Is the ad party over for the online giants?

This year, the man who controls the world’s largest marketing budget did something he had never contemplated before — he cut spending on digital adverts.

It was a bold act of defiance from Marc Pritchard, chief brand officer at Procter & Gamble (P&G), maker of Bounty chocolate bars and Pampers nappies.

For years, companies that sell goods and services have operated by an apparently immutable law: that shovelling ever more cash to Facebook and Google was the key to prosperity.

Online advertising held a powerful allure, promising a cleaner, more effective way to reach consumers. Internet platforms offered the chance to target consumers with the precision of a surgeon’s scalpel, serving up ads based on users’ age, gender, sexual orientation and income. The perceived inefficiencies of advertising on TV and radio and in newspapers and magazines would be swept away.

Yet P&G has gone against this received wisdom. Between April and June, the company slashed $140m (£107m) from its digital ad budget after the YouTube extremist video scandal. And guess what? The sky did not come crashing down.

Despite weak consumer spending, P&G enjoyed stronger than expected revenue and profit growth. The company concluded that the pulled spending had been “ineffective”, either because it appeared alongside repellent content or was not viewed by a human being.

So is this a harbinger of a broader backlash against all-powerful digital platforms — and a ray of hope for the traditional media? Not exactly.

In the April-June quarter, Facebook posted a 45% jump in revenue, with profits soaring 71% to $3.9bn. Google, with a far bigger turnover, saw sales climb by a fifth. There is little sign yet of an advertisers’ strike. Yet the winds of change are beginning to blow through the online ad industry.

Commercial broadcasters, in particular, have seized on the YouTube furore to argue that they alone can provide a safe marketing environment for big brands such as P&G. They are pushing at an open door. Marketing chiefs are increasingly concerned that ads are not reaching their intended target, and that much of their digital spending disappears into the ether. Fraud is rife. It is thought half of online ads are viewed by networks of hacked devices programmed to generate fake clicks.

A number of FTSE 100 marketing chiefs have told me of their irritation with Google and Facebook, which have been reluctant to share data on where their ads have been placed and who has viewed them. Their complaint is that Silicon Valley’s ad-buying algorithms are, in effect, a big black box. Advertisers have been invited to take it on trust that the Valley giants will do the right thing with their ad dollars. Compared to the shadowy alleys of the internet, the circulation and viewing figures delivered by publishers and broadcasters are a model of transparency.

Advertisers are demanding that the internet behemoths shed more light on the hideously complex world of online marketing. Unilever has made it clear that it will move money from platforms that cannot, or will not, demonstrate that ads are viewed by humans rather than robots.

Vodafone has taken a different tack. The mobile phone giant, which spends about half its £750m global marketing budget online, has drawn up a “white” list of approved sites where its ads can be shown. Other leading advertisers, including JP Morgan, followed suit.

Whether this will break the Facebook/Google duopoly is debatable. As long as consumers flock to their services, advertisers will do what they have always done — follow the eyeballs.


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