Proctor & Gamble (P&G) is probably the number one client any ad-based business hopes to acquire. After all, P&G is the largest advertiser in the world.
So when P&G cuts its ad spending by a double-digit amount, ad-based businesses take notice.
As reported by AdAge, P&G cut its ad spend by just under 20% in April and May of last quarter according to TNS Media Intelligence. This amounts to $135mn.
While TNS Media Intelligence’s numbers don’t cover all marketing spend, it does cover bellwether segments including television, cable and syndicated TV, newspapers, internet and radio.
Pressured by slowed consumer spending and the rapid rise of commodity prices, P&G is not the only major consumer products company to cut spending.
Johnson & Johnson, L’Oreal and Unilever cut their ad spending last quarter by 8.6%, 6.6% and 4.1%, respectively.
Such cutbacks indicate that macroeconomic conditions are starting to impact even the most resilient spenders.
As AdAge observes:
“The trims mark the first time in several years P&G has made a major pullback in media spending in its final fiscal quarter and are seen by some industry watchers as a bad sign heading into the company’s fourth-quarter earnings announcement, set for Aug. 5.”
While online marketers may point out that P&G increased its online spending 10% in April and May compared to those two months in 2007, that increase amounts to a mere $600,000.
When looked at holistically, the situation leaves little reason for those in the offline and online worlds to celebrate.
The trend is clear – these are tough economic times and nobody should take the ad budgets of the P&Gs of the world for granted.
That said, it’s certainly not all doom and gloom.
P&G and its competitors will continue to spend and they’ll shift budgets to go where the returns are. For instance, P&G increased spending for Cover Girl, Always, Tampax and Actonel – brands that produced healthier results than some of its other brands.
In the online world, if they last for any length of time, I see tighter budgets as potentially offering greater opportunities for publishers who are capable of meeting expectations and delivering results.
If tighter times lead to a “flight to quality,” it just might provide publishers with a greater incentive to look at big spenders like P&G as real clients as opposed to ATM machines.
As I’ve pointed out before, I think far too many publishers have taken advertisers, especially the P&Gs of the world, for granted:
“It’s my opinion that the average publisher has little to no interest in going the extra mile to ensure that advertisers achieve optimal results. When the market is hot and advertisers are competing fiercely for a finite number of eyeballs, there’s little incentive for publishers to do anything other than deliver access to an audience and cash the checks. This can be seen in the attitudes exhibited by people like Duncan Riley, who like to focus on all the money flowing into the online advertising space but rarely ever discuss just what advertisers are getting in return for their money. In other words, there are a lot of takers, but fewer givers.”
If belt-tightening forces more publishers to consider what advertisers are getting in return and to possibly even deliver results, I think in the long run it will actually benefit the online advertising business even if there is some short-term pain for ad-based businesses.