The Ads Affair: How the Ad Industry Has Changed and Is Changing

The growth of digital advertising

The first digital ad appeared online in 1994 when HotWired (later known as Wired) began selling banner ad space on its website. AT&T seized the opportunity for brand exposure and paid $30,000 to place an ad for three months. The result was a click-through rate (CTR) of 44 percent — significantly higher than today’s average CTR of around 0.5 percent for display ads.

Fast-forward to 2024, when the digital ad industry was estimated to be worth $600 billion, according to Precedence Research. A key reason why digital ads grew so significantly was that, early on, companies realized this marketing technique could be easily customized toward specific user groups.

Moreover, digital ads could reveal insights about user behavior and generate data that helps businesses better understand their audiences. As the industry began to gain momentum, data tools emerged that offered the option to analyze and optimize ad campaigns. This allowed ads to enter a new territory of more complex ROI models.

With this relationship, both sides get something: Companies earn valuable data, and customers receive personalized content, such as quiz results, white papers or product recommendations. This type of direct value exchange is essential for sustaining long-term marketing efforts, especially as mistrust in digital ads has grown over the years.

Desktop to mobile — and the shift toward targeting

In the mid-2000s, the rise of social media and mobile advertiser IDs meant companies could identify and follow persistent customer identities. This practice allows companies to sync customer browsing behavior on desktop and mobile — as well as their offline activity — through device location.

Shifts in digital advertising

Several notable shifts occurred during this time:

• Facebook’s approach: Facebook was one of the first to experiment with how to present ads to users. Rather than overwhelm people with repetitive ads, it chose to run fewer unobtrusive ads integrated into news feeds. This was an effort to make them seem like a natural part of a user’s updates.
• Expansion across platforms: YouTube, Twitter (now X) and Instagram later launched their social media marketing capabilities.
• Google’s mobile-first algorithm: By 2017, half of all internet traffic was accessed from mobile. So, Google changed its search algorithm to prioritize mobile-friendly websites over sites not optimized for mobile. This forced many companies to shift their ad strategies toward mobile.

Consumer response to digital ads

However, according to a recent study by Bango Audiences, many consumers still have negative perceptions of digital ads:

• Two-thirds of respondents said most of the digital ads they see are irrelevant.
• Thirty-nine percent find the number of ads they see excessive.
• Around half of consumers unsubscribe from or block a brand due to irrelevant ads and perceived intrusiveness.

That’s not to say that modern-day marketing means turning away from online ads. Rather, companies should focus on fewer, more relevant ads tailored to a brand’s target audience. In fact, the Bango Audiences study found that 49 percent of consumers actually enjoy ads for products they’re interested in. Marketers have taken the concept of user-first marketing to focus their advertising strategy on targeting specific users with ads that will hopefully resonate.

“At first, it was all about reach and frequency — buy as many impressions as you can,” said Andrew Barrow, founder of Revenue Arc. “Today, ads are micro-targeted down to specific user behaviors and interests.”

Rising concerns about privacy

Social media ads’ have become highly targeted in nature. So, data scraping and online social tracking have become ways for businesses to collect more in-depth insights about their target audiences. Social media sites might warn users that they will have access to user data, but there isn’t always confirmation that it won’t be shared or sold to third parties.

Opt-out options and accessibility issues

Several shifts took place to address rising privacy concerns. For example:

• TikTok: In 2019, TikTok launched a setting called “personalized ads” that allowed users to block the app from using personal information to show targeted ads. (Since then, TikTok has updated its policy in some regions.)
• Instagram and Facebook: Both platforms allow users to opt out of targeted ads in Settings.
• X: X lets you manage personalized ad settings.
• Google: Google allows you to adjust your ad settings to turn off “Personalized ads.”

However, requiring users to opt out of advanced targeting inherently favors tech-savvy users, while seniors and children may not understand how to turn off these settings. Additionally, most people use social media across multiple devices, and, in some cases, privacy settings must be updated across every phone, computer and tablet. Plus, while users can limit ads, they cannot entirely remove them, and some data collection may still occur.

The decline of third-party cookies

Beyond increasing privacy controls, third-party cookies are on the decline. Many browsers currently block them, and Google plans to phase them out sometime in 2025.

“With the end of third-party cookies imminent, brands are turning to first-party data and contextual targeting,” explained Saleha Malik, co-founder of S-SQUARED. “Privacy concerns and regulations like GDPR have forced a recalibration of strategies, putting consumer trust and transparency at the forefront.” [Read related article: GDPR: Email Marketing in the Age of Digital Privacy]

In response to these changes, companies must find new ways to understand and meet customer needs while respecting privacy. The key to ethical marketing is voluntary user consent rather than covert tracking.

The Facebook ads boycott

In 2020, Facebook faced scrutiny for the following:

• Microtargeted political ads: Facebook came under fire for its role in running microtargeted political ads. The company refused to prevent advertisers from using user data and behaviors to target political ads.
• Suspect ads: Facebook also said it wouldn’t block newsworthy political ads that violated its speech policies.

Consider the 2018 Cambridge Analytica data breach, in which millions of Facebook users’ information was harvested for political advertising. On its heels, Facebook faced pressure to address its approach to digital advertising.

In July 2020, more than 1,000 companies, including Adidas, Coca-Cola and Hershey, boycotted ads on the platform under the hashtag #StopHateForProfit. They demanded better policing of harmful and misleading content.

For many businesses, joining the boycott was an automatic decision. However, participation was dominated by larger companies with disposable marketing budgets.

Smaller brands that couldn’t afford to sacrifice their marketing goals tailored their participation to show support without harming their bottom line by:

• Pausing ads briefly (for a few weeks instead of months)
• Investing ad budgets in social initiatives
• Using alternative ad techniques, such as quizzes, to capture leads

Decline in strong creative

As companies seek to better target their audiences across social media, there has been a rise in user-generated content and influencer ads. Unlike big-budget commercials with a carefully thought-out creative strategy and a highly polished look, these ads are designed to be produced quickly, cost less and appear authentic rather than scripted.

The current strategy of generating a high quantity of lower-production ads certainly has its benefits; this is especially the case for brands looking to find cost-effective ways to appear in their target audience’s feeds. But it may be having a negative long-term effect.

“We’ve unfortunately seen a decline in the emphasis placed on brilliant creative, even though all the data points to creative being one of the most powerful levers that can be pulled to make campaigns more effective,” said Peter Bray, founder and executive creative director of Bray & Co. “The reason for this is clear: The platforms don’t make money from creative brilliance, so they don’t advocate for it.”

Opt-in marketing: A quiz-based future

Digital advertising is set to become a consumer-driven movement. As consumers become more privacy-conscious, companies must move to new, transparent ways of promoting their products.

True, customers’ greater autonomy over their data will make in-depth tracking and audience profiling more difficult. However, the good news is that there are other options, such as quizzes — a form of interactive content that benefits both consumers and brands.

Here’s why quizzes work:

• Quizzes are user-driven and directed. People take them to learn something about themselves or a topic, considering them a value-add. They can be more effective than traditional ads because they establish a question-and-answer dialogue.
• They aren’t disruptive. Consumers voluntarily submit data, making this technique less intrusive to the user experience.
• Quizzes increase conversions. Interactive content, such as quizzes, almost doubles conversion rates compared to passive material, according to a Demand Metric study. Why? Quizzes trigger consumer curiosity by rewarding them with insights — whether it’s testing their knowledge (“How much do you know about investing?”) or personalized product recommendations (“You’re a savvy saver!”).
• They bring brands valuable data. Companies gain voluntarily provided insights into how customers view themselves. Since users seek meaningful quiz results, they provide truthful responses. Unlike traditional tracking methods, quiz data is gathered ethically and offers qualitative insights rather than just numerical metrics.

Freely given, accurate and personal data is a powerful alternative for an advertising industry facing rising privacy concerns and consumer distrust. In the future, expect advertisers to shift from collecting data from an unwilling public to embracing consumer-led marketing channels such as quizzes.

The future of advertising

Although advertising evolves, some things remain the same. Consumers still seek authentic engagement and continue to rely on social media and QR codes for product referrals and brand information. However, emerging trends, such as AI-driven marketing, are shaping the future of customer experiences.

Here are a few trends to consider as you look toward the future of advertising.

Specialized agencies

In the past, businesses primarily relied on large advertising agencies to deliver their brand message to the masses. Working with a nationally known agency that hired the most creative and award-winning marketing team could elevate your brand. However, the shift to hyper-targeted digital ads means that the broad, mass-marketing approach no longer works.

“Under the surface, there’s a sense that the giant holding company model, while still influential, is growing unwieldy,” said Barrow. “We’re witnessing a quiet shift toward leaner, more specialized teams who can move quickly without the overhead.”

Expect smaller teams and digital marketing agencies that understand the ins and outs of specific target groups. Advertising strategy will be less about getting views and more about building brand communities.

“Specialist agencies that can embed brands in the lifestyle of real community conversations, irrespective of size, will surely dominate,” explained Wil Shelton, founder and CEO of Wil Power Integrated Marketing. “Expect hyper-local, culturally savvy strategies in place of traditional mass approaches with ROI becoming increasingly tethered to community participation, not reach.”

Connected TV ads

Connected TV (CTV) ads on platforms like Apple TV and Roku are expected to grow significantly in the coming years. As consumers continue embracing their favorite paid subscription apps, there has been a sharp rise in FAST (free ad-supported streaming TV) channels.

In 2022, Netflix and Disney+ added an ad-supported tier to their streaming services. In May 2023, the most-watched CTV app, YouTube, followed suit; it introduced a 30-second non-skippable ad option for CTV to attract advertisers.

The benefit of CTV ads is that brands can more precisely target consumers based on the audience demographic of the streaming content. First-party data can also be leveraged to reach people who have already shown interest in the product or service. CTV ads, combined with Google Ads and social media campaigns, create a multichannel digital marketing strategy that reinforces brand messaging and improves ad recall.

“Brands are also turning to connected TV ads, relying on social and Google ads to capitalize on their target audience,” said Chelsea Gladden, founder and CEO of Everything Branding. “Once the consumer has clicked onto their online store, their connected TV, Google and social ads can retarget them until they become a customer.”

AI advances

Advertisers can use AI and generative media to engage customers with immersive experiences. AI ad features integrated into Facebook and Google Ads make it a no-brainer for companies looking to stay ahead in their industry.

“The future of advertising is being shaped by cutting-edge technologies like AI and machine learning, which will enable hyper-personalized campaigns at scale,” said Malik.

AI will tailor experiences to target audiences, creating content designed to capture a specific user type. Companies will be able to quickly generate multiple ad versions, even in different languages, for international digital marketing.

“AI-driven platforms now enable video creation, translation and personalization at an unprecedented scale,” explained Matt Panousis, COO of Monsters Aliens Robots Zombies. “Tools that can automatically synchronize lip and facial movement to dubbed audio enable advertisers to effortlessly localize spots for geographic and brand-specific target audiences.”

AI tools will also continue to streamline competitive data collection. Companies can instantly analyze product reviews and social media comments to create valuable first-party data. Leveraging this data, AI can also automate media buying, ensuring the right content reaches the right audience instantly and efficiently.

The human touch

Although technology is changing online advertising, perceived authenticity will only grow in importance as AI-generated content becomes more widespread. While AI tools can do a great deal, consumers still want to see real people and authentic stories as much as possible.

“With the rise of AI, many have ignored the fact that humans desire authenticity,” said Bray. “Authenticity was a buzzword for a while, now usurped by AI. But the pendulum swings, and the parts of the industry that understand people want ‘realness,’ not a simulation of the real, will thrive.”

Of course, AI isn’t going anywhere. Businesses will have to find ways to leverage AI while still prioritizing real, authentic brand storytelling.

“The key to success in the digital advertising space is to find the right balance between embracing automation and maintaining the human touch,” said Ameet Khabra, founder of Hop Skip Media. “While AI is great for efficiency and scalability, the human element of understanding context, creative thinking and ethical decision-making will become even more important for achieving stellar results.”

Long-term relationships

Expect businesses to prioritize building long-term relationships over one-off conversions in their advertising strategies. While metrics like CTR and digital marketing ROI remain important, companies are seeing the importance of customer lifetime value for long-term success.

“There’s a growing movement toward ‘slow advertising,’ where brands prioritize meaningful, long-term connections over short-term results,” Malik noted. “This shift may herald a return to creativity, storytelling and purpose-driven marketing.”

With the decline of third-party cookies, businesses will also focus on building trust with customers to develop long-term relationships. Privacy and transparency will remain at the forefront of brand messaging as companies shift to first-party data to deliver relevant, personalized experiences.

Julie Thompson contributed to this article.