Procter & Gamble, the consumer goods group and world’s biggest advertiser, said it would “take back control” of its marketing and move more of it in-house, saving $2bn in spending.
P&G has already cut its agency and commercial production spending by $750m in the past three years. In a blow to the advertising industry’s largest players such as Publicis and WPP, it plans to increase that figure to $1.2bn by 2021, with additional savings through more efficient media buying.
“We used to work with 6,000 agencies around the world and have cut it down to 2,500. We think we can cut another 50 per cent,” Marc Pritchard, P&G chief brand officer, told the Financial Times.
P&G, owner of brands such as Ariel laundry detergent and Crest toothpaste, spends an estimated $10.7bn a year on advertising but was “re-thinking” its relationships with agencies.
“Agencies are going to need to decide how they are organised,” he said after addressing the ISBA conference for UK advertisers, adding that there had been “too many touchpoints” between P&G and its consumers. “We are going to take more control of our media planning, data and analytics.”
Shares in the biggest advertising companies have fallen over the past 12 months, led by WPP, the owner of Ogilvy & Mather; Group M; and J Walter Thompson, which has lost a third of its value.
WPP, led by Sir Martin Sorrell, said last week that it would simplify much of its business and merge some agency functions in response to client needs. Mr Pritchard said that WPP was “taking the right steps” but added it “remains to be seen” if the plans would be sufficient.
“We had too many people between us and the consumer,” he said, adding that it was “taking too long to get things done. We have to move a lot faster.”
The big agencies are under attack on several fronts. Brands can work directly with technology platforms such as Google and Facebook, while professional services firms such as Deloitte and Capgemini have been ramping up their work in a field that the likes of WPP and Publicis used to have all to themselves.
Meanwhile, activist investors are putting pressure on consumer goods companies such as Unilever and Nestlé to cut their spending on marketing.
Brands are also seeking better results from digital advertising, with the average view time of a video advertisement on a mobile device at only 1.7 seconds, “little more than a glance”, Mr Pritchard told the ISBA conference.
He added that digital advertising had to be rethought. “We’re annoying people with too much frequency, serving ads to people who don’t want to be reached, and doing so too many times,” he said.
“As we all chased the holy grail of digital . . . we relinquished too much control — chasing shiny objects, overwhelmed by big data, and ceding power to algorithms.” The time had come to “take back control of our own destiny”, he said.
This article has been amended to reflect the fact that the P&G will cut spending with ad agencies by $1.2bn
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