Procter & Gamble (P&G) is to lay off 1,600 staff as part of a cost cutting exercise that will also include a re-evaluation of the company’s $10bn ad budget.

It comes as P&G chairman Robert McDonald revealed to analysts that the company had somewhat belatedly recognised the cost efficiency of digital marketing.

Under McDonald P&G’s ad spend increased by 24% over the two years up to October 2011 despite only seeing a 6% increase in sales.

According to Business Insider, McDonald told analysts that though the company had traditionally spent 9% to 11% of sales revenue on advertising: “Over time, we will see the increase in the cost of advertising moderate.”

He said that P&G was quickly moving more of its businesses into digital to take advantage of the different media channels.

In the digital space, with things like Facebook and Google and others, we find that the return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient.” 

McDonald cited the Old Spice adverts as an example of a campaign that achieved 1.8bn ‘free’ impressions online.

P&G’s move to digital is exactly what the company should be doing, particularly if it equates to savings – and a broader reach.

But the realisation comes quite late in the day for the world’s largest marketer, which up until now has chosen to plough a vast majority of its ad budgets into traditional ad channels.