Last year, Procter & Gamble, one of the world’s largest ad spenders shocked the industry with the announcement that it would cut hundreds of millions of dollars from digital advertising budgets. What’s even more surprising? The cuts are expected to continue in 2018, beginning with half of what’s left of its global agency roster. P&G CFO Jon Moeller said the 2017 cuts translated to $750 million in savings of agency fees and production costs, and with the most recent cuts, the savings will likely grow to more than $1 billion in agency reductions by the end of the year.
With the prevalence of digital ad fraud, bot-generated traffic, nonviewable inventory and the clutter in the industry, P&G has put a very large stake in the ground for media accountability. Today, advertisers constantly question whether their media dollars are being seen at all, never mind being seen by the right audience, or more importantly, driving action. For P&G, that’s simply not acceptable.
During the company’s Q2 earnings call, Moeller said, “There is more opportunity to eliminate waste by reducing excess frequency within and across channels, eliminating non-viewable ads, and stopping ads served to bots or adjacent to inappropriate content. Through these efforts, we've been able to eliminate waste and cut losses, while simultaneously increasing reach, the number of consumers we're actually connecting with, by about 10 percent.”
P&G has always played an important role in the advertising arena and as the company continues to make these bold cuts, other advertisers are likely to follow suit by reallocating ad spend to focus on building campaigns around the metrics that matter – performance and action. While awareness is an important stepping stone for brand marketers, it’s nearly impossible to measure, particularly in the current landscape. Instead of investing in campaigns with uncertain returns, leading brand marketers are shifting investments to campaigns that can be measured and produce real results – like leads, installs, registrations and downloads.
P&G’s recent budget cuts represent a massive turning point for the digital advertising marketplace. Following P&G’s lead, more brands will shift their approach, focusing efforts and budgets on performance-driven campaigns that drive measurable return for their ad budgets. The evolution is under way.
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