence of advertising functions, from market research to ad produc-
salesmanship began to influence the evolution of advertis- tion, to space buying (Jones, 2004). Agency development
ing toward more like what we recognize today. The adver- was stimulated after World War I when consumers were
tising agency, working on a commission basis, has been demanding more goods and services (Wells et al, 2000).
chiefly responsible for this evolution. During the late By the 1920s, market research suggested the role of
nineteenth century, most advertising appeared in newspa- women in making many family purchasing decisions.

20 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION