P and G Slashed Digital Ad Spending. This is What Happened Next, by Wolf Richter

It was hard enough trying to measure the effectiveness of advertising in the good old pre-computer days. Measuring the effectiveness of advertising on the internet is like trying to count the fish in a lake one by one. From Wolf Richter at wolfstreet.com:

Tired of feeding an opaque, slimy industry of bots and fake clicks.

Procter & Gamble, one of the largest and most sophisticated advertisers in the world, reported on Thursday that sales were slightly down in the fourth quarter and for the fiscal year, despite consumer price inflation. It’s the epitome of corporate revenue stagnation: only price increases keep revenues from declining. An activist investor – formerly called “corporate raider” – is breathing down its neck. So cost cutting to raise profits is the trick.

When a corporate giant cuts costs, it cuts the revenues of other companies.

And it did. Its “selling, general, and administrative expenses,” which include advertising and marketing, fell 7% in the quarter. Net income jumped 12%. And digital advertising took it on the chin in P&G’s earnings report:

Digital ad spending was lower versus a high base period and due to current period choices to temporarily restrict spending in digital forums where our ads were not being placed according to our standards and specifications.

Back in the day before digital ads, advertisers lived by a rule of thumb: Half of our advertising doesn’t work and is wasted; we just don’t know which half.

Digital advertising with all its consumer tracking technologies and direct micro-targeting promoted by now withering “adtech” companies or booming Facebook was supposed to have changed that equation. But it hasn’t. The hard part still is figuring out which half is wasted. But P&G is working on it.

When P&G speaks about cutting digital advertising, people listen, other companies follow, and the advertising industry quakes in its boots.

In April, P&G announced some details of its $12 billion or so cost-cutting binge over five years. This includes slashing $2 billion in advertising expenditures – among them $1 billion in media and $500 million in agency fees.

To continue reading: P&G Slashed Digital Ad Spending. This is What Happened Next

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