Proctor and Gamble Moderates Ad Spend to Focus on Facebook and Google
Proctor and Gamble (NYSE:PG) is finally dealing with the reality that they cannot keep putting so much money into advertising. The company, which has a $10 billion annual ad budget, plans to lay off 1,600 workers. CEO Robert McDonald, who increased the advertising budget 24 percent over the last two years, told Wall Street analysts that he planned to “moderate” his ad budget because Facebook (NASDAQ:MSFT) and Google (NASDAQ:GOOG) can be “more efficient.”
McDonald also told analysts, “As we’ve said historically, the 9 percent to 11 percent range [for advertising as a percentage of sales] has been what we have spent. Actually, I believe that over time, we will see the increase in the cost of advertising moderate. There are just so many different media available today and we’re quickly moving more and more of our businesses into digital. And in that space, there are lots of different avenues available. In the digital space, with things like Facebook (NASDAQ:MSFT) and Google (NASDAQ:GOOG) and others, we find that the return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient. One example is our Old Spice campaign, where we had 1.8 billion free impressions and there are many other examples I can cite from all over the world. So while there may be pressure on advertising, particularly in the United States, for example, during the year of a presidential election, there are mitigating factors like the plethora of media available.”
P&G (NYSE:PG) should be following their Old Spice campaign model throughout the company, problem is they aren’t. McDonald finally coming to the realization that digital media is free, comes too late, after spending close to $150 million on a campaign for their new product the Tide Pod. The campaign was delayed several months; meanwhile competitors already launched their own Pod-type products.
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