It seems to me that this story, reported at the Wall Street Journal, could have enormous implications for the Internet. P&G, long the biggest advertiser in the world, is cutting back on its Internet ads, eliminating ads on sites with fake traffic or objectionable content, and reducing its spending on targeted ads on Facebook. The reason is obvious enough:
Chief Executive David Taylor said in an interview that the digital spending cuts are part of a bigger push by the company to more quickly halt spending on items — from ad campaigns to product development programs — that aren’t working.
“We got some data that said either it was in a bad place or it was not effective,†Mr. Taylor said of the digital cuts. “And we shut it down and said, ‘We’re not going to follow a formula of how much you spend or share of voice. We want every dollar to add value for the consumer or add value for our stakeholders.â€
After cutting back on certain digital ads, “we didn’t see a reduction in the growth rate,†said Mr. Moeller during the call. “What that tells me is that the spending we cut was largely ineffective.â€
P&G also said it reduced overhead, agency fee and ad-production costs in the quarter.
One of the places they’re changing their practices is Facebook:
The company about a year ago said that it would move away from ads on Facebook that target specific consumers, after finding that ultra-niche targeting compromises reach and has limited effectiveness. P&G indicated it wouldn’t pull back on overall Facebook spending.
I’ve always thought that Facebook’s business model was dubious. I’m not sure how much P&G has been spending on targeted ads at Facebook but my guess is that the loss of this business would smart. If they move from “ultra-niche” to a more general audience without reducing total Facebook advertising spending, it would soften the blow. But that “ultra-niche” focusing is an important part of Facebook’s value proposition. Stay tuned.
