P&G and WPP: How the shit hit the fan in digital marketing
In the wake of P&G's plans to axe $200 million in online spending and WPP's devastating share price knock, Bob Hoffman argues the marketing industry only has itself to blame for its current crisis.
It’s getting ugly out there.
In just a few hours this week WPP, the world’s largest agency holding company, lost about 15 percent of its value. Trading in the stock was suspended. It later regained some value.
P&G, the world’s largest advertiser, said that as part of a $200 million reduction in online spending, it had reduced spending on Facebook, Google and YouTube by 20 to 50 percent.
P&G also said that it had eliminated about 90 percent of the online publishers it was buying from programmatically.
So what’s going on? Simple, the bullshit is starting to hit the fan.
According to The Wall Street Journal, net sales at WPP didn’t just flatline in 2017, they actually dropped about one percent. They dropped even more than that in the fourth quarter. They are forecasting similar bad news for 2018.
Of course, WPP blames “structural changes” in the agency industry for their problems. I’m not buying it. A substantial part of the problem for WPP and the rest of the holding company mob is that they squandered the trust of their clients with sleazy, shady online media buying practices (including non-transparent charges and media kickbacks) as revealed in the ANA investigation several months ago.
What do people do when they no longer trust an industry? They take their business elsewhere or do it themselves. Which is exactly what P&G is doing.
According to MarketingWeek, Mark Pritchard of P&G had this to say on Thursday: “If entrepreneurs can buy digital media, why can’t the brand team on Tide, Dawn and Crest be entrepreneurs and do the same? They can, and they will.”
MarketingWeek went on to say: “[Pritchard’s] comments are likely to make uncomfortable reading for the big agency holding companies such as WPP, Publicis and Omnicom.”
In a provocative article scheduled to appear in today’s The Australian, the great Mark Ritson uses some very interesting data to suggest that agencies may be pushing clients into digital media because it can result in greater commissions for the agencies — in some cases almost three times greater than for traditional media.
While Professor Ritson is too prudent to make outright accusations, I’m not. There is no doubt in my mind that to some agencies, “digital first” is just code for “me first.”
The agency holding companies and the online media have been engaged in ten years of squalid practices, half-truths, and unreliable metrics. Sooner or later, even CMOs catch on.
As for P&G’s retreat from online advertising, The Wall Street Journal headline read, “P&G Contends Too Much Digital Ad Spending Is a Waste.” Who’d a thunk it?
The Journal went on to say: “P&G discovered that the average view time for a mobile ad appearing in a news feed, on platforms such as Facebook, was only 1.7 seconds… The consumer products giant says that its push for more transparency over the past year revealed such spending had been largely wasteful and that eliminating it helped the company reach more consumers in more effective ways…”
According to Adweek, cutting $200 million out of online “helped P&G eliminate 20 percent of its ineffective marketing and increase reach by 10 percent.” How? They “…reinvested into areas with ‘media reach’ including television, audio and ecommerce.”
The Journal said: “…it represents an important shift after years of marketers raising digital ad spending almost reflexively.”
P&G’s Mark Pritchard said: “Once we got transparency, it illuminated what reality was.”
You have to ask yourself how on earth a company that is spending over $2 billion a year on online advertising just discovered “what reality was.” Reality was always there for anyone who wanted to see it. An idiot blogger I know has been writing about it for almost 10 years.
If you have trouble believing that marketers can be this ignorant listen to this from one of the smartest analysts in the media industry, Brian Weiser of Pivotal Research Group: “We think relatively few marketers are aware of how little time is spent viewing individual ad units on Facebook.”
Back to P&G’s Pritchard: “As we all chased the Holy Grail of digital… we were relinquishing too much control – blinded by shiny objects, overwhelmed by big data, and ceding power to algorithms.”
Also, I am told by industry insiders, a “blockbuster” study on media performance in the UK is coming in the next few days. It will make the digital ad industry apoplectic and have them screaming.
The most entertaining part of this whole shit show is that it will have next-to-zero effect on the never-ending fantasy that has afflicted our industry. “Digital” has become a religion. It is invulnerable to facts. If you don’t worship you can no longer work in advertising. This will not change.
As I said in Marketers Are From Mars, Consumers Are From New Jersey, in marketing today delusional thinking isn’t just acceptable – it’s mandatory.
Bob Hoffman has been the CEO of two independent agencies and is the author of the Ad Contrarian blog.
I’m guessing you haven’t been in the game for the past 10 years – and your affection for Ritson furthers this point.
Sure, smalltime agencies take clients for a ride, same with creative, and anyone else operating on old models.
This article reminds me of the episode of The Simpsons where Abe Simpson is in the paper (you remember those, right? They made your businesses a lot of money back in the day – you know, when people actually read them) shaking his fist at the sky under the headline ‘Old Man Yells at Cloud’.
P+ G is one example of a business taking digital in-house – among many many examples of businesses investing more and more into digital every month. Because it works. Sorry. Welcome to the future.
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“According to Adweek, cutting $200 million out of online “helped P&G eliminate 20 percent of its ineffective marketing and increase reach by 10 percent.” How? They “…reinvested into areas with ‘media reach’ including television, audio and ecommerce.”
Of course they did, they moved money from completely measurable channels into channels that rely on extrapolated survey data. Very robust thinking…
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The fact that their sales didn’t suddenly drop 20% should tell you something…
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@bill
Bill can you explain what you mean by digital channels being completely measurable? Feels just a little disingenuous after the last few years of Facebook bs and programmatic fraud
If digital is that future I think we all need to stick to ‘ I know 50% of my advertising works…. ‘ for the near future at least
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It is also said that P&G were devil worshipers, google that my non-agency friends.
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Sorry Bill. Measurable? In what way? Clicks = no correlation with sales for fmcg. Views = gamed by optimisation and tactical buying. Viewability also irrelevant once it becomes optimised based on an MRC standard that is ridiculous and not even adopted through the buying chain
Ritson, Hoffman et al are on the money with this.
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Sounds like a WPP bash
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Well done Bill and Garbage.
First a bit of offensive ageist stereotyping (play the man not the ball) then an warranted bit of tv bashing. Par for the course.
Do yourselves a favour. On Wednesday have a look at Ebiquity’s new report on media channels in the UK. Will help get you up to Bobs speed.
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Presumably Bob is just talking about digital display advertising for CPG brand building and not digital holistically? We get sales data broken by channel for most of our clients and, surprise surprise, digital channels are eating traditional sales channels alive. What’s more, we can track those sales directly back to comms in other digital channels. When was the last time you stepped into a travel agent to book a flight? Or a branch to take out a car insurance policy? Having handled P&G for many years I, like Bob, respect and listen to what they have to say…mostly about what’s good for their business and, in that respect, I’m sure much of the above is valid. But Bob, you’d be better being more specific and less generalizing despite that being less click-bait friendly.
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Just because P&G restrategizes doesn’t indict the entire digital marketing world, as this author seems to want to do for some untold reason. They’re still spending in that area, and there are other digital marketing methods that may be effective that are within that realm. They’re just pulling back some in Facebook, Google and YouTube according to this article. P&G’s overall marketing budget is enormous. What works for P&G, or doesn’t, doesn’t make the law for all businesses and industries.
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Is this one completely independant or has it been commissioned by a TV body (like the Payback studies here)?
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A fair bit of ‘fake-news’ here. Many digital media channels pay no commission, let alone three times the old-media. Digital is intense to plan and manage, so higher fees might apply for creative and agency management, but to suggest that agencies ‘push’ clients into digital to gain commissions is rubbish.
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…your name is Pure Garbage?
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As somebody lucky (old?) enough to have worked across both traditional and digital, I know ‘squalid practices, half-truths, and unreliable metrics’ is not exclusively a digital problem, it’s an industry problem that cuts across all channels both old and new.
Until this is acknowledged this ‘debate’ is just piss and wind.
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Yes, that everyone needs to buy toilet paper, soap and deodorant and there’s only so a limited number of brands, from a limited number of suppliers on the shelves.
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Mark – if agencies charge clients a fixed fee, like we do for almost all our clients.. is the whole article you wrote just puff / irrelevant? I think your points apply to the small time agencies still playing the commissions game. This is 2018, tell me any large advertiser who hasnt reviewed their agency rem models by now?? We’ve been through the whole transparency-led reviews for 3 years now, there are no clients left (or any size/importance) who havent done anything
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Digital channels are extremely measurable.
It’s just that what they measure turns out to be either pretty useless to marketing or just plain wrong.
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Hey Mark,
I wonder if you have any opinions on how a business could ever have ‘smashed sales forecasts’ without any TV?
http://www.adnews.com.au/news/.....oured-cans
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So, Pure Garbage has the answers.
Only ‘smalltime’ players would risk their livelihoods ripping off their clients, of course.
Not the big guys.
We should have known all along.
Darn those rusty old models.
And digital works, right?
And your ads will never, ever appear adjacent to offensive content, right?
Perhaps Amazon, Google, TripAdvisor et al spend way too much on TV?
These modern masters of audience tracking and ROI measurement are just throwing their money at an unproven medium.
Somebody should rescue them.
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Newsflash, they’re not. Defrauding all the tracking to boost impressions is super easy, so any “extreme measuring” you’re doing is overinflated by an order of magnitude or two. By how much, you’ll never know.
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Having worked in WPP agencies, I can tell you that the commission and fee structure is based on a 3x multiplier of actual salaries (indeed like many other industries, ie. bill out at extortionist rates as needed). Not a lot of that money goes to the people actually doing the work required to implement campaigns and do the digital advertising. The majority of the cash goes to the directors and partners doing the fluff work taking in extraordinary salaries to spit the bs to company execs. And, of course, to Sir Martin so that he can buy more toys. God forbid he can’t upgrade to 2018 versions…
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Interesting read, but I’m not sure that one change by one firm (however large) or one drop to one holding company (again, however larger) signals some kinda of apocalypse. I’m sure that you are right that structural weakness in the ecosystem has been revealed, but it can adapt, not simply die.
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Digital is completely measurable(1 or 0)…more than any platform…but what you DO with the measurements, and data, and how you utilize the information in an efficient and meaningful way, is the question that is now being answered. So much data in 2017 was collected(more than all years previous combined)that even the largest companies are overwhelmed, and are doing their best to keep up with this collection and analysis, and there are always new factors, platforms being introduced….its hard to do this well, and to know what to look at, look for…
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If that’s the case they don’t need advertising at all.
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I Googled it: https://www.snopes.com/fact-check/trademark-of-the-devil/
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Hair on fire! Digital is dead! So, there are dishonest agency types out there taking advantage of clients. Shocked, shocked I am, my innocence shattered. All this illustrates is the obvious, that digital media and strategy, like everything else in the world, can be mismanaged, and apparently has been with wild abandon in this case. And damn, 3x multiplier commission, heck, wish I had thought of charging this much… Seriously, there’s a world of boutique to midsize agencies out there that do not screw over their clients and generate results in digital. Amazing. And I ought to know. I co-own one.
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This seems like a misplaced condolence piece around “Digital Marketing”. Firstly, no other form of marketing provides as much opportunity to measure and know about your investments as Digital marketing does. The fact that P&G could decide for itself that its investments in the realm of Digital Advertisements ain’t quite faring well enough is a tribute to the “decision powering” abilities of Digital Marketing. In other forms you would be left wondering and wandering in the dark hoping that results would start getting seen sooner than later.
Are agencies “commission hungry”? Not any more! Not with so many agencies fighting for the same Digital pie and not with many advertisers forcing the agencies out of a hackneyed “commission model”.
Digital is here to stay. Some organizations might invest heavily into it, some like P&G might invest, then evaluate which is absolutely normal.
But to stretch this scenario beyond its stretchable limits and to start singing condolence tunes around Digital Marketing is drawing inferences out of a wrong sample.
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Sigh – Another one. And if only they were a minority, but I am afraid, they are the norm.
This new era of “Digital Marketing” is the biggest scam ever in Marketing History. And the problem is that they are winning at convincing clients to use their conman tactics which produce jackshit results.
But we live in an era of post truth where so called “Digital Marketers” shouts everywhere with no evidence that TV, Prints and Radio and any other “traditional” media are dead, despite the overwhelming Body of research that demonstrate just the opposite.
I am sad to see that we had it right before the dot com bubble with the IMC concept. But most Marketers nowadays wouldn’t have a clue what that means, nor do they understand the 4P’s of Marketing, segmenting, targeting and positioning just to name a few concept back from the old days.
No, not anymore. We now have growth hackers (don’t even know WTF that means) who not only are proud not to have any qualification in Marketing, but spend most of their time in their AR/ VR head set, and getting to understand how AI and Blockchain can revolutionise the face of Marketing in targeting the Millenials, which apparently is a worthwhile target for all their clients.
Marketing has completely lost his way. A comparison to the scientific world would be if the flat earthers won the scientific battle and are now in charge of NASA but always find excuse to why they can’t get their rocket into orbit.
Sinek, Vaynerchuck and consor have completely destroyed this industry. More and more, businesses out there, after being burned a few time by “Digital Agencies” think that Marketers are scammers. And I must admit that I don’t disagree with them. What a sad world we are living in…
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