What Is Advertising? Definition & Types (2025 Guide)

Wherever you’re at in the product life cycle, there’s one thing each stage has in common: the need to advertise. Your product positioning tactics, content mix, and overall marketing strategy will vary, but every business invests in advertising to some degree throughout its life cycle.

But what is advertising really? In this guide, get a crash course in Advertising 101, and learn how to start advertising your business today. 

What is advertising?

Advertising is a marketing tactic in which you pay for space to promote your product, service, or cause. The actual promotional messages are called advertisements, or ads. As a business owner, the goal of advertising is to reach the people most likely willing to pay for your products or services and entice that target audience to buy. 

Unlike other forms of marketing, advertising guarantees that your message reaches your target audience through purchased media space or time. This distinguishes it from earned media (like press coverage) or owned media (like your website or social media channels).

How advertising works

Advertising works by capturing attention, generating interest, creating desire, and prompting action—a process often described as the AIDA (attention, interest, desire, action) model. For example, when you see a billboard on your commute, are served a targeted social media ad, or hear a commercial on your favorite podcast, you’re experiencing advertising in action.

The effectiveness of advertising lies in its ability to reach the right people at the right time with the right message. Modern advertising combines creativity, data analytics, and strategic placement to influence consumer behavior and drive business results. Whether you’re building brand awareness, launching a new product, or driving immediate sales, advertising provides measurable ways to achieve your business goals.

History of advertising

The evolution of advertising mirrors the development of commerce itself. From ancient Egyptian merchants using papyrus to create sales messages to today’s AI-powered digital campaigns, advertising has continuously adapted to new technologies and consumer behaviors.

Print advertising first appeared in the 15th century, and eventually dominated the landscape. By the early 1900s, newspapers and magazines were the primary channels for reaching mass audiences. The 20th century brought revolutionary changes with radio advertising in the 1920s and television commercials in the 1940s, transforming how businesses connected with consumers.

The digital revolution of the late 1990s and early 2000s fundamentally changed advertising again. Online banner ads appeared in 1994, Google AdWords (now known as Google Ads) launched in 2000, and Facebook advertising began in 2007. Digital channels like those form much of today’s advertising landscape, with digital advertising reaching $259 billion in 2024, representing a 15% year-over-year increase. This shift reflects changing consumer habits, as people spend more time online and expect personalized, relevant advertising experiences.

Finding your ideal customer

Before you can create effective advertising, you need to understand exactly who you’re trying to reach. When trying to zero in on that target audience, it’s best practice to begin by looking at demographic characteristics.

Some basic demographic details to identify include: 

• Gender
• Age
• Education level
• Income level
• ZIP code

By more precisely getting to know your target audience, you can better choose advertising vehicles that will reach more of those customers for less money. For instance, say you learn that a segment of your ideal customers live in the suburbs west of Boston. You could buy an expensive ad in The Wall Street Journal, but it may be more cost-effective to buy ads in local papers there for far less.

Demographic targeting

Demographic targeting forms the foundation of effective advertising by focusing on measurable population characteristics. Beyond basic demographics, modern advertisers also consider household income, family size, occupation, and home ownership status. These data points help predict purchasing behavior and media consumption patterns.

For example, a luxury watch brand might target individuals aged 35 to 54 with household incomes above $150,000, while a budget-friendly meal kit service might focus on busy parents aged 25 to 40. Understanding these demographics helps you allocate your advertising budget efficiently and craft messages that resonate with your specific audience.

Psychographic targeting

While demographics tell you who your customers are, psychographics reveal why they buy. This deeper level of targeting examines lifestyle choices, values, interests, attitudes, and personality traits. Psychographic data helps you understand the motivations behind purchase decisions and create advertising that connects emotionally with your audience. For example, consider how outdoor gear companies target adventure seekers who value experiences over possessions, or how sustainable fashion brands appeal to environmentally conscious consumers. 

By combining demographic and psychographic targeting, you can create highly personalized advertising campaigns that speak directly to your ideal customer’s desires and pain points. This approach is particularly powerful in digital advertising, where platforms like Facebook and Google offer sophisticated targeting options based on interests, behaviors, and online activities.

Types of advertising

Each advertising channel offers unique advantages and helps you reach audiences in different ways. Once you understand the various types of advertising out there, you can make more informed decisions when choosing the right ad mix for your specific business goals and budget. 

Traditional advertising channels

Despite the digital revolution, traditional advertising channels remain relevant, particularly for local businesses and brands seeking broad reach. 

Here are some examples of traditional advertising channels: 

• Print advertising through newspapers and magazines offers tangible, credible placement that readers actively engage with. Local newspapers are especially effective for reaching community-focused audiences, while specialized magazines help you connect with niche interests. 

• Television advertising continues to deliver mass reach and emotional impact through sight, sound, and motion. While production costs can be high, local cable spots and streaming TV ads may offer more affordable entry points. 
• Radio advertising provides cost-effective frequency, reaching commuters and workers throughout their day. 
• Out-of-home advertising in the US. reached $9.13 billion in 2024, indicating that advertising in places like billboards and public transit is still a valuable way to build brand awareness in specific geographic areas.

Digital advertising channels

Digital advertising accounted for 72% of overall advertising revenue in 2024, according to PwC. 

Consider these popular digital advertising channels: 

• Search engine marketing (SEM)captures high-intent audiences actively looking for products or services. 
• Display advertisingbuilds awareness across millions of websites. 
• Social media advertisingenables unprecedented targeting based on interests, behaviors, and demographics on the social platforms (e.g., Instagram, TikTok, Facebook) where your audience is most engaged.
• Video advertising has exploded with the rise of YouTube and streaming services, offering engaging formats, from six-second bumper ads to long-form content. 
• Email marketing remains highly effective for nurturing customer relationships.
• Mobile advertising reaches consumers on the personal devices they’re likely to be spending the most time on. 
• Programmatic advertising uses AI to automatically buy and optimize ad placements in real time, maximizing efficiency and results.

Emerging advertising formats

The advertising industry continues to evolve, with new technologies and consumer behaviors developing all the time. 

These are a few of the emerging ad formats of the past decade:

• Native advertising seamlessly blends with editorial content (digital or print), providing value to the reader while simultaneously promoting the advertiser’s products. 
• Influencer marketing leverages social media personalities to authentically recommend brands to their engaged followers. 
• Podcast advertising taps into the intimate relationship between hosts and listeners, with host-read ads commanding premium attention. 

• Voice search optimization helps you reach tech savvy consumers who use AI voice assistants (think: Apple’s Siri) to perform internet searches. This type of advertising represents a growing frontier as more homes adopt smart devices like Amazon’s Alexa and Google Home. 
• Augmented reality (AR) ads let consumers try products virtually before buying, while connected TV advertising brings digital targeting capabilities to the living room. 
• Retail media networks (RMNs) allow brands to advertise directly on ecommerce platforms where purchase decisions happen, creating a shortened path from awareness to conversion. Popular examples of RMNs include Walmart Connect and Shopify Audiences. 

Where to advertise your business

These days, advertisements can be placed nearly everywhere and anywhere, including the following places:

Out-of-home advertising locations

• Roadside billboards
• Sides of buildings or vehicles
• Subway car walls and platforms
• Product packaging
• Snail mail postcards or flyers
• Restaurant placemats
• Event bulletins in community spaces
• Store windows
• Order packaging inserts

Digital advertising locations

• Websites
• Search engines
• Email newsletters
• Social media platforms
• Podcast ad spots
• YouTube videos

How to create an advertising strategy

Creating an effective advertising strategy requires careful planning and alignment with your overall business objectives. A well-crafted strategy ensures your advertising investments deliver measurable returns while building long-term brand value. Start by clearly defining what you want to achieve, then work backward to determine the best channels, messages, and tactics to reach those goals.

1. Set your advertising goals

Before you start advertising, get clear with yourself about what you want to achieve with your efforts. Your advertising goals should be specific, measurable, achievable, relevant, and time-bound (SMART). 

Common advertising objectives include: 

• Increasing brand awareness by a certain percentage
• Generating a specific number of leads
• Driving foot traffic to physical locations
• Achieving a target return on ad spend (ROAS)

For example, new businesses tend to prioritize driving brand awareness and customer acquisition, while established brands might focus on customer retention or market share growth.

Link your advertising goals directly to business outcomes. If your business goal is to increase revenue by 25% this year, calculate how many new customers you need and what role advertising will play in acquiring them. This connection helps justify advertising investments and provides clear metrics for success. Consider both short-term goals (like promoting a seasonal sale) and long-term objectives (like establishing your brand as a category leader).

2. Budget for advertising

Determining your advertising budget requires balancing ambition with financial reality. Many businesses allocate 5% to 10% of revenue to marketing, with a portion dedicated to paid advertising. Startups and growth-phase companies often invest more aggressively, sometimes 12% to 20% of projected revenue, to build market presence quickly. Your industry, competition level, and growth stage all influence the appropriate budget levels for your needs.

Beyond the total budget, consider how to best allocate funds across channels and campaigns. The 70-20-10 rule suggests spending 70% on proven channels, 20% on emerging opportunities, and 10% on experimental tactics. For example, if your audience is already engaged on Instagram and Pinterest, you might spend 70% on ads on those platforms, 20% on influencer marketing, and 10% to experiment with ads on a retail media network relevant to your brand. 

Alongside your media spend, factor in production costs, agency fees, and testing budgets. Keep in mind it’s best to start with smaller test budgets to identify winning strategies before scaling successful campaigns.

3. Measure your advertising ROI

Modern advertising offers unprecedented measurement capabilities, but choosing the right metrics matters more than tracking every possible metric. Key performance indicators (KPIs) vary by campaign objective: brand awareness campaigns might track reach and frequency, while direct response efforts focus on cost per acquisition (CPA) and lifetime value (LTV). Establish baseline metrics before launching campaigns to accurately measure improvement.

When measuring your advertising’s return on investment (ROI), it’s important to accurately identify the touchpoints that led to a customer’s purchase. This attribution process remains one of advertising’s biggest challenges, especially with privacy changes limiting tracking capabilities. If possible, it’s best to implement multitouch attribution models that credit various touchpoints in the customer journey. 

You can also use marketing mix modeling for broader insights into how advertising impacts overall business results. Regular reporting and optimization based on performance data ensure continuous improvement and help you to justify ongoing advertising investments.

Creating effective ads

Advertising messages are designed to persuade an individual to buy a company’s goods or services. Even in business-to-business (B2B) transactions, individuals first have to be convinced to choose one product over another.

To accomplish this, ads typically have five main components:

1. Headline: This is the key attention-getting message. “Got milk?” is an example of a memorable headline, or Wendy’s old “Where’s the beef?”
2. Subhead: Not always necessary, but some ad headlines need clarification, much like a book’s subtitle.
3. Body copy: The meat of the advertising message occurs in the main section, where the product or service’s features and benefits are highlighted.
4. Image: Unless you’re advertising via audio only, including a product photo or image illustrating a key benefit is crucial.
5. Call to action (CTA): At the end of the ad you want to invite the consumer to take a step toward doing business with you, such as visiting a website or texting a certain number.

While advertising is the only way to guarantee that your message will be seen or heard by the right audience, it’s expensive compared to other marketing methods. For that reason, allocating a big budget toward paid advertising tends to be more popular with large corporations and brands than small businesses. That said, even if most of your marketing efforts are organic, your small business doesn’t need a big budget to test out some strategic paid ads.

The AIDA model in advertising

When you’re crafting your first ads, it helps to have a model to refer to. TheAIDA model provides a proven framework for creating advertisements that guide consumers through the buying process. AIDA stands for attention, interest, desire, and action—four stages every effective ad must address. This century-old model remains relevant because it aligns with fundamental human psychology and decision-making processes.

Here’s how the AIDA model shakes out: 

• Attention comes first, through compelling headlines, striking visuals, or unexpected approaches that stop people in their tracks. 
• Interest follows, as you present relevant information that resonates with your audience’s needs or challenges. 
• Desire builds by showing how your product improves their life or solves their problems, often through benefits-focused copy and social proof. 
• Action concludes the sequence, with a clear, compelling CTA that makes the next step obvious and easy. 

Modern digital advertising enhances AIDA with personalization, retargeting, and interactive elements that adapt to where consumers are in their journey.

Advertising examples

Studying real-life successful advertising campaigns provides inspiration and practical insights for creating your own effective ads. The best ad examples demonstrate how creative execution, strategic targeting, and clear messaging combine to achieve business objectives. These campaigns show that memorable advertising doesn’t always require massive budgets—sometimes a clever idea and deep audience understanding matter more.

Successful digital campaign examples

Dollar Shave Club revolutionized razor marketing with its 2012 viral video, “Our Blades Are F***ing Great.” The ad cost just $4,500 to produce but generated 12,000 orders in 48 hours. The campaign succeeded by combining humor, direct response, and a clear value proposition that disrupted the traditional razor industry. Its approach proved that understanding your audience’s frustrations and speaking their language can outperform polished big-budget productions.

Smart fragrance diffuser brand Pura took a different approach: using the power of Shopify Audiences and Shop Campaigns to improve their marketing ROI. With this combination of Shopify’s marketing tools, Pura could use strategic audience lists (e.g., Lookalike, Prospecting) to target (or re-target) the right people in the right place at the right time. They were also more easily able to implement mobile-first personalization in their ad campaigns. The result? Pura reduced customer acquisition costs (CAC) by up to 20%, boosted product sales by 100%, and increased average order value (AOV) by 15%. 

Creative traditional campaign examples

Despite digital dominance, traditional advertising continues producing memorable, effective campaigns. For example, Spotify’s annual “Wrapped” billboards turn user data into clever outdoor advertisements, like, “Dear person who played ‘Sorry’ 42 times on Valentine’s Day, What did you do?” These campaigns bridge digital and physical worlds, generating social media buzz from traditional out-of-home (OOH) ad placements.

This Rare Beauty billboard campaign (in partnership with Shopify) is another creative example of OOH advertising. To promote the launch of their first fragrance, Rare Beauty put up scratch-and-sniff billboards in three street-level locations around New York City. Pedestrians could also scan the billboard’s QR code and use the Shop app to order a free sample of Rare Eau de Parfum. By combining that sensory preview with easy access to the real thing, Rare Beauty and Shopify created a memorable experience that paired creative outdoor advertising with innovative mobile ecommerce technology.