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.


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