Announcer (00:02)
And now, you’re listening to the Last Analog Marketers podcast. For marketers who lived through the transition to digital and the newcomers who inherited the results. Using the past as a lens to understand the present and navigate the future with intention. With your hosts, Aaron Peterson and Jamie Jones.
Jamie Jones (00:31)
Hello, hello. Aaron, good to see you. Quick question before we start. How many ads do you think you have seen today?
Aaron Peterson (00:41)
Well I’ve been awake for about five hours, so probably many?
Jamie Jones (00:46)
It doesn’t matter. We don’t even realize how many we’ve seen anymore. Studies are getting thrown around saying that the average American sees somewhere between four and ten thousand ads a day.
Aaron Peterson (01:00)
Ugh, and that number obviously gets debated a lot, so we’re not trying to say that that’s the ‘set in stone’ number. Nobody can really agree on how to even count and add anymore, right? But yeah, it’s basically a lot. There’s a lot of background, it’s basically radiation behind us at this point, all around us happening all the time.
Jamie Jones (01:21)
My gosh. Just diving into my deep fears there about all of the cell phone signals and Wi-Fi going around my head every day. But anyway, a good segue into what we want to dig into today. Welcome to The Last Analog Marketers, the show where we make discussing marketing way more fun than it has any right to be. I’m Jamie.
Aaron Peterson (01:42)
And I’m Aaron. And today we’re kicking off part one of The History of Marketing, where we’re gonna trace how we got from a guy tacking a handbill to a wall to whatever TikTok shop is supposed to be.
Jamie Jones (01:57)
We’re not getting into TikTok chop today.
Aaron Peterson (02:00)
No, no, not today, not today. We will get into that in the next episode, possibly, but today we’re going old school. We’re going to kind of start at the beginning and do three eras of how marketing came along in America, specifically. First we’re going to talk about marketing in America before commercial radio really existed. So we’re talking newspapers, catalogs, snake oil salesmen, that whole wild west that was the start of everything.
Jamie Jones (02:26)
Right. And then the broadcast era, which is probably where most people think about advertising starting. Radio takes over, then TV, and then absolutely my favorite show ever, “Mad Men” and Madison Avenue.
Aaron Peterson (02:41)
Of course. We’d lose all cred otherwise if we didn’t talk about that show while we’re discussing the history of advertising.
Jamie Jones (02:47)
And then the third act of our content today, cable, premium TV – kind of what we grew up with a little bit – HBO, MTV, all the explosion of channels in the eighties and early nineties.
Aaron Peterson (03:02)
Yeah, I mean it’s a big episode, lots to discuss, so let’s dive right into it.
Jamie Jones (03:08)
Great. Sounds good. All right, Aaron, you’re gonna set the scene for me. If I’m an American business owner in, I don’t know, the 1800s, how do people even know about my product?
Aaron Peterson (03:21)
Back then very manually. I mean you’re talking handbills, signs painted on the sides of buildings, some of which you can still see today. I’ve seen one recently in downtown Norfolk, Virginia, for flour. And newspaper classifieds. And a lot of it is just text. It’s dense blocks of text. There’s not a lot of design to these really whatsoever.
Jamie Jones (03:44)
It sounds like some of my extended family’s Facebook posts that you just scroll right past.
Aaron Peterson (03:50)
Kind of, yeah. But the thing that’s wild here, is that at this point there’s really no such thing as an advertising agency, at least as we recognize it today. I mean, if a company wanted to advertise during this time, they’d usually just buy space directly from a newspaper or work with a broker who was basically just kind of reselling newspaper space in bulk.
Jamie Jones (04:13)
Yeah, so there’s no creative, there’s not a lot of strategy. We’re just sort of like buying the space, buying the chance to have the text.
Aaron Peterson (04:21)
Yes, basically, exactly right. And that changes though in 1869 in Philadelphia, when a 21-year -old guy named Francis Waylord Ayer starts an agency called N. W. Ayer and Son.
Jamie Jones (04:35)
N. W. Ayer and Son, but it’s his agency? It’s kind of a funny name.
Aaron Peterson (04:41)
Yeah, it’s kind of a fun and weird detail. He named it after his father, Nathan Wheeler Ayer, partly because he thought a father-son-sounding firm would look more trustworthy to clients. Which, again, is sort of its own sense of early marketing, right? Thinking through how the audience is gonna react, right? And also because his dad did put $250 in to help him start the agency. So there were sort of two reasons behind it. But yeah, ultimately he started this agency and N. W. Ayer is widely credited as the first true advertising agency in the United States.
Jamie Jones (05:17)
What made it different than just being like a space offerer or broker?
Aaron Peterson (05:25)
Kind of a few things really. So one of the first was that they pioneered the idea of an open contract in 1875, which basically meant that the agency worked for the client over time instead of just brokering the one-off newspaper buys. And so that early sign of signing that annual contract of that relationship between the agency and the brand or the client. And they were the first agency to bring on full-time copywriters and to keep an in-house art department. And so suddenly, you’ve got people whose actual job is to make the ad good, not just cheap.
Jamie Jones (06:04)
It’s so innovative. I mean, honestly, to think of it not only as putting together that entire business model, but the invention of the entire ad agency, right? They’re creating the demand and the supply all at the same time.
Aaron Peterson (06:22)
I mean, pretty much, yeah. And it worked. Obviously we are where we are today. But, going back and looking then, by 1890, not that many years later, Ayer was the largest agency in the country. They’re working with clients like Procter and Gamble, American Express, John Deere, these big brands that still exist today. But these were big emerging brands in the early parts of America. And they created some of those iconic lines that you probably can still think of or see today. You know the Morton Salt slogan, “When it rains it pours”?
Jamie Jones (06:55)
Yeah, still on the box.
Aaron Peterson (06:58)
Yeah, that was Ayer back in 1912. So, literally over a hundred years ago, and it’s still on the box. That’s how good and profound, and how much it worked to resonate with what the brand was and how it was trying to reach its audience. And then another one, “I’d walk a mile for a Camel,”the cigarette slogan, which for us were still very prevalent.
Jamie Jones (07:21)
Haven’t seen that box in a while, but I do know that slogan.
Aaron Peterson (07:26)
Yes, of course. 1921. That’s when they created that slogan. So, a long time ago, this one agency is responsible for some of the most durable marketing lines in American history. And they’re considered the first American agency. So, just a lot of history and prestige around what came out of that one person’s idea.
Jamie Jones (07:47)
So crazy. I love hearing about history and kind of understanding where we came from. Okay, so I have to ask, is this also the era of the “snake oil salesman” traveling around, knocking on doors, selling tonics that cure everything from, I don’t know, baldness to a broken heart?
Aaron Peterson (08:11)
I’m sure plenty of people fell for both of those, because absolutely it’s a huge era for that. Patent medicines were a massive advertising category. There were mysterious tinctures promising to cure basically anything. Those products in that era had no or little regulation. Sometimes even a healthy dose of alcohol or even opium in the bottle of the tincture.
Jamie Jones (08:39)
God, not safe, not very safe at all.
Aaron Peterson (08:42)
Yeah, totally not safe. And it got bad enough and advertising got aggressive enough that it actually helped trigger the regulatory backlash, right? So the Pure Food and Drug Act in 1906 was partly a response to exactly this kind of wild, unsubstantiated advertising claims that were being put out by all of these different products. So, even in the earliest days you’ve got this tension that’s going to run through the entire history of marketing where advertisers will try to push the boundary, but eventually if it’s too far society and/or the regulators will push them back into their lane.
Jamie Jones (09:20)
Yeah, I mean I think that’s a theme we know well and we’re gonna hear a lot about today and even in the next episode, I assume.
Aaron Peterson (09:28)
I mean every single section, guaranteed. It’s something that just has existed since these things started to happen, right? And, it’s to protect consumers, and protect people, which makes sense. That’s part of the job. So yeah, very interesting.
Jamie Jones (09:41)
Yeah, so besides newspapers and snake oil, whatever snake oil is, what else is happening in the pre-radio era?
Aaron Peterson (09:51)
This one to me is I think really interesting, and we’ll come back to this in later episodes. So just remember this message. But, so, mail-order catalogs are huge, right? This is when Sears and Montgomery Ward are essentially building their national retail brands through the mail. They’re reaching farm families who don’t have access to city stores. One thing that’s also been explored more recently is how Sears also enabled a lot of people of color and or of immigrant communities or marginalized communities to actually have access to and to get products that they couldn’t normally get because they could order them directly through the mail and have them delivered to their home. And so it took out a lot of the potential prejudice or issues that might have existed in trying to go physically buy those products at a store at that time. And so it actually did have an even more profound effect than maybe the company even realized at the time that it was doing, right?
And magazines also start to matter a lot too. You see a lot of the general interest magazines that pop up and some of the magazine titles that still exist today, whether they have consolidated down or moved to digital or things like that. Things like the Saturday Evening Post became prime real estate for advertisers because for the first time you could really, genuinely reach a national audience with just one placement in a single product, knowing that that was gonna get really distributed across the US to subscribers.
Jamie Jones (11:20)
Right. Okay. So even before radio shows up, you’re already starting to see these national brands starting to form and do advertising.
Aaron Peterson (11:30)
Yeah, exactly. I mean, that’s the big shift that we sort of see by the 1910s and the 1920s. The advertising really stops sort of being, “Hey, buy from the local guy,” or “Hey, this is gonna fix all your problems.” And it really starts being about building an actual brand. We start seeing trademarks, consistent packaging, a slogan people remember. Companies realize a memorable brand identity is worth protecting and repeating. And I think the perfect example to think about in the US is Coca Cola, right? They’re still [here] to this day. And they’ve made slight tweaks and changes to that brand over the years, right? And that logo. But still while keeping that core identity that they created and built all those all those years back then.
Jamie Jones (12:14)
I just saw that they’re moving Coke Zero a little bit closer to the way regular [Coke] looks. They keep bringing it a bit closer. Almost like it’s gonna be very hard to tell whether you’re drinking a regular Coke or Coke Zero. Sorry, that was a weird aside but I had just seen how that brand was transformed.
Aaron Peterson (12:29)
See, that’s what made me think about the Coke thing.
Jamie Jones (12:32)
Super interesting. My spouse likes to drink Coke Zero. And I’m like, man, it’s gonna be hard to tell what’s Coke Zero and Coke, anymore. Anyway, before we move on, it’s funny talking about this whole newspaper and catalog world. Part of this series that we’re putting together is the fact that we grew up in a little bit of an analog age. But we’re really talking about analog, like, not the 80s. We do remember newspapers. I do remember Sears catalog, but we’re talking about like the beginning-beginning of all of this. But it still always hits a place in my heart because that was sort of our childhood. So, as we are talking about the origins of newspapers and catalogs, I’m wondering if anyone is measuring whether the advertisements are successful. Like, is it just a gut feeling? Is it just sales? How do you know if the ad is actually working in this time period?
Aaron Peterson (13:23)
Well, I mean, it still is mostly a gut feeling at this point, but this is actually the time period where advertising research is born, too. Obviously it takes time to develop this and it somewhat grows alongside the industry, which of course there were new emerging media coming out which complicated the collection and the and and all of that research. But a guy named Daniel Starch develops what’s called the recognition method around 1919. You’d basically hand someone an actual magazine and ask whether they noticed a given ad, whether they read part of it, whether they read most of it. And he turned that basically into a business, Daniel Starch and Staff, in 1923.
Jamie Jones (14:03)
1923 seems like a familiar date for something else in the industry also.
Aaron Peterson (14:09)
Well, it’s funny that you say that because 1923 is also the year where a Chicago engineer named Arthur Nielsen starts a company. But at that point, AC Nielsen is just testing industrial equipment and tracking retail sales. So, I mean, it is adjacent to this within terms of catalog and stuff, but it’s gonna be over a decade before Nielsen really starts to touch anything resembling a rating. And so in this sort of whole pre-radio era, if you wanted to have proof that your ad actually landed and it resonated in some way. Starch’s recognition studies are basically what is considered “state-of-the-art” at the time.
Jamie Jones (14:45)
Okay, that makes sense. So, then, radio shows up at this point and basically blows the whole thing open at this point.
Aaron Peterson (14:55)
Yeah, that’s exactly where we’re heading next. Right into the next era.
Jamie Jones (14:59)
Okay, so talk to me about the radio era. How does advertising actually show up on the radio?
Aaron Peterson (15:08)
So the generally agreed upon first radio commercial advertisement is August 28, 1922, on a station WEAF in New York.
Jamie Jones (15:20)
Okay. And was it an ad?
Aaron Peterson (15:23)
So it was an ad, although…so, it was for real estate. A company called the Queensborough Corporation paid to advertise apartments at a new development called Hawthorne Court out in Jackson Heights in Queens.
Jamie Jones (15:39)
Okay, and how long was the spot or the ad?
Aaron Peterson (15:43)
Well, this is where it gets kinda funny, I guess for us, especially looking back, but the ad was ten minutes long and they paid $50 for it.
Jamie Jones (15:52)
Ten minutes! My gosh, you could not hold my attention for 10 minutes on the radio, too, right? So you’re only listening to it, there’s no visual to this at all, remember? Wow! And it’s about an apartment complex so you really are having to use your imagination about potentially wanting to move there.
Aaron Peterson (16:08)
I mean I’m imagining that. I mean, I haven’t listened to the spot. I’m sure we could probably try to find it and listen to it. Maybe if I find it I’ll link it to this episode when it’s posted. But I imagine it’s like describing all the little amenities in each room and like you walk into a living room that’s five hundred square feet and it’s da da da da like I don’t know, but, it, yeah. Different time. And so the concept there was actually called toll broadcasting. And the idea was basically just like a toll road – you pay a fee to use the airwaves for your message. And so WEAF, this station that aired this, which was AT&T-owned, basically said, “We’re not gonna have an opinion or represent anyone. We’re just gonna sell blocks of time to whoever wants to buy them.” And so that idea that selling time instead of just selling sort of the goodwill is really the birth of the entire broadcast advertising model. because prior to that it was a lot more, any of the radio OF what we would consider even some sort of an ad or commercial was really kind of more of like an endorsement where a person might speak to a product that they really liked. But again, they had to actually really like the product because you weren’t gonna convince someone on the radio who has prestige and is a broadcaster at that time to talk about a product they don’t believe in.
Jamie Jones (17:22)
That is a very interesting topic. I would love to get into more at a future point in time, like the idea that you’re endorsing something versus just buying a block and you may or may not have any connection to that product, but for another time. Okay, so we’re at radio and it’s exploding at this point.
Aaron Peterson (17:39)
So it does. basically NBC launches as a network in 1926, CBS in 1927. and now you’ve got national advertisers who can basically reach millions of homes simultaneously. And this is where we get one of my favorite bits of marketing trivia, the soap opera. So as I said, these launch and they start to produce these products, these content called soap operas, which we’re very familiar with.
Jamie Jones (18:05)
So like soap operas because of actual soap, is what you’re saying?
Aaron Peterson (18:11)
Like, literally actual soap. So Procter and Gamble figured out that daytime serial dramas were incredibly effective at reaching housewives at home. Because remember, this is an area where the household purchasing decisions are overwhelmingly being made by women who are still at home, largely in hometaker roles. And so P&G starts sponsoring these dramas to advertise products like their soap product, Oxidol Detergent.
Jamie Jones (18:41)
So the sponsors basically like baked right into the name.
Aaron Peterson (18:46)
I mean, not just right into the name, but right into the DNA of the entire genre, right? So, now we think of soap operas and obviously, if you’re maybe a younger person and you’re not aware of this, you might not even make that connection and you might wonder why they’re even called, “soap operas.” But then there were shows that came from this genre, shows like Ma Perkins in 1933, where basically these became extended commercials with a plot sort of wrapped around it.
Jamie Jones (19:12)
Soap operas are such a part of my childhood. And my mom would record hers on a VHS on the TV in our kitchen. and then when she’d come home from work, she’d rewind and play her soap opera for the day. So, it is one of those phrases that is so ingrained in you that you’ve said a thousand times. But I really have never thought about the origin of it. So that’s pretty cool.
Aaron Peterson (19:36)
I mean the same thing with “prime time,” honestly. So that’s another concept that kind of gets formalized in this era because advertisers realize that there are certain hours that reach way bigger audiences. Prime time, which is that time when all of the family members are home. They’ve typically gathered and had their family meal. And then afterwards what became sort of a habit was sitting around the radio, and then eventually the TV, to consume content. And so they realized that since they were gonna have these bigger audiences, they could make advertisers pay a premium for them.
Jamie Jones (20:09)
Yeah, I mean basically radio sets the template for advertising, but then television comes in and it’s visual and it just overtakes it. I mean, a new medium steamrolling the previous medium that’s so shocking to us, right? I love history because it definitely repeats itself.
Aaron Peterson (20:27)
Another theme, yes – that’s gonna be another thing that’s gonna come up in every section pretty much, right? Is something coming out that is supposed to completely replace it. And while it does come in, it’s coming in fast and it does a lot to take over radio. Obviously we know to this day radio still exists. So it’s not that the medium took it over, it’s that consumers adjusted their days to incorporate a new technology, right? And they might have reduced their time of radio-listening time over time, but they still are consuming large chunks of media. So, by 1950, or in 1950, only maybe nine percent of American households have a television. By 1955, five years later, that’s jumped to over 64.5 percent. So, basically, almost 65 percent. And by 1960, it’s over 87 percent. So we’re talking about a ten-year period where we go from less than ten percent to almost 90 percent adoption of a technology where there’s one in each household.
Jamie Jones (21:27)
I love that statistic because it just reminds you that change does come fast and sometimes we are shocked by it, but it’s written right in history that it has happened before. So this decade is the decade of TV. It goes from being a novelty to every home has a TV.
Aaron Peterson (21:45)
Yeah, it’s literally one of the fastest consumer technology adoptions in American history. Obviously we’re seeing some other things happen through the time as well, but…and advertisers really pile in on this immediately. They’re using the, like we said earlier, that exact same playbook that radio taught them. Single-sponsored shows, or one advertiser’s name is in the title. A good example is, think Texaco Star Theater. Obviously Texaco gas and oil stations and such. So that’s where that happens.
Jamie Jones (22:16)
Okay, interesting. So now we need to talk about Madison Avenue. I’m already imagining so many episodes of Mad Men in my head of the kids sitting in front of the television in the little room that’s next to the kitchen and Betty’s cooking. So my mind is already reminiscing on one of my favorite shows. So when you say 1960s advertising, talk to me about the “Mad Men” era, talk to me about the “Don Drapers” and their cocktails on Madison Avenue.
Aaron Peterson (22:45)
Yeah, I mean, absolutely your brain goes there because everyone should, right? The show is fiction, but it’s drawing from a very real place in time. Madison Avenue in Manhattan was by the 1950s and 60s genuinely the epicenter of the American ad industry. I mean, you had these agencies like Ogilvy and Mather, Young and Rubicam, BBDO, and Doyle, Dane, and Burnback. They’re all clustered there. They’re doing work that fundamentally changes what advertising even is.
Jamie Jones (23:16)
And how were they changing it at that point in time?
Aaron Peterson (23:20)
Well before that, so a lot of the advertising was what people would call, sort of, the “hard sell,” – just repeat the product benefit loudly and often. But this generation of Madison Avenue creatives pioneered something closer to emotional and even witty advertising. The classic example is Doyle Dane Bernbach’s Volkswagen campaign, “Think Small,” which took what should have been a weakness, this small, funny-looking German car in a market obsessed with big American sedans. And it turned it into the whole joke and the whole appeal of the product itself.
Jamie Jones (23:52)
Yeah, I mean, it’s such a modern idea, self-aware advertising. I didn’t even realize it had a start somewhere. So that’s really cool.
Aaron Peterson (24:02)
Yeah, and I mean, of course, as we’re saying at the time, it was so radical. And it’s often cited as sort of the start of what people call the “creative revolution” in advertising. And so these real-life people behind this era are genuinely characters. You’ve got David Ogilvy, you’ve got William Burnback, you have a copywriter named George Lewis, who we’ll actually hear from again later in the episode. There was also Jane Moss, who was an ad executive who is sometimes called the real life “Peggy Olsen”, and she’s on record saying something like, “everything that they dramatize on ‘Mad Men,’ the reality had even more of it. So, more smoking, more of the three-martini lunch,” apparently.
Jamie Jones (24:43)
So this show actually undersold how crazy it really was at that time?
Aaron Peterson (24:49)
According to the people who lived it, yes.
Jamie Jones (24:51)
That’s pretty cool. That’s pretty cool. Okay, so we are talking about Madison Avenue. We’re deep into that topic. Let’s talk about a little bit of a topic that’s really close to our heart, which is ad testing. So talk to me. I asked earlier about whether they knew an ad was successful or not, and you said, no, it was a gut feeling. So let’s talk about how we’re now at Madison Avenue. We’re much more sophisticated. There’s different channels that you have and can use to reach consumers. How are agencies starting to seriously test if an ad actually works or are they just sort of happy if it’s really clever?
Aaron Peterson (25:39)
I mean, it’s actually a really interesting time. And because part of what happens here are things that we still hear of and use relatively today. So back in 1932, George Gallup – yes, like from the Gallup poll, but this is before that – he sets up the first copy testing department inside of one of the ad agencies. And it’s at Young and Rubicam. So Y&R, that we just mentioned two minutes ago, is one of those big agencies during the 50s and 60s, it has this copy testing department built right inside of the ad agency.
Jamie Jones (26:14)
Okay. So the agency that’s basically like a “Mad Men” set piece is the one inventing the idea of, “hold on, let’s check to see if this works?”
Aaron Peterson (26:25)
Yeah, exactly. So Gallup had already been starting to apply Starch’s recognition method that we talked about earlier to newspaper and magazine readership in the late 1920s. And so he brought that same discipline in-house at Y&R. That’s the moment that research stops being some outside curiosity and really becomes part of how agencies pitch and prove their work to their clients.
Jamie Jones (26:50)
Okay, so what’s the societal impact? Does it go beyond “ads are getting more clever?” How are they actually measuring?
Aaron Peterson (27:01)
Well, there’s a couple of big things that happened during this era. One, this is the era where advertising really becomes a genuine cultural force. I mean, think about jingles, slogans, and TV characters become shared national reference points in a way that hadn’t really existed before.Because, for the first time, almost everyone is watching the same handful of channels at the same time.
Number two, audience measurement really gets a lot more serious. And Nielsen, the company that we mentioned started in 1923, that was only counting retail sales? Well, they jump right into the middle of all of this. They buy the rights to a device called the Audimeter. And it is used to track what a radio is tuned to. And by the early 1940s, that becomes the Nielsen Radio Index. And it’s built off this, these Audimeters wired into a sample of households. And so then not long after that, in 1950, Nielsen basically adapts that same technology to start to measure television.
Jamie Jones (27:59)
Okay, so it’s just like a little box and it’s there kind of doing its thing, silently telling the company what channel you’re on?
Aaron Peterson (28:10)
Pretty much. I mean the Audimeter logs the channel automatically and for years it’s paired with paper viewing diaries that family members fill out by hand and mail back so that Nielsen can also capture who in the house was actually watching. And so they use that and by 1973 they’re able to start producing the daily national TV ratings that we’ve all come to know and hear about because even it’s talked about in the general media to consumers as well.
And interestingly enough, at one point I was a Nielsen Diary household in the early 2000s, and even then I was still filling out a paper form for them.
Jamie Jones (28:53)
I mean, we always talk about the idea that you sort of feel the need as a marketer to participate in those sorts of things. But it is very interesting to me to think somebody way back started saying, “I’ll give you this information for free.” I mean, now we think about our data and our PII in such a different way. But back then, I guess it was very different. Okay. So, talking about Nielsen again, it’s basically now the scoreboard that everybody is playing to?
Aaron Peterson (29:23)
Yeah. And it creates this feedback loop. So what Nielsen says people are watching determines what gets renewed, what gets canceled, and where advertisers put their money. And so it becomes the currency of the entire industry. And honestly, to some degree, it still is an underlying currency used in the industry.
Jamie Jones (29:43)
Yeah, I mean, as you mentioned earlier, it’s a name that outside of marketing or market research is very familiar to people. So the fact that it came into regular culture just shows you how big of a deal it was. And of course, the idea that everyone’s watching the same three channels, I feel like that’s hard to conceptualize for us who grew up in a completely different time period with a lot more options than than three channels. So I guess that’s where we’re gonna start to transition and pivot now.
Aaron Peterson (30:18)
That’s exactly the pivot. Because once cable shows up, that shared audience model starts to fracture and we just continue to see that fracturing to this day.
Jamie Jones (30:30)
So before that happens, like who’s running the show? Who are the most important players? What three networks like have all of all of the scoring in Nielsen at this point?
Aaron Peterson (30:44)
Okay, so going into the era of cable, before that, essentially, yeah, you’ve got three major – NBC, CBS, ABC, and then of course public broadcasting as well. A handful of channels are basically controlling almost all the attention that’s happening in the country. And then cable comes out and it starts to change the math behind that because the moment that really kicks off, people start to realize that they can have a lot more control over what they want. And what really also helps to trigger that is the premium side, which launches on November 8 in 1972 when HBO launches.
Jamie Jones (31:20)
And for our younger listeners, maybe they don’t realize that that stands for Home Box Office.
Aaron Peterson (31:28)
Yes. Still to this day exists, too, in a much different way. But HBO was launched by Time Inc. And when it started it was absurdly small. There were only 365 subscribers. It was based out of Wilkes-Barre, Pennsylvania, which ironically is the DMA that I went to high school in. So I’m very familiar with that market.
Jamie Jones (31:51)
I went to Penn State, so, also very familiar with cold-calling and having one of those jobs in college. So pretty funny for both of us. But 365 people is a very small number to start the entire idea of premium TV that maybe we know today.
Aaron Peterson (32:08)
I mean, yeah, especially when we think about today, subscribers to premium streaming channels having millions of subscribers, right? And it’s, like, 365 people started this entire industry.?Crazy. So, the very first thing that HBO broadcast was a hockey game, which is interesting considering this year has become such a year of hockey becoming popular with “Heated Rivalry” at the beginning of the year. And it’s the Rangers versus the Canucks. And then after the broadcast of the hockey game, they played a movie. And the pitch was completely different from the broadcast TV era. Subscribers were now paying extra, something like, I think, six dollars a month at the time. And in exchange, they got this programming with no commercials.
Jamie Jones (32:50)
Which is wild to think about at the time, but now has become a model that we are a little bit more familiar with. So then I’m sure they were just trying to cram as much advertising into television as possible. And HBO comes along and says, like, we have a completely different model. Like you pay us and then you won’t see any ads at all.
Aaron Peterson (33:14)
Yeah, that’s the fundamental innovation that occurs, right? It’s a second revenue model living right alongside the ad-supported one and it scales really fast. So in 1975, HBO becomes the first American network to distribute its programming by satellite, which that allows it to go national instead of being that regional cable curiosity that it had started as. And then right after that, Showtime shows up as a direct rival, backed by Viacom.
Jamie Jones (33:44)
So as you said, we got ad free growing and ad supported growing side by side.
Aaron Peterson (33:52)
Exactly. And that’s sort of the tension that exists, ad supported versus pay for no ads. It’s honestly still the exact same conversation we have about every streaming service today, right?
Jamie Jones (34:02)
Yeah, nothing new. Everything new is old or new is, yeah, nothing new under the sun. whatever is old is new again. So it’s pretty funny. I love recounting this history because it really does bring you back to the present challenges that we have, which I think is so interesting. But back to the late 70s.
Aaron Peterson (34:19)
Yeah. So meanwhile, basic cable is exploding in parallel. Some numbers for you. So in 1975, there are about 3,500 cable systems serving 10 million subscribers nationwide. And within a decade, so by the mid eighties, when you and I are little toddlers, that’s up to roughly 6,600 systems serving nearly 40 million subscribers. So again, still a relatively huge growth.
Jamie Jones (34:45)
That’s me, yeah. I mean I don’t…I’m not fast enough to do the math in my head, but it sounds like quadrupling. I guess maybe not quite as fast as the onset of the TVs, but still massive growth in a short amount of time.
Aaron Peterson (34:58)
Yeah, I mean pretty significant and close to that level of growth. And so by the end of 1983, you have about 40 percent of American TV households that have cable. And by 1990, that number has climbed up to 60 percent. And it’s not just the subscriber growth that’s happening, because that in and of itself is obviously impressive, but it’s the channel growth that really is also having an impact here.
So in 1978, there are about eight cable programming networks total. Which again, when you go from three to eight, three original channels to adding eight new channels, it’s still such a big change. But not even ten years later, by 1984, that number is up to 47. And by 1993, that number is up to 99. And obviously we’ve known since then it’s fluctuated a lot.
Jamie Jones (35:48)
So in 15 years you go from eight choices to over a hundred choices?
Aaron Peterson (35:54)
Yeah, which completely changes what advertisers have to think about, right? Because when there were three networks, you basically had made one ad and you blasted it to the entire country. Once you’ve got dozens, then close to a hundred channels, you can suddenly target. So you’ve got sports fans watching one channel, you’ve got news junkies watching another. Teenagers watch something completely different.
Jamie Jones (36:17)
So give me an example of the channels that really were capturing a specific audience at that time.
Aaron Peterson (36:24)
So obviously you and I grew up during this era. We have a lot of feelings about things that were happening here. So two huge ones launched right around this time. CNN launches in 1980. It’s the first 24-hour news channel. And that just completely changes the news business, right? Because now news isn’t just a nightly 30-minute broadcast. It’s constant. But that also means constant ad inventory too. And then on top of that, you get MTV launching on August 1, 1981, and that’s just revolutionary.
Jamie Jones (36:57)
Yeah, “Video killed the radio star.”
Aaron Peterson (37:00)
I mean, yes, that’s literally the first video they played. I mean, which in hindsight is a pretty on-the-nose joke about the whole medium eating the previous one. But yeah, MTV launches with around 800,000 subscribers at a time when cable overall is only in about a quarter of American homes. And so as a callback for you, MTV actually kind of struggled early on because a lot of the cable operators themselves refused to carry it.
Jamie Jones (37:27)
So what sort of turned it around?
Aaron Peterson (37:30)
Well, cleverly enough – an ad campaign, of course. “I want my MTV” was a campaign that MTV put out at the time and it got kids calling their local cable operators demanding that the channel get added to their system. That came out of the agency world of George Lewis, who’s the same Madison Avenue creative I mentioned back in the broadcast section.
Jamie Jones (37:55)
I mean, that’s great. So it means the Mad Men generation doesn’t disappear. They kind of follow this audience into cable. Maybe a little bit more behind the scenes, but they’re still there.
Aaron Peterson (38:05)
Yeah, exactly. It’s the same creative DNA, they’re just sort of like adapting to that new medium, that new pipe.
Jamie Jones (38:12)
So we got a hundred-ish, about a hundred channels, not three. Let’s go back to Nielsen. How are they keeping up? Is the Audimeter that’s sitting on top of your TV plus the mailed diary system that people like you are filling out? Is that able to keep up to tracking beyond just those three channels?
Aaron Peterson (38:36)
Well it has to evolve sort of really fast. And the big leap happens in 1987 when Nielsen launches the People Meter. So, instead of just logging which channel the TV’s tuned to, it’s a device where each household member punches in a button to say they’re the one watching right now. So for the first time, Nielsen can tie a program to real age and gender demographics, not just “a television in the house was on.”
Jamie Jones (39:02)
Okay, so now we’re starting to talk a little bit more about specific audience, not just hitting everyone.
Aaron Peterson (39:09)
Right. Fragmentation and the people meter basically evolve together. One sort of drives the need for the other. And this is also exactly when Ipsos enters the picture too. So it’s founded in Paris in 1975 by a guy named Didier Truchot. And by 1977, they’ve already built one of the first dedicated tools for measuring ad effectiveness, originally for billboards of all things. And then through the 80s, Ipsos becomes one of the top research firms in France, and by the late 90s, it’s expanding into the US and other markets, eventually growing into one of the biggest market research companies in the world, right alongside Nielsen.
Jamie Jones (39:47)
Right. So we’re talking about this parallel thing happening with research industry scaling up right alongside sort of all the different mediums, all the different media, all the different channels that are coming on T V were kind of growing really fast alongside each other.
Aaron Peterson (40:04)
Yeah, absolutely, right? Because more channels means more complexity, which means did this actually work? Gets a lot harder to answer and a lot more variables to answer as well. And so the big picture takeaway from this whole era is fragmentation, right? Broadcast TV was built on the idea of one message reaching everyone. Cable proves that you can build a more loyal, more targeted audience by narrowing your focus, and that a niche engaged audience can actually be more valuable to certain advertisers than a huge generic one.
Jamie Jones (40:35)
Right. So that sounds a lot like the targeted advertising pitch that we’re much more familiar with today.
Aaron Peterson (40:42)
Because this is genuinely the moment that idea is kind of born at scale, right? So cable is the ancestor of every algorithmic feed sorting people into micro audiences today. And it just did it with channel numbers instead of code. That’s the difference.
Jamie Jones (40:56)
Okay, great. Well, we’ve covered a lot of ground, a lot of time. I can visually see the timeline in my head. Let’s do a little bit of a recap because we did talk about so many things. We basically start in the 1800s, no formal advertising industry at all. Then we have newspapers and traveling salesmen, and then we get our first real advertising agency. N. W. Ayer & Son, which actually is created by the son, not the father. But alas, he was beyond his years in actually trying to promote and brand himself.
Aaron Peterson (41:35)
Right. And then radio shows up in the 1920s, invents the whole pay to reach an audience model, gives us the soap opera, and then TV shows up to take that playbook and turn it into a genuine cultural institution, right? Which is the world that produces the real Madison Avenue, the real “Mad Men.”
Jamie Jones (41:54)
And then from there we get cable and then premium TV, which blows the doors off everything. No one’s watching the same thing at the same time anymore. HBO also brings us this ad free subscription model, which again is something that’s very resonant today. And then channels like you were talking about CNN, 24-hour news, MTV, which can start to prove that you can have a real business value from just a very narrow focus.
Aaron Peterson (42:23)
Yeah, absolutely. And that’s basically gonna set up everything that comes next.
Jamie Jones (42:28)
Right. That’s a good reminder to our audience that this was just part one of this episode. There is a part two. We’ll pick up where cable leaves off and we’re heading into the birth of the internet. Talking about moving really fast. Wow, there’s a lot there too. The rise of social and eventually streaming, and then the AI-saturated world that we actually live in today.
Aaron Peterson (42:53)
Yeah, it gets a lot weirder from here.
Jamie Jones (42:55)
I really do.
Aaron Peterson (42:57)
All right, before we close up, wanna share this episode’s one last thing, Jamie?
Jamie Jones (43:01)
Yeah, I thought about this as we were chatting and just this idea of advertising and how as individuals there’s a psychology to when we sort of know that we need advertising or sort of accept it or are willing to listen to it or view it or scroll it on our phones now, today. And that there’s this idea that sometimes there’s too much advertising and it turns us off to the product or the entire medium altogether.
I’ve been listening to a lot of podcasts. We’re doing podcasts because we’re podcast people. And these two hosts were commenting about how there’s one platform that delivers content via podcast that does a lot of ads and they’re leaning into even more ads. And it made me realize that there were a few shows I had previously liked and no longer could get through anymore because there were so many ads. It was like you’d get three minutes of content and then two minutes of ads.
Three minutes of content and two minutes of ads. And the ads are the same ad over and over again. And then you and I had chatted, I don’t know, a couple of weeks ago about how Hulu used to be like this, where you thought you could go for the ad the ad tier and you’re like, okay, it’s final, it’s not that big a deal. I grew up with ads, right? I grew up with MTV and all these other ch cable channels that had ads. And then the ads were the same ad over and over again. And they would come too frequently to get into the content. And we’ve sort of changed the way we consume content these days. And so it just made me realize like we still don’t always get it right.
And I love the idea of HBO in the 70s coming along and saying, premium tier, you pay us, no ads. And that’s still something that brands are challenged with, right? Do I want to pay for Patreon? I don’t get the ads, but I have to pay the podcast, you know, group directly. So I think it really is interesting to kind of revisit the history and also realize there are places where we still haven’t quite figured it all out.
Aaron Peterson (45:02)
Hundred percent. I think that’s just such a relevant thing to talk about, and how it’s crazy how it does tie-in, we did not plan this. It’s just that that ended up being something that tied directly into the history we were talking about and just how consumer choice really has become the norm and people will only tolerate so much disruption in trying to consume whatever content it is they’re trying to consume before they get frustrated. And either, to your point, they’re gonna stop watching, or if there’s an option, they’re gonna pay a premium price to not be disrupted. So anyway, thanks everyone for listening to The Last Analog Marketers. If you enjoyed this, tell a friend, leave a review, all that good stuff, and be sure to subscribe and we’ll see you next time.
Jamie Jones (45:47)
Aaron, I love the history lesson and we’ll see you all for part two. See you later.
Aaron Peterson (45:51)
Thanks for tuning in to The Last Analog Marketers podcast. Like, share, and subscribe to keep in tune and show your support.