Digiday’s History of Ad Tech: In the beginning …

Few industry observers had a better ringside seat than Martin Kihn. A former Gartner analyst and best-selling author, he is also the brains (and voice) behind influential industry-tome Paleo AdTech. This pursuit has seen him play host to some of the biggest names of this era, a period he now describes to Digiday as “a very dramatic time.” 

The boom and bust era of the 1990s 

Household names such as AOL and Yahoo also sprang up at this time, albeit there are plenty that didn’t make it. “The ‘90s are often forgotten,” noted Kihn, “most people forget about the ‘90s because they don’t remember it, or a lot of the companies have disappeared.” 

He points to other (more niche) names berthed in the 1990s, like 24/7 Media and ADvertising.com — many of which were later acquired by Silicon Valley and Madison Avenue titans or simply fell victim to the infamous dotcom crash in the early 2000s. “There were a lot of interesting boom and busts,” adds Kihn. “At that time, it was real easy to raise money, and you had several ad networks that popped up.”  

Early distaste for advertising 

Ironically, Kihn points out how the scions of the contemporary market were initially opposed to the business model, claiming this is an indication of the scale of the evolutionary journey undergone by the digital economy. 

“Google started as an academic thesis, and none of these companies, including Facebook, wanted to do advertising, which is very interesting to me,” he says. “In the original paper they wrote, Google said advertising would distort the values of the company, and they would never show ads; it’s comical.”  

Other household names originally have pledged their opposition to running ads on their services, including Facebook, LinkedIn, and Netflix.  

Observers of the digital media landscape note how the first-ever online display ad appeared on October 27, 1994, in the guise of an AT&T commercial on www.Hotwired.com (the then-online portal for Wired magazine) that asked visitors, “Have you ever clicked your mouse right here?”

Although, as indicated by Google et al.’s early distaste for online advertising, the early online landscape resembled a hellscape of pop-up ads of dubious quality. Nascent ad networks started to emerge at this time, but arguably, this media sales model did not enter its heyday until the following decade.

Rise of the ad server 

However, some credit the emergence of ad servers as a significant milestone in the sector’s maturation and one that helped shape the early “World Wide Web” into one more palatable to Madison Avenue media buyers.          

The fundamental value proposition of such technologies was their capabilities as decisioning tools that better facilitated ad delivery through content storage and optimization. This decision involved managing ad creatives, deciding the best ad unit to serve based on available session and user data, and optimizing this process based on the results of earlier campaigns.

• DoubleClick 

Founded in 1996 by Dwight Merriman and Kevin O’Connor, DoubleClick was widely recognized as the leading ad server of the day and is arguably the most significant company in the space. After its 1998 IPO, it branched out to other services before its 2007 sale to Google for $3.1 billion. 

• NetGravity

Founded in 1995 by John Danner and Tom Shields, companies such as Yahoo used its sell-side ad server. It listed on the Nasdaq in 1998 and was later purchased by DoubleClick in a transaction, valued at $530 million the following year.

• AdKnowledge

Known initially as FocaLink Media Services when it was founded in 1995 by Dave Zinman, Andrew Conru, and Jason Strober, the AdKnowledge brand emerged in 1998 after its merger with ClickOver. CMGI’s Engage Technologies later bought it for $193 million in 1999.  

Richy Glassberg, currently CEO of SafeGuard Privacy, helped found the IAB in 1996 — at that period, his day job was in online ad sales at Turner Broadcasting — and explains how the emergence of ad servers was a breakthrough.  

“You used to get an insertion order [IO, or written agreement media-buyer and a publisher containing the details of an ad campaign] and then hard code it into the webpage, and it was a real pain,” he recalls. “But with DoubleClick and NetGravity, you had the technology to put an ad on a page without having to hard code.” 

Rich LeFurgy, founding chairman of the IAB who helped Disney monetize internet properties such as ESPN.com in the mid-90s, further explains how ad servers helped publishers alter their revenue model, as it helped introduce an objective means of measuring website visitors. 

“At that time, we were selling time on a website, and not impressions… but then we started charging CPMs,” he says, adding how this helped online publishers mimic legacy media. “This helped us figure out how to price stuff, so when we had CPM guarantees, it made make-goods possible, just like in television.”

The emergence of the IAB 

Similar to the current CTV landscape, the online display advertising industry of the early-to-mid 1990s was beset by fragmentation. The chaotic state of the sector discouraged investment in online advertising as a lack of industry standards inflated production costs while simultaneously deflating buyers’ enthusiasm.

“Agencies very much had a ‘wake me when it’s over’ attitude about tech in those days,” recalls LeFurgy, “at that time, agencies and clients wanted their own [web] pages to be destination sites, but how would people know to go to one of them?” 

Glassberg further explains how the lack of standards in the mid-1990s meant less than half of advertisers’ initial investment in online campaigns was received by publishers. “If General Motors spent $100, then more than $50 would have to go on making the different ad sizes,” he says. “At that time, there was a survey of all the different ad-supported websites, and there were 512 different sizes [of ad formats].” 

Glassberg and LeFurgy mooted the idea of a trade body with peers that can corral stakeholders to agree on standardized means of business practice and convince marketers of their members’ proposition, on the sidelines of the CNET conference in February 1996. 

The initial “administrative meeting” of the ‘Internet Advertising Council’ – it later rebranded from the IAC to its current moniker, the IAB, to better distinguish the organization – took place in early 1996, with the organization boasting 112 members in October of that year.     

“We were a believer in a rising tide raises all boats,” recounts Glassberg, adding that much of the trade org’s workforce was voluntary, “we had to tell everybody to leave your ego at the door.”  

The standardization of online media standards and the development of ad-serving technologies forged the path for rich media formats (thus spurring better levels of creativity in online ads), attracting further investment.  

According to the first annual IAB internet advertising report by PricewaterhouseCoopers, online advertising spending in the U.S. was $257 million in 1996, later rising to $8.2 billion in 2000, a sign of how fast the dotcom bubble was inflating.   

What goes up must come down

According to Kihn, the Nasdaq rose 500% in the closing half of the 1990s with an average price-to-earnings (PE) ratio in the region of 200 as the market peaked in 2000. Compare this with the “mini-bubble of 2021,” when its average PE ratio was 25. “It was a real bubble,” he remarks, “absurd really.”   

The following years saw a host of companies in the sector debut on the public markets, with examples including DoubleClIck’s IPO in 1998, 24/7 Media going public the same year, and aQuantive’s IPO in 2000.  

However, despite this period of vitality, it was not enough to defy the weight of gravity that would later sink the entire industry, with KIhn attributing the disastrous $165 billion ‘merger’ of AOL and TimeWarner the one development that would subsume ad tech companies, even if their numbers looked favorable. 

“Some of the basic innovation happened at that time; it was just the economic environment that made it difficult for them to survive,” recalls Kihn, characterizing the decline of ad tech companies that didn’t survive the burst of the dotcom bubble as “irrational.”  

This is the first in a series examining the history of ad tech. To read the full series, view here.