Online Marketing was fought by P&G, and Marketing won

digital adsA tremor rumbled through the electronic advertising world in July if Proctor & Gamble announced that they had cut $140 million of electronic invest in one quarter. P&G Chief Financial Officer Jon Moeller noted that the decrease had two triggers:

[We made a choice] to temporarily stop spending with electronic media outlets at which our ads were not being placed based on our standards and specifications…. [We left] a option to decrease spending, by an electronic standpoint, in which it was ineffective — where either we were serving robots  instead of human beings or in which the positioning of ads wasn’t facilitating the equity of our brands.

Many (well, all) pundits assumed that the “areas where ads were not being placed based on our standards” mention was a not-very-opaque reference to YouTube and the hullabaloo around brand security earlier this year. And also the “bot” mention is no doubt a critique of screen advertising — both the programmatic and superior.

Is this really P&G’s issue?

If P&G says anything about advertising, the industry listens. In the end, the business spends roughly $10 billion a year on advertising.

However, is history. The business has 18 manufacturers that do more than $1 billion of annual earnings. And really, the majority of these are products that consumers pick over a more affordable choice (e.g., toothpaste, paper towels, dish soap), therefore that branding must be really powerful.

Because of This, many commentators have drawn the conclusion that if P&G is cutting back on electronic invest, digital advertising must be broken:

When among the very sophisticated high-tech advertisers on the planet decides it’s overspending on electronic advertising and can  very carefully  eliminate the rust, thus bringing down its costs without hurting its own earnings, other companies will follow, using a few implications for the relentless but often wasteful surge of electronic advertising dollars.

A question of robots

Contrarian that I am, I think that P&G understands as much about electronic advertising since J.C. Penney understands about e-commerce — that is to say, not as much.

P&G claims that a great deal of its advertising spend was wasted on robots, which can be straight-up ad fraud. Bots certainly exist, and advertising fraud remains a problem on networks. However, if we suppose that 50 percent of decrease was due to cutting bot traffic out, it looks like the firm spent $70 million on traffic. In 3 months. Assuming a $2 CPM, that’s 35 billion fraudulent impressions.

Why did it take 35 billion opinions to find the fraud, and also did not P&G request a refund from its own advertising networks and agencies? I mean, fool me once, shame fool me personally 35 billion times!

There are two methods to prevent $70 million of bot traffic to networks. To begin with, do a holdout check to evaluate incrementality. Measure KPIs shift budget and a week by channel and publisher.

My guess is that P&G — and their agencies — did neither. They purchased traffic based on murky top-of-funnel “metrics” like “reach” and purchased a lot of 35-year-old feminine … bots.

Ad exchanges will need to do everything they can to eliminate traffic, but attributing an exchange for getting scammed countless times is a sign of laziness or ineptness. Ones have figured out how to avoid most of it, although all electronic marketers must deal with fraud.

Brand Security problems

Regarding P&G’s brand security issues, I understand how important it would be for a brand to prevent showing up on racist sites, and it seems like YouTube was somewhat too lax in its own policing of content (that they seem to have addressed that). That said, the internet is amazing because of the long run of the available, which means that it’s impossible to run ads on the internet that an ad wo show up to the website.

As someone really smart (me!) Stated in The Wall Street Journal about electronic advertising, “The benefit is you have access to several million publishers and a billion articles. The disadvantage is you have access to several million publishers and a billion articles.”

Therefore brands that are accustomed to purchasing ads for particular TV shows at times are going to have to get used to a little more doubt with online advertising. Going into a corner to sulk and pulling all of your spend will just allow your opponents to take away market share.

The changing retail environment

Meanwhile, the world around P&G is shifting quickly, and usually not to its own benefit. Historically, P&G has obtained by constructing great brands and then obtaining supermarkets to give these brands prominent placement in stores (and supermarkets were pleased to get it done — these brands sold much better than naturally-occurring rivals). Branding success gave P&G a real estate benefit to put it another way.

However, what happens when consumers stop visiting grocery stores? Online grocery store spending is projected into top $100 billion by 2025, and goods like “personal attention and beauty,” that P&G depends on, are more likely to be bought online than offline. And, like it or not, TV promotion — that the basic principles of P&G’s success — is giving up more and more ground to online advertising.

Meanwhile, there’s a little firm in Seattle called Amazon that just purchased Whole Foods and would love to be the supermarket of the future. Presently, if you do a search for “laundry detergent” on Amazon, P&G’s manufacturers (and Unilever’s) dominate the real estate, just like at a supermarket. However, Amazon hates missing an opportunity to improve its own profit, as retailers have found, and a few of the ways it’s doing so is by private-labeling its own products. The “Amazon Basics” line now has over 1,300 merchandise. And guess what? Whenever you do a search for a item that its own Amazon Basics line is offered in by Amazon, Amazon’s goods receive top billing.

Join the dots between a supermarket purchase and a private label line that is growing, plus it doesn’t seem crazy that Amazon will offer.

And then there are upstarts like Brandless (disclosure: a client of my service) who believe that millennials care more about a provider’s values and also a product’s ingredients than lofty brand promises. Check their product line out — it looks similar to P&G.   Furthermore, a recent Kickstarter from Brandless competitor Public Goods– increased 3X what it was initially looking for, demonstrating that the appetite for non-traditional non-P&G healthcare alternatives.

Put together this all executed the decline of the supermarket, marketing, and the rise of Amazon, online marketing and direct sellers that are online — and it seems to me that P&G would be better served interrupting itself than whining about bot traffic.


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