Easy Fun Is Breaking The Digital Bank

Michael Hedges September 11, 2017 Follow on Twitter

For two centuries and two decades advertising people have enjoyed a privileged life. They have benefitted from one innovation after another designed to display messages from product makers and service suppliers. The advertising people charged fees and commissions for this service. The digital revolution made them very happy; more opportunities for billable service. Profits grew exponentially. Alas, what the profit margins giveth, the digital gods taketh away and the advertising people are having a bit of a mid-life crisis.

This past January Procter & Gamble (P&G) chief brand officer Marc Pritchard set ad people twitching in their seats by announcing a complete review of agency accounts, reported AdWeek (January 30). “Frankly, there’s, we believe, at least 20 to 30 percent of waste in the media supply chain because of lack of viewability, nontransparent contracts, nontransparent measurement of inputs, fraud and now even your ads showing up in unsafe places,” he detailed. Since then Unilever, Nestlé and others have chimed in. Something is rotten in the state of advertising and all pointing toward the digital realm.

Certainly - and absolutely - chief executives at publicly traded companies like P&G have one thing on their minds: the shareholders, and several institutional shareholders are raising their voices at those board meetings. Shareholders want profits because profits mean dividends. Zero-based budgeting is a common demand; cut everything (and everybody) unnecessary. If ads aren’t persuading consumers to buy, cut the ads.

Consumer products and services companies from great to small have grown discontent with the sneaking suspicion that digital ads are largely seen by bots - not real people - and ad placements in proximity to dodgy content will turn-off consumers… or worse. The world’s biggest multipliers of digital advertising - Google, through YouTube, and Facebook - are addressing “brand safety” or, at least, going through the motions. Big media buyers are hiring auditors.

So far, little of this has hampered prospects for digital advertising while overall ad spending growth rates continue to soften. Forecasts from media buyer Zenith, formerly Zenith Optimedia, show 4% growth for this year to US$558 billion “driven by digital display formats, in particular social media in-feed ads and online video.” headlined advertising support group World Advertising Research Center (WARC - September 11). That’s down from the previous quarter (June) of 4.2% and the quarter before that (March) 4.4%. Media buying house GroupM cut its global ad spending forecast for this year to 3% from 4.4% (March). Both blamed cost-cutting by consumer packaged goods (CPG) producers.

“Internet display (advertising) is coming into its own as a brand-building media, powered by social media and online video,” said Zenith’s director of global intelligence Jonathan Barnard. “But the distinctions between online video and traditional television are being eroded,” he added, “and the two work together much better than they do separately.” Western Europe growth rate forecasts have been “dragged down” by Brexit. Softness in North America was explained by poor US network TV ratings.

“This year Facebook is likely to replace the Murdoch empire in second place,” intoned WPP chief executive Martin Sorrell to German business weekly WirtschaftsWoche (September 8), ranking his top-three media buying recipients. Google, of course, leads by quite a stretch, just under US$6 billion this year. WPP’s ad sending with Murdoch-owned News Corporation and 21st Century Fox - basically representing traditional media - last year was US$2.25 billion. Facebook earned US$1.7 billion. “The digital business is growing, traditional media is stagnating.” WPP’s second and third biggest ad clients are P&G and Unilever.

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