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4/1/2018 Turmoil on Madison Avenue as Marketers Push for Change - WSJ

https://www.wsj.com/articles/turmoil-on-madison-avenue-as-marketers-push-for-change-1519947386 1/6

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https://www.wsj.com/articles/turmoilonmadisonavenueasmarketerspushforchange1519947386

BUSINESS MEDIA & MARKETING

Turmoil on Madison Avenue as Marketers Push for Change P&G slashes digital ad spending, calls for disrupting ‘archaic Mad Men model’

P&G Chief Brand Of�icer Marc Pritchard , right, with Facebook COO Sheryl Sandberg in 2016. Mr. Pritchard has been pushing digital giants to �ind ways to keep ads from appearing around controversial content. PHOTO: MICHAEL NAGLE�BLOOMBERG NEWS

March 1, 2018

By Nick Kostov and Suzanne Vranica

4/1/2018 Turmoil on Madison Avenue as Marketers Push for Change - WSJ

https://www.wsj.com/articles/turmoil-on-madison-avenue-as-marketers-push-for-change-1519947386 2/6

The world’s biggest marketers are taking aggressive steps to change how they buy ads, triggering upheaval across the advertising industry.

Consumer products giant Procter & Gamble Co. said Thursday that it slashed spending on digital advertising by more than $200 million last year, after a recent push for more transparency had revealed such spending to be largely wasteful.

The cut is a sliver of P&G’s overall annual ad spending, which was $7.1 billion in the fiscal year that ended in July, but it represents an important shift after years of marketers raising digital ad spending almost reflexively.

Meanwhile, WPP PLC, the world’s largest ad agency company, on Thursday logged its worst performance since the financial crisis, posting a decline in net sales for the year and projecting no growth in 2018. Among the reasons: Big clients like P&G and Unilever PLC have been stepping up their campaigns to cut ad agency costs.

The developments highlight the fallout as marketers reassess their relationships with ad agencies and big tech companies like Facebook Inc. and Alphabet Inc.’s Google in an increasingly complex media environment.

WPP shares tumbled 8.2% in London, and the news affected rivals including Publicis Groupe SA, which fell 3.4% in Paris.

Marketers aren’t cutting their ad spending overall. Global ad spending is projected to rise 4.3% this year, according to GroupM. But, as they contend with pressures on their businesses, marketers are focusing on how to rein in costs paid to agencies, limit the number of agencies they work with, and make ad spending more efficient. They are also bringing in-house some creative and ad-buying functions once handled by agencies.

“It’s time to disrupt this archaic ‘Mad Men’ model,’” P&G Chief Brand Officer Marc Pritchard said Thursday at an ad industry event.

P G 0.56% ▲

WPP -0.21% ▲

GOOGL 3.18% ▲

PUBGY -0.12% ▲

4/1/2018 Turmoil on Madison Avenue as Marketers Push for Change - WSJ

https://www.wsj.com/articles/turmoil-on-madison-avenue-as-marketers-push-for-change-1519947386 3/6

Mr. Pritchard has been pushing digital giants including Google and Facebook to improve safeguards to keep ads from appearing around controversial content, and to allow independent verification of the data they release on the reach of ad campaigns.

He said the companies have done much of what he asked, including providing better metrics. But in part thanks to the enhanced measurement data and transparency, P&G realized some people were seeing the same ads far too many times, and that the average

view time for a mobile ad in a platform like Facebook was only 1.7 seconds.

“Once we got transparency, it illuminated what reality was,” said Mr. Pritchard. P&G then took matters into its owns hands and voted with its dollars, he said.

4/1/2018 Turmoil on Madison Avenue as Marketers Push for Change - WSJ

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P&G, whose brands include Tide, Pampers and Crest, has said that it is looking to cut an additional $400 million over three years in agency and production costs, having already saved around a combined $750 million in recent years.

Mr. Pritchard didn’t specify which digital companies P&G had reduced spending with, but one of the biggest reductions was with Google’s YouTube. P&G suspended advertising on the popular online video service a year ago after ads appeared alongside objectionable videos.

YouTube has added more human reviewers and given marketers more control over where ads appear, while Facebook’s recent newsfeed algorithm changes helped address concerns over the quality of content, including news, on its platform.

“P&G is a great partner to Facebook,” Facebook said in a statement. “We’re proud of the work we’ve done together, particularly in the areas of third-party verification and brand safety.”

Google declined to comment.

P&G said it hasn’t reduced its overall spending, but has shifted those digital dollars into other areas.

Ad Industry’s Upheaval Rocks WPP; Stock Sinks

Heard on the Street: Is WPP Cheap Enough to Own?

Unilever Threatens to Reduce Ad Spending on Tech Platforms That Don’t Combat Divisive Content(Feb. 11)

P&G Cuts More Than $100 Million in ‘Largely Ineffective’ Digital Ads(July 27, 2017)

P&G’s Marc Pritchard Doubles Down on Demands of Digital Ad Giants(March 2, 2017)

4/1/2018 Turmoil on Madison Avenue as Marketers Push for Change - WSJ

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For their part, big ad agency companies that have traditionally bought advertising space on behalf of marketing clients are under pressure to reinvent themselves to remain relevant as the industry changes. Advertisers are demanding that their agency partners be more transparent about media-buying, so it is clear that agencies are getting the best possible deal for the clients and aren’t receiving rebates from sellers.

Advertisers also want agency-holding companies like WPP to streamline their complicated organizations—alphabet soups of agencies that were assembled through years of acquisitions. Mr. Pritchard called for companies to combine their creative and media operations to foster better collaboration.

The ad giants haven’t made that bold of a move yet, but are working to come up with ways for clients to work with advertising staff that was previously siloed.

“We have to alter our model,” WPP Chief Executive Martin Sorrell said in an interview.

“We’re clear on the destination,” he added. “The changes that are taking place are pushing us to do it faster.”

This year alone, WPP has announced the merger of its public-relations firms Burson- Marsteller and Cohn & Wolfe and said that it would consolidate five of its branding agencies into one. In 2017, it combined its media agencies Maxus and MEC to form Wavemaker; moved its digital agency Possible into its customer-relationship marketing business Wunderman; and created WPP Health & Wellness out of its four large health-care agencies.

WPP executives often refer to this approach as “horizontality,” while rival Publicis is trying to unite its operations in a restructuring dubbed “The Power of One.” Omnicom Group Inc. has also been pushing to simplify areas like customer relationship management, national brand advertising and public relations.

OMC 0.04% ▲

4/1/2018 Turmoil on Madison Avenue as Marketers Push for Change - WSJ

https://www.wsj.com/articles/turmoil-on-madison-avenue-as-marketers-push-for-change-1519947386 6/6

WPP’s results Thursday showed that the changes so far haven’t been enough to counter the industry’s headwinds. Investors expected sales to be broadly flat after the company had cut its forecast three times, so they were spooked by the year-over-year decline. The firm also said it is setting budgets for 2018 on the assumption of no growth in revenue and net sales.

In the fourth quarter, organic net sales were down 3.4% in North America, 2.6% in Western Continental Europe and 3% in Asia Pacific. The bright spot was the U.K., which rose 9.1%.

“2017 for us was not a pretty year,” Mr. Sorrell said.

—Stacy Meichtry contributed to this article.

Corrections & Amplifications Martin Sorrell is chief executive of WPP PLC. An earlier version of this article incorrectly stated he was also chairman of the company. (March 2, 2018)

Write to Nick Kostov at [email protected] and Suzanne Vranica at [email protected]

Appeared in the March 2, 2018, print edition as 'Ad Industry Reels as Clients Cut Spending.'

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