TYPES OF STOCK

The rights and benefits of a stockholder vary according to the type of stock held. There are two main categories of stock, common and preferred.

A Common Stock
Financial loss or gain can be greater with common stock than with preferred stock. Holders of common stock have residual equity in a corporation. This means they have the last claim on the earnings and assets of a company, and they may receive dividends only at the discretion of the company’s board of directors and after all other claims on profits have been satisfied. For example, if the company is dissolved, stockholders share in what is left only after all other claims have been settled. Because dividends and equity do not have fixed dollar values, holders of common stock can reap greater benefits when a company is prosperous or lose more when a company is doing poorly than holders of preferred stocks.

B Preferred Stock
Holders of preferred stock take precedence over holders of common stock. Preferred stock shareholders are usually entitled to receive a fixed dividend before any payments are made to common stockholders. Holders of preferred stock typically receive a share of the proceeds from the dissolution of a company before holders of nonpreferred stock. Some stocks have both preferred dividends and preferred assets. Stock with first preference in the distribution of dividends or assets is called first preferred or, sometimes, preferred A; the next is called second preferred or preferred B, and so on.

Although holders of preferred stock may have to forego a dividend during a period of little or no profit, this is not true for two types of preferred stock. One is cumulative preferred stock, which entitles the owner to cumulative past-due and unpaid dividends. Another type is protected preferred stock, which the corporation issues after paying the preferred-stock dividends and placing a specified portion of its earnings into a reserve, or sinking, fund in order to guarantee payment of preferred-stock dividends.

Two other categories of preferred stock are redeemable stock and convertible stock. Redeemable stock is issued with the stipulation that the corporation has the right to repurchase it. Convertible stock provides the stockholder with the option of exchanging preferred stock for common stock under specific conditions, such as when the common stock reaches a certain price or when the preferred stock has been held for a particular time.

C Voting, Nonvoting, and Vetoing Stock
Although most stockholders have the right to vote at their meetings, thus participating in corporate management, some stocks specifically prohibit this. Such nonvoting stock may be common or preferred stock. However, at least one kind of stock issued by a corporation must be endowed with the voting privilege. This type of stock is called voting stock, and it may not be changed to nonvoting stock without the stockholder’s consent. Another type of stock is vetoing stock. Holders of vetoing stock may vote only on specific questions. Voting at stockholder meetings can be done by proxy—that is, a stockholder who will not be present at the meeting can authorize someone who will be at the meeting to cast their vote. Each share of stock is worth one vote. Before voting by proxy was permitted, independent stockholders had a greater chance of influencing the management of a company. After voting by proxy was authorized, however, company managers and directors holding a stock minority usually obtained enough proxies from absentee stockholders to outvote any opposition, thus perpetuating their control.

While stockholder voting is typically limited to the determination of the company’s board of directors and other specific corporate matters, there are instances where social concerns lead stockholders to force a change in business operations. For example, during the 1970s and 1980s the stockholders of a number of corporations required their companies to terminate or modify their business operations with South Africa. The stockholders wanted this change because South Africa was then engaged in the practice of apartheid—a policy of segregation involving economic and political discrimination against non-Europeans.

Automobile Racing

INTRODUCTION
Automobile Racing, sport in which drivers race specially designed automobiles over tracks or courses of differing lengths, designs, and constructions. The competition tests the skills of the drivers, the speed capabilities of the vehicles, and the endurance of both. Originally consisting of occasional challenges among wealthy individuals in the United States and continental Europe, automobile racing has evolved into an international year-round professional sport that is one of the most popular spectator attractions in the world.

AUTOMOBILE RACING BASICS
There are three basic types of race courses in automobile racing: (1) the oval track, (2) the road course, and (3) the straight-line course. Oval tracks, which can be dirt, asphalt, or concrete, range in length from 0.16 to 2.5 mi (0.27 to 4 km). Some oval tracks, longer than 1 mi (1.6 km) and highly banked (angled toward the ground), are called superspeedways. Road courses have either of two forms: courses that are created by temporarily closing city streets, and courses specially designed to duplicate the twists and turns of country roads but used only for racing. Road courses of both types are generally 1.5 to 4 mi (2.4 to 6.4 km) long in the United States, sometimes longer in other countries. Straight-line courses consist of a simple strip of asphalt or concrete used for drag races between two vehicles. Straight-line courses are generally 0.25 mi (0.4 km) long, but they can be 0.125 mi (0.2 km) long as well.

There are five basic components of an automobile racing team: (1) the ownership, (2) the team manager, (3) the driver, (4) the support crew, and (5) the sponsors. The ownership of the car is in charge of the team but usually employs a manager to run operations on a day-to-day basis. The driver is always an independent contractor. Drivers usually compete in a variety of different cars for different owners throughout their careers. The support crew maintains the car before, during, and after races. The driver and support crew work together during races to handle needed repairs, tire changes, and fuel refills (done during brief service breaks known as pit stops). Finally, sponsors, usually corporations, provide money to the racing team in exchange for promotional ties. The most obvious examples of this relationship are company and product logos, which are commonly seen on the outside of vehicles during races.

Although there are many categories of automobile racing—and many types and levels of competition within each category—the major forms of the sport differ in the United States and abroad. In most parts of the world, the premier race series are those for Formula One (F1) vehicles and for sports cars. These competitions receive less attention in the United States, where the most important race series are those for Indianapolis (Indy) cars and for stock cars. Some drivers and teams move between American and overseas forms of racing, but this is uncommon.

The coordinating committee for automobile racing in the United States is the Automobile Competition Committee for the United States (ACCUS), which serves as the U.S. representative on the Fédération International de l'Automobile (FIA; International Automobile Federation), the worldwide governing body of the sport. ACCUS coordinates activities between FIA and six major sanctioning bodies for automobile racing in the United States—addressing rules, regulations, automotive specifications, safety, and related matters. The eight organizational members of ACCUS are Championship Auto Racing Teams (CART), National Association for Stock Car Auto Racing (NASCAR), Indy Racing League (IRL), Grand American Road Racing Association (GRAND-AM), Professional Sports Car Racing (PSC), the Sports Car Club of America (SCCA), the National Hot Rod Association (NHRA), and the United States Auto Club (USAC).

RECENT TRENDS

One of the most important issues in auto racing is spectator and driver safety. The sport has always been dangerous, with every innovation to increase speed also ratcheting up the level of danger. Unfortunately, although some safety measures—such as fire control and better helmets—have been developed in response to accidents, the innovations did not stem the tide of deaths. One study done in 2001 estimated that, at all levels of the sport, there were more than 250 racing-related deaths in the United States since 1990. In particular, the deaths of several high-profile drivers—Ayrton Senna in 1994, Adam Petty in 2000, and Dale Earnhardt in 2001—highlighted the need for mandatory head restraints and other safety controls, and the governing bodies of the sport began to act. Spectators who are killed when parts of cars fly into the grandstands also remain a concern for the sport.

Another problem in automobile racing both in the United States and internationally is the immense cost of competing. Driver salaries have skyrocketed and the cost of building a car capable of winning is often enormous, sometimes into the millions of dollars. To win a racing series, such as the Indy car championship or the Winston Cup, requires a fortune for salaries, construction, engine rental and maintenance, and other related costs. Modern racing teams require large corporate sponsorships along with lucrative television deals to have a chance to win. These sources of revenue can suddenly dry up if the overall economy sours or other problems develop, such as the governmental restrictions on tobacco advertising that have hurt the sport financially in recent years.
Another concern is the rapid rate of technological change in automobile racing. Early in the sport's development the race cars changed gradually, often with years intervening between significant innovations. Over time, however, it became increasingly common for competitors to actively seek technological superiority. This can be very costly, as research, technical staff, and implementing change itself (requiring the physical construction of new cars or components) add a great deal to the cost of running a race car. If a team does not keep up with the cutting-edge technology, however, it may be sacrificing a chance for victory. Such challenges will continue to be part of automobile racing in the years ahead.

Brands of Cars;

Brands of Cars;
ACURA
ALFA ROMEO
ASTON MARTIN
AUDI
AUSTIN-HEALEY
BENTLEY
BMW - USA
BMW - U.K
BMW - Germany
BUICK
CADILLAC
CHEVROLET
CHRYSLER
CHRYSLER CORPORATION
CITROEN
COBRA
DAEWOO
DAIHATSU
DELOREAN
DODGE
EAGLE
FERRARI
FIAT
FORD
Ford - U.K.
GEO
GENERAL MOTORS (GM)
GMC
HONDA
HUMMER
HYUNDAI
INFINITI
ISUZU
JAGUAR
JEEP
KIA
LAMBORGHINI
LANCIA
LAND ROVER
LEXUS
LINCOLN
LOTUS
MASERATI
MAZDA
MCLAREN
MERCEDES-BENZ
MERCURY
MG
MINI
MITSUBISHI
NISSAN
OLDSMOBILE
OPEL
PEUGEOT
PLYMOUTH
PONTIAC
PORSCHE
RENAULT
ROLLS ROYCE
ROVER
SAAB
SATURN
SEAT
SKODA
SUBARU
SUZUKI
TOYOTA
VAUXHALL
VOLKSWAGEN
VOLVO

Advertising

INTRODUCTION

Advertising, a form of commercial mass communication designed to promote the sale of a product or service, or a message on behalf of an institution, organization, or candidate for political office. Evidence of advertising can be found in cultures that existed thousands of years ago, but advertising only became a major industry in the 20th century. Today the industry employs hundreds of thousands of people and influences the behavior and buying habits of billions of people. Advertising spending worldwide now exceeds $350 billion per year. In the United States alone about 6,000 advertising agencies help create and place advertisements in a variety of media, including newspapers, television, direct mail, radio, magazines, the Internet, and outdoor signs. Advertising is so commonplace in the United States that an average person may encounter from 500 to 1,000 advertisements in a single day, according to some estimates.

Most advertising is designed to promote the sale of a particular product or service. Some advertisements, however, are intended to promote an idea or influence behavior, such as encouraging people not to use illegal drugs or smoke cigarettes. These ads are often called public service ads (PSAs). Some ads promote an institution, such as the Red Cross or the United States Army, and are known as institutional advertising. Their purpose is to encourage people to volunteer or donate money or services or simply to improve the image of the institution doing the advertising. Advertising is also used to promote political parties and candidates for political office. Political advertising has become a key component of electoral campaigns in many countries.

Many experts believe that advertising has important economic and social benefits. However, advertising also has its critics who say that some advertising is deceptive or encourages an excessively materialistic culture or reinforces harmful stereotypes. The United States and many other countries regulate advertising to prevent deceptive ads or to limit the visibility of certain kinds of ads.
Advertising has become increasingly international. More than ever before, corporations are looking beyond their own country's borders for new customers. Faster modes of shipping, the growth of multinational corporations, rising personal income levels worldwide, and falling trade barriers have all encouraged commerce between countries. Because corporations are opening new markets and selling their products in many regions of the globe, they are also advertising their products in those regions.

In 2000 the United States was the leading advertising market in the world with total advertising spending of $147.1 billion. Japan ranked second with $39.7 billion, followed by Germany with $20.7 billion, the United Kingdom with $16.5 billion, and France with $10.7 billion. This article deals primarily with advertising practices in Canada and the United States.

TYPES OF ADVERTISING

Advertising can be divided into two broad categories—consumer advertising and trade advertising. Consumer advertising is directed at the public. Trade advertising is directed at wholesalers or distributors who resell to the public. This article focuses on consumer advertising, the form of advertising that is familiar to most people.
Consumer advertising can be further divided into national advertising and local advertising. National advertising is aimed at consumers throughout the entire country. National advertising usually attempts to create awareness among the public of a product or service, or it tries to build loyalty to a product or service. Local advertising is aimed at informing people in a particular area where they can purchase a product or service. Advertising to the public may also take the form of institutional advertising, image advertising, informational advertising, or cooperative advertising.

Institutional advertising seeks to create a favorable impression of a business or institution without trying to sell a specific product. This type of advertising is designed solely to build prestige and public respect. For nonprofit institutions, such advertising helps support the institution’s activities—for example, by encouraging blood donations or cash contributions for the work of an organization like the Red Cross. A for-profit business has other reasons for improving its reputation rather than trying to sell a particular product. In some cases a large company may sell a diversity of products. As a result, there is more value and greater efficiency in building a brand image for the company itself. If consumers learn to have a high regard for the company, then they are more likely to have a favorable opinion of all of the company’s diverse products.

Many advertisers prefer a strategy known as image advertising. These advertisers seek to give a product a personality that is unique, appealing, and appropriate so that the consumer will want to choose it over similar products that might fulfill the same need. The personality is created partly by the product's design and packaging but, more importantly, by the words and pictures the advertisements associate with the product. This personality is known as a brand image. Advertisers believe brand image often leads consumers to select one brand over another or instead of a less expensive generic product. Brand image is especially important for commodities such as detergents, jeans, hamburgers, and soft drinks, because within these product categories there are few, if any, major differences.

Informational advertising seeks to promote an idea or influence behavior. Sometimes known as public service advertising, it may try to discourage young people from using illicit drugs or tobacco, or it may encourage people to adopt safer, healthier lifestyles.

Cooperative advertising is an arrangement between manufacturers and retailers in which manufacturers offer credits to their retail customers for advertising. The credits, or advertising allowances, are based on the amount of product the retailer purchases. For example, if the retailer purchases $100,000 worth of a product from a manufacturer, the manufacturer’s cooperative advertising program may allot a 1 percent credit, or $1,000, toward the cost of purchasing an ad that will feature the product. In addition, some manufacturers will match the amount that the retailer spends, sharing the cost of the ad. In the United States antitrust laws enforced by the Federal Trade Commission (FTC) ensure that these ad allowances are offered on equal and proportionate terms so that large retailers are not unduly favored over small retailers. Cooperative advertising is a form of local advertising because it directs consumers to local retail outlets.

THE ROLE OF THE ADVERTISING AGENCY OR DEPARTMENT

Advertising agencies create most advertisements and are the core of the advertising industry. Some companies, however, have their own advertising departments which function much like an agency. The development, production, and placement of a single ad can be a time-consuming process involving a large number of people with a variety of business and creative skills. Advertising agencies not only create the advertisements but also pay for the cost of placing the ad in a newspaper or magazine or on television or radio. A large advertising agency or department may employ hundreds or thousands of people, including advertising and marketing specialists, designers, writers known as copywriters, artists, economists, psychologists, researchers, media analysts, product testers, librarians, accountants and bookkeepers, and mathematicians.

A typical advertising agency is divided into a number of departments, such as account service, research, media planning and buying, the creative department, and production. A multinational advertising agency with clients that spend hundreds of millions of dollars on advertising may employ as many as 8,000 people worldwide and up to 900 people in a major office. A local agency with clients that spend about $15 million a year on advertising may employ only about 25 people.

Advertising agencies make money in a variety of ways. When the agency uses the client’s advertising budget to buy time for an ad on the radio or on television or when it buys space for an ad in a newspaper or magazine, the media outlet allows the agency to keep 15 percent of the cost of the space or the time as a commission. The 15 percent commission has become an advertising industry standard and usually accounts for the largest portion of the agency’s income. Agencies also charge clients for the cost of producing the ads. Increasingly, agencies are charging clients a straight monthly or hourly fee for all of their services or are combining a fee with some kind of commission. Agencies have turned to this approach because clients are asking them to address a range of marketing issues rather than just producing ads. The fee arrangement pays for the time devoted to these larger marketing issues.

Once a company selects an agency, the agency assigns an account executive to act as liaison between it and the client. The account executive manages all of the services conducted on behalf of the client and coordinates the team assigned to the client's business. The account executive directs the preparation of the advertising strategy, which includes deciding how and to whom the product or service will be presented. The account executive also assigns priorities, oversees the budget, reviews and approves all recommendations before they are taken to the client, and makes sure that the agency meets all deadlines.

METHODS OF ADVERTISING

To reach the consumer, advertisers employ a wide variety of media. In the United States, the most popular media, as measured by the amount of ad spending, are television, newspapers, direct mail, radio, Yellow Pages, magazines, the Internet, outdoor advertising, and a variety of other media, including transit ads, novelties, and point-of-purchase displays. (These rankings are measured each year by Advertising Age, an advertising trade magazine, and seldom vary.)

In Canada, newspapers are the most popular advertising medium, followed by television, magazines, radio, and outdoor advertising. Canada is the ninth largest advertising market in the world.

In 1999 television attracted about 23.4 percent, or $50.4 billion, of the advertising dollars spent in the United States. Television is available to advertisers in two forms: broadcast and cable. Broadcast TV—television signals that are sent over the air rather than through cable wires—generates all of its revenue from advertising. Advertising accounts for about 60 percent of cable television revenues with the rest coming from subscriber fees.

To run commercials on television, advertisers buy units of time known as spots. The standard units of time are 15, 30, or 60 seconds in length. These spots are purchased either locally or from a national network. Because of the high cost of national network spots, ranging from hundreds of thousands of dollars to millions of dollars, only large national advertisers can afford to run network television spots. Advertisers wishing to reach a local audience can buy time from an individual station. But even these spots cost so much to produce and run that small and even many mid-sized companies cannot afford them.

Because television commercials combine sight, sound, and motion, they are more dramatic than any other form of advertising and lend excitement and appeal to ordinary products. Advertisers consider television an excellent medium to build a product's brand image or to create excitement around a particular event such as a year-end auto sale. But TV spots are too brief to provide much product information. As a result, television works best for products such as automobiles, fashion, food, beverages, and credit cards that viewers are familiar with and easily understand.

In the United States, newspapers are the second most popular advertising medium after television and in 1999 received 21.7 percent, or $46.6 billion, of all advertising dollars. Newspapers enable advertisers to reach readers of all age groups, ethnic backgrounds, and income levels. Two types of advertising appear in newspapers: classified advertising, such as the want ads, and display advertising. Display ads range in size from as large as a full page to as small as one column in width and less than one centimeter (less than one inch) in length. Display ads often contain illustrations or photographs and usually provide information about where the product or service being advertised can be purchased. Typically, advertising makes up about 65 percent of a newspaper's content and generates about 65 percent of a newspaper's revenue. About 88 percent of this revenue comes from local businesses.

Most advertisers believe that newspaper ads fail to convey the kind of emotional images that build brand image. As a result, most newspaper advertising is done by retailers who use newspaper ads to provide timely information that can lead to immediate sales. Newspapers are particularly well suited to this role because most are published daily. Readers can clip coupons from the newspaper and cash them in quickly at local stores. People also turn to newspapers for immediately useful information about product discounts, bank interest rates, restaurant specials, and entertainment.
Direct mail is the third largest advertising medium, attracting about 19.2 percent, or $41 billion, of all U.S. advertising dollars in 1999. Direct mail advertising, as the name implies, is advertising that is sent directly to people by mail, usually through the postal system. Increasingly, however, electronic mail (e-mail) is being used as a direct mail device. Direct mail can be as simple as a single letter or as involved as a catalog or an elaborate e-mail known as HTML mail that offers graphics and links to more information.

From the advertiser's point of view, the key to a successful direct mail program is the mailing list. The mailing list contains the names and addresses of people who share certain common characteristics that suggest they will be likely to buy a particular product or service. Because advertisers are speaking directly to those who are most likely to buy their product or service, many advertisers consider direct mail the most effective of all advertising media for generating immediate results. Direct mail through the U.S. postal system, however, is the most expensive form of advertising, costing about 14 times as much per exposure as most magazine and newspaper ads. But because of the results it produces, many advertisers believe the expense is justified.

Radio attracted about 8 percent, or $17.2 billion, of all U.S. advertising dollars, making it the fourth largest advertising medium in 1999. Although national advertisers can buy national network radio time, 90 percent of all radio advertising is local. Unlike television which reaches a broad audience, the specialized programming of radio stations enables advertisers to reach a narrow, highly specific audience such as people who like sports or urban teenagers who listen to the latest styles of popular music. Because many people listen to radio while in their cars, radio also enables advertisers to reach prospects just before they go shopping. But because people listen to the radio while doing something else such as driving or working, radio commercials can be easily misunderstood. As a result, radio ads work best when the messages are relatively simple ones for familiar, easily understood products.

Yellow Pages, the thick directories of telephone listings and display advertisements, represented the fifth most popular advertising medium in 1999, attracting $12.6 billion, or 5.9 percent, of total advertising spending. Almost all advertising in the Yellow Pages is local advertising.

THE IMPACT OF ADVERTISING

Advertising has an important effect on a country’s economy, society, culture, and political system. This is especially true in the United States where the advertising industry plays such a prominent role.
Economic Impact: Most economists believe that advertising has a positive impact on the economy because it stimulates demand for products and services, strengthening the economy by promoting the sale of goods and services. Manufacturers know that advertising can help sell a new product quickly, enabling them to recoup the costs of developing new products. By stimulating the development of new products, advertising helps increase competition. Many economists believe that increased competition leads to lower prices, thereby benefiting consumers and the economy as a whole. These economists also argue that by interesting consumers in purchasing goods, advertising enables manufacturers and others to sell their products in larger quantities. The increased volume of sales enables companies to produce individual units at lower costs and therefore, sell them at a lower price. Advertising thus benefits consumers by helping lower prices.

Other economists, however, believe that advertising is wasteful. They argue that the cost of advertising adds to the cost of goods and that most advertising simply encourages consumers to buy one brand rather than another. According to this view, advertising simply moves sales from one company to another, rather than increasing sales overall and thereby benefiting the economy as a whole.

Social Impact: Advertising can have wide-ranging repercussions on a society. Some critics suggest that advertising promotes a materialistic way of life by leading people to believe that happiness is achieved by purchasing products. They argue that advertising creates a consumer culture in which buying exciting new products becomes the foundation of the society's values, pleasures, and goals.

Other critics express concern over the way advertising has affected women and racial minority groups. Ads in the 1950s depicted women primarily as decoration or sex objects. Although millions of women worked outside the home in the 1960s, ads continued to focus on their role as homemakers. Whether owing to the feminist movement or to women's increasing economic power, after the 1960s it became more common to see women depicted in professional roles. However, many ads today still emphasize a woman’s sexuality.

The way advertising has depicted racial minorities has also been harmful. Prior to 1960, African Americans were usually shown in a subordinate position. Due to the influence of the civil rights movement, however, advertisers by the 1980s had begun to depict African Americans as students, professionals, or business people. However, many African American organizations and community activists continue to object to the way that alcohol and tobacco companies have seemingly targeted low-income minority communities with a heavy preponderance of outdoor advertising for their products.

As ads have begun to more fully reflect the lives of women and African Americans in the United States, increasing attention has been paid to the way in which advertising shows other ethnic groups, including Hispanics, Asians, Native Americans, and Eastern Europeans. There is still considerable debate over how advertising influences public perception of gender and of particular ethnic groups.

Advertising has a major social impact by helping sustain mass communications media and making them relatively inexpensive, if not free, to the public. Newspapers, magazines, radio, and broadcast television all receive their primary income from advertising. Without advertising, many of these forms of mass communication might not exist to the extent that they do today, or they might be considerably more expensive, offer less variety, or even be subject to government control through subsidies. In-depth news programs, a diversity of magazines, and free entertainment might no longer be widely available.

At the same time, however, some critics warn that because advertising plays such a major economic role, it may exercise undue influence on the news media and thereby curtail the free flow of information in a free society. Reporters and editors, for example, may be hesitant to develop a news story that criticizes a major advertiser. As a result, society might not be alerted to harmful or potentially harmful conduct by the advertiser. Most members of the news media deny that pressure from an advertiser prevents them from pursuing news stories involving that advertiser, but some members of the media acknowledge that they might not be inclined to investigate an issue aggressively if it threatened to offend a major advertiser.

Advertisers may affect media programming in other ways, too, critics charge. For example, companies that sponsor TV programs prefer relatively wholesome, non controversial programming to avoid offending a mass audience. This preference causes TV networks to emphasize this type of programming. The result is that society may be denied the benefits of being able to view challenging or highly original entertainment programs or news programs on controversial issues. Because advertisers are especially interested in attracting the 18 to 34 year olds who account for most consumer spending, television shows are often developed with this audience in mind. If the ratings show that a program is not attracting large audiences, particularly among 18 to 34 year olds, advertisers often withdraw support, which causes a program to be canceled. As a result, shows that are more likely to interest and to be of value to older audiences are not produced.

The impact of television on young children has received much attention. Research suggests that children see television advertising as just another form of programming and react uncritically to its messages, which makes them especially vulnerable to advertising. There is also concern about the way in which adolescent girls respond to advertising that features beautiful, thin models. Research indicates that many adolescent girls are unduly influenced by this standard of beauty, become dissatisfied with their own bodies, and may develop eating disorders in pursuit of a thin figure. New research suggests that adolescent boys are also being influenced by advertising images of bulked-up, buffed bodies. As a result, many become dissatisfied with their own body image, devote large amounts of time to weightlifting, and may even take drugs that have harmful side effects in order to develop more muscle. Those over the age of 60 are thought to be less influenced by advertising, but some elderly people no longer process messages as easily as younger people, making them more susceptible to questionable advertising claims.

Political Impact: Advertising is now a major component of political campaigns and therefore has a big influence on the democratic process itself. In 1998 more than $467 million was spent on election campaigns in the United States. That amount of spending placed political advertising in the ranks of the country’s 30 leading advertisers that year. Political advertising is a relatively new development in U.S. history. Advertising professionals did not become involved in electoral campaigns until the 1950s. But since then, political advertising has grown in sophistication and complexity.

Political advertising enables candidates to convey their positions on important issues and to acquaint voters with their accomplishments and personalities. Television advertising is especially effective for candidates running for national or statewide office because it can reach so many people at once. Candidates can also use advertising to respond effectively to the charges of their opponents.

Various campaign finance reform proposals, however, have tried to address the impact of television advertising on political campaigning. Because of the high cost of television ads, the costs of political campaigns have skyrocketed, making it necessary for candidates to raise money continually, even after they have been elected to office. Critics say this factor jeopardizes the democratic process by making elected officials beholden to wealthy contributors and by making it more likely that only the wealthy will run for office. Some reform proposals have called for free airtime, but television and radio networks have resisted this idea.

Critics of political advertising also charge that the 30-second television spot has become more important to a political campaign than a thorough discussion of the issues. As a result, voters are bombarded with image advertising rather than being acquainted with the candidate’s positions. They contend that this practice is harmful to good government. Issues are simplified, and candidates are “packaged and sold” much like a consumer product, thereby distorting the political process.

Cultural Impact: Advertising can affect cultural values. Some advertising messages, for example, encourage aggressive individualism, which may clash with the traditional cultural values of a country where the collective or group is emphasized over the individual or humility or modesty is preferred to aggressiveness. With the globalization of the world economy, multinational corporations often use the same advertising to sell to consumers around the world. Some critics argue that advertising messages are thus helping to break down distinct cultural differences and traditional values, causing the world to become increasingly homogeneous.

Many advertising campaigns, however, have universal appeal, overriding cultural differences, or they contribute to culture in a positive way. Humor in advertising has made many ad campaigns widely popular, in some cases achieving the status of folklore or taking on new life in another arena. For example, a popular ad campaign for a fast-food chain with the slogan “Where’s the beef?” became part of the 1980 Democratic presidential primary campaign between Gary Hart and Walter Mondale. The ad ridiculed a competitor by depicting a small hamburger patty dwarfed by a huge bun. During a primary debate one of the candidates used the ad slogan to suggest that his opponent’s campaign lacked substance.

REGULATION

REGULATION
Advertising is subject to both government regulation and industry self-regulation to prevent deceptive advertising or to limit the visibility of advertising. Advertising is heavily regulated in the United States, Canada, and a number of European and Asian countries.

In the United States Government Regulation
Federal, state, and city governments have all passed legislation restricting advertising in various ways in the United States. The Supreme Court of the United States has overturned some restrictions, however, ruling that advertising is protected under the free speech provisions of the First Amendment to the Constitution, although to a lesser extent than political speech. In a landmark 1976 ruling, Virginia State Board of Pharmacy v Virginia Citizens Consumer Council, the Court declared advertising to be a semiprivileged form of free expression, subject to some regulation. In the Virginia case the Supreme Court struck down a ban that prohibited pharmacists from advertising drug prices. The ruling removed bans that had applied to other professionals, such as physicians and lawyers, and enabled them to advertise their services.

In the United States the main government regulatory agency for advertising is the Federal Trade Commission (FTC). The FTC enforces a variety of consumer protection laws to eliminate ads that deceive the consumer. The FTC defines deceptive advertising as any ad containing a misrepresentation or omission harmful to the consumer. An advertisement does not have to be untrue to be deceptive. For example, ads for a certain bread product claimed that it had half as many calories per slice as its leading competitors. The advertiser failed to say, however, that each slice of its bread was also half as thick as the competitors. The ads were ruled to be deceptive.

The key to the FTC's regulation of advertising is its power to require that advertisers substantiate the accuracy of their claims. So if advertisers say that "tests prove" or "physicians recommend," they must be able to show test results or affidavits from doctors. Moreover, companies cannot misuse evidence. For example, claims that a particular brand of dog food provided all the milk protein a dog needs were ruled to be misleading because dogs do not need milk protein.

Products that can affect health receive special regulatory attention. The U.S. Congress banned cigarette advertising from radio and TV in 1971 under the Public Health Cigarette Smoking Act. In 1998 the tobacco industry and the attorneys general of 46 states agreed to ban outdoor cigarette advertising and the use of cartoon characters in advertising, a practice that many thought had encouraged young people to start smoking.

Advertising directed to children has received considerable scrutiny. In 1990 Congress passed the Children's Television Advertising Practice Act. Among other things, it set limits on the amount of advertising that could be included in children's television programming and barred hosts of children's shows from selling products.

State laws and enforcement bureaus impose additional regulations on certain types of advertising, particularly those involving contests. These regulations may differ from state to state. Consequently, advertisers planning a national contest through newspapers may have to prepare several different versions of an advertisement to comply with the varying laws. In some states the media are themselves regulated. For example, it is illegal in a number of states for radio and television stations to broadcast distilled-liquor advertising; outdoor billboard advertising is banned in certain other states.

Industry Regulation
The advertising industry has resorted to self-regulation in a serious effort to stop abuses before they occur. These self-imposed codes of ethics and procedures aim principally to curtail not only bad taste but also misrepresentation and deception in copy and illustrations, as well as derogatory and unfair representations of products of competitors.

Several advertising trade associations are concerned with maintaining high standards. The associations believe it is good public relations to do so, inasmuch as advertising that weakens public confidence damages the impact and influence of all advertising.

Individual media and media groups often establish their own codes of ethics. Some newspapers and magazines refuse to publish advertising for tobacco and alcoholic beverages; most of them, in varying degree, investigate the reliability of advertisers before accepting their copy. Some publishers have strict rules about the presentation of advertising to prevent the publication of false or exaggerated claims and to preserve the aesthetic tone of their publications.

Radio and television stations generally try to investigate the company and its product before broadcasting advertising messages that might cause unfavorable reactions. The networks and the National Association of Broadcasters have established codes regulating the advertising of medical products and controlling contests, premiums, and other offers. All the networks maintain so-called acceptance departments, which screen both commercial and noncommercial scripts, either deleting or challenging for substantiation any questionable material. Most magazine publishers have their own strict rules on acceptance of advertising copy.

The American Advertising Federation, an organization of leading national advertisers, has long campaigned for “truth in advertising.” Other organizations that promote ethical standards are the American Association of Advertising Agencies and the Association of National Advertisers. The Institute of Outdoor Advertising encourages its members to improve the design of their advertising posters and signs and, more importantly, to make sure they do not erect advertising billboards in locations where they will mar the landscape or otherwise offend the public. The best-known and most active watchdogs in the advertising field are the Better Business Bureaus, which bring pressure to bear on unethical advertisers through persuasion, publicity, or, in extreme cases, legal action. The fact that local and national bureaus are subsidized by both advertisers and media reflects the conviction of modern business management that “good advertising is good business.”

In Canada
Canadian advertising regulations are even stricter than those in the United States. The Competition Act is the Canadian federal statute that seeks to prevent false and misleading advertising. The act is administered by the Bureau of Competition Policy which is part of Consumer and Corporate Affairs. If the bureau finds advertising to be misleading, it may simply ask the advertiser to stop running the ad or it may ask a company to take certain steps to correct the impression made by the false claims. The bureau may also take legal action against the advertiser in which case it will turn over its evidence to the Attorney General of Canada who will decide whether the evidence warrants a criminal prosecution.

Canada’s self-regulatory body, the Canadian Advertising Standards Council, has the right to take a commercial off the air if it offends taste and public decency. Moreover, in Canada ads that deal with products regulated by the government (for example, food, drugs, alcohol, and children's products) have to be approved before they air and can also be pulled if complaints arise after they run. In the United States, action can only be taken after the advertisement runs. Finally, beginning in 2001 tobacco advertising in Canada was limited to direct mail and to adults-only environments such as bars.

In Other Countries
Advertising is often heavily regulated in other countries as well. But the regulations vary from country to country. For example, in Mexico advertising for tobacco and alcohol is limited to late evenings after children have gone to bed. France prohibits any reference to health in tobacco ads, and Italy allows alcohol advertising to promote the brand name but not product attributes such as "cold filtered" or "smooth tasting."

Advertising regulations in other countries are often designed to protect culture and morals. France prohibits the use of foreign expressions where there are equivalent French terms as a way of protecting the French language. Advertising regulations in Malaysia bar the depiction of nudity, disco dancing, seductive clothing, and blue jeans in ads and require ads to project the Malaysian culture and identity. Varying regulations present numerous challenges to multinational corporations that advertise their products in many different countries.

HISTORY of ADS

Archaeologists have found evidence of advertising dating back to the 3000s bc, among the Babylonians. One of the first known methods of advertising was the outdoor display, usually an eye-catching sign painted on the wall of a building. Archaeologists have uncovered many such signs, notably in the ruins of ancient Rome and Pompeii. An outdoor advertisement excavated in Rome offers property for rent, and one found painted on a wall in Pompeii calls the attention of travelers to a tavern situated in another town.

In medieval times word-of-mouth praise of products gave rise to a simple but effective form of advertising, the use of so-called town criers. The criers were citizens who read public notices aloud and were also employed by merchants to shout the praises of their wares. Later they became familiar figures on the streets of colonial American settlements. The town criers were forerunners of the modern announcer who delivers radio and television commercials.

Although graphic forms of advertising appeared early in history, printed advertising made little headway until the invention of the movable-type printing press by German printer Johannes Gutenberg about 1450. This invention made the mass distribution of posters and circulars possible. The first advertisement in English appeared in 1472 in the form of a handbill announcing a prayer book for sale. Two hundred years later, the first newspaper ad was published offering a reward for the return of 12 stolen horses. In the American colonies, the Boston News-Letter, the first regularly published newspaper in America, began carrying ads in 1704, and about 25 years later Benjamin Franklin made ads more readable by using large headlines.

In the United States, the advertising profession began in Philadelphia, Pennsylvania, in 1841 when Volney B. Palmer set up shop as an advertising agent, the forerunner of the advertising agency. Agents contracted with newspapers for large amounts of advertising space at discount rates and then resold the space to advertisers at a higher rate. The ads themselves were created by the advertisers. In 1869 Francis Ayer bought out Palmer and founded N. W. Ayer & Son, an agency that still exists today. Ayer transformed the standard agent practice by billing advertisers exactly what he paid to publishers plus an agreed upon commission. Soon Ayer was not only selling space but was also conducting market research and writing the advertising copy.

Advertising agencies initially focused on print. But the introduction of radio created a new opportunity and by the end of the 1920s, advertising had established itself in radio to such an extent that advertisers were producing many of their own programs. The early 1930s ushered in dozens of radio dramatic series that were known as soap operas because they were sponsored by soap companies.

Television had been introduced in 1940, but because of the high cost of TV sets and the lack of programming, it was not immediately embraced. As the American economy soared in the 1950s, so did the sale of TV sets and the advertising that paid for the popular new shows. Soon TV far surpassed radio as an advertising medium.

The tone of the advertising was also changing. No longer did advertising simply present the product benefit. Instead it began to create a product image. Bill Bernbach, founder of Doyle Dane Bernbach in New York City; Leo Burnett, founder of the Leo Burnett agency in Chicago, Illinois; and David Ogilvy, founder of Ogilvy & Mather in New York City, all came to prominence in the late 1950s and 1960s and led what has been called the "creative revolution." Bernbach's agency captured the spirit of the new age. Bernbach believed that advertising had to be creative and artistic or it would bore people. He also believed that good advertising began with respect for the public's intelligence. The ads his agency created were understated, sophisticated, and witty.

For example, when Bernbach's agency picked up the account for the Henry S. Levy Bakery in Brooklyn, a borough of New York City, the agency created an ad that entertained New Yorkers and provided fodder for many conversations. The ad showed a Native American eating a slice of the bakery's rye bread with the headline, "You don't have to be Jewish to love Levy's." But it was the advertising for Volkswagen that made the agency's reputation. At a time when American cars were getting bigger and bigger and the advertising for them trumpeted that bigger was better, Doyle Dane Bernbach created a magazine ad that showed a small picture of the Volkswagen Beetle surrounded by a sea of white space with the headline, "think small." An equally unconventional ad carried the headline "lemon" beneath a photo of an apparently flawed Volkswagen. The ad's copy explained that "this Volkswagen missed the boat. The chrome strip on the glove compartment is blemished and must be replaced…We pluck the lemons; you get the plums." In an era of hype and bombast, the Volkswagen ads stood out because they admitted failure in a witty way and gave facts in a believable manner that underlined the car's strengths. This wit together with a conversational and believable style was a hallmark of the advertising created by Doyle Dane Bernbach and that style became highly influential.

The creative foundation established by Bernbach and others has been critical to the success of contemporary advertising. The introduction of the TV remote control and access to hundreds of cable channels mean that today advertising must interest and entertain consumers or else they will simply use the remote to change the channel. New digital devices even threaten to make it possible to edit out commercials. The development of interactive television, combining the functions of a computer with access to high-speed transmission over cable lines or optical fibers, will likely enable consumers to select from a vast video library. Consumers will be able to determine not only when they watch something, but also, to a greater extent than ever before, what they will watch. Some industry observers believe that as consumers gain greater control over their viewing activities, they will find it easier to avoid advertising.

No one can predict what new forms advertising may take in the future. But the rapidly increasing cost of acquiring new customers makes one thing certain. Advertisers will seek to hold onto current customers by forming closer relationships with them and by tailoring products, services, and advertising messages to meet their individual needs. So while advertising will continue to encourage people to consume, it will also help provide them with products and services more likely to satisfy their needs.