BATAVIA, Ohio (AdAge.com) -- Increasing signs point to a surge in digital spending by package-goods players that's gathered momentum over the course of 2009 and heading into 2010 -- though that might not be apparent from looking at the measured-spending numbers.
At a time when a lot of agencies are laying off, two digital agencies serving industry heavyweight Procter & Gamble Co. and other package-goods players have massively ramped up hiring this year following last year. Between them, they have added more than 140 employees just in the U.S., representing headcount growth of around 30% in a year. P&G rival Unilever is about to name its first digital roster and Reckitt Benckiser, which boosted the medium a lot this year, is also talking big about the next one.
New-business wins by WPP's Bridge Worldwide, Cincinnati, and independent Resource Interactive, Columbus, account for some of their growth, but organic growth of spending on digital creative among package goods clients has also been a major driver. "The back half of this year in particular we've seen just a hockey stick of growth in CPG," said John Kadlic, director-marketing and business development at Resource. "Not only have we had wins, but a change in the past few years has been the duration of the commitments," he said. "The contracts for two of the three [CPG] new-business wins are three-year commitments, which is somewhat unusual ... and across multiple lines of business."
Add to that Unilever, which is poised to name its first global digital roster, possibly as soon as this month. While it's seemingly been poised that way since last spring, the effort now appears to have been rolled into the world's No. 2 marketer's global-media review.
Reckitt Benckiser, which shifted 5% of its TV budget to online video, still hasn't delivered a verdict on how well that decision delivered, but it remains bullish on digital. "Digital is going to continue to be a massive, massive part of our [media plans]," Marc Fonzetti, advertising manager-internet specialist at the marketer, said at the Advertising Age Media Mavens awards Dec. 10. "Video is just going to be part of that." The leadership position the company has attained in video, he said, "is not something we'll relinquish easily."
No uptick in measured media
Even so, measured media hasn't shown a steep uptick for consumer package goods. The Internet Advertising Bureau found industry spending accounted for 6% of the $10.9 billion total in the first half, down from 7% a year ago. That meant it fell considerably faster than the 5.3% decline in total online media spending, IAB found. However, a lot of the growth coming from CPG isn't necessarily in the form of media, particularly the online display buys most readily tracked by TNS or Nielsen. Mr. Kadlic said a lot of his agency's digital growth in the category comes from social-media projects, digital point-of-purchase or mobile media that wouldn't be reflected in tracked media spending.
Massive recent growth by TotalBeauty.com suggests digital media gaining traction fast with consumers and marketers in the beauty and personal-care space. Traffic to TotalBeauty has increased five- to six-fold over last year to 2 million to 3 million in recent months, according to Compete.com -- pushing the 2-year-old site past sites linked to leading women's fashion and general-interest print publications such as Elle.com, InStyle.com and Glamour.com.
TotalBeauty CEO Emrah Kovacoglu pegs monthly traffic at 5 million, and said after a slow first quarter as marketers hunkered down, the site sold out inventory for the last four months of 2009. "The first quarter was soft," Mr. Kovacoglu said, but CPG digital spending, at least on TotalBeauty, appears to have picked up steadily over the course of the year.
"In beauty at least, they're definitely spending, increasing their [digital] spending, and trying to do more innovative things," he said. "This is the exact reason I left P&G to start this company. I saw how much we were spending vs. how much we wanted to spend. Companies such as P&G and L'Oreal needed places to spend the money."
Growth in TotalBeauty's concept has worked sufficiently well that it's close to entering a joint venture with an online male-oriented media player to launch a male grooming and lifestyle site, according to a person familiar with the matter. Mr. Kovacoglu declined to comment.
CPG behind much agency growth
CPG has been a substantial factor behind a roughly 30% growth in headcount this year at Resource Interactive, whose clients include several P&G brands, Scotts-Miracle Gro and more recently added Bush Brothers. Resource recently opened a second 10-person office in Cincinnati, primarily to serve P&G. And the roughly 70 employees the agency added this year are in contrast to 10 layoffs in 2008.
Probably around half of Resource's CPG growth is organic, including new-business wins from brands naming their first digital agencies of record or clients expanding AORs to new brands.
A particular hot ticket for CPG clients this year is e-commerce, Mr. Kadlic said, which taps into Resource's experience for such clients as Tractor Supply, Victoria's Secret and formerly Walmart. "We're working on a couple of projects right now with our CPG brands to see how can they create some incremental revenue without disrupting their [other] channel relationships," he said. "They're really looking at e-commerce as something fundamental to what they do and not something they allow others to do alone."
For Bridge, whose clients include P&G, ConAgra Foods, Abbott Laboratories' Similac and Red Bull, business is up about 40% over last year, gaining momentum over the course of the year, said CEO Jay Woffington. About half of that represents organic growth from existing clients who are heavily weighted in CPG.
CPG display-advertising work is growing, he said, but much of its assignments are taking other forms, such as a new relationship program for Similac, or ways of making brand websites more engaging.
A Forrester report earlier this year noted that while research shows consumers want to interact with brands in social and digital media, there's no single way they identify as a preference – meaning CPG brands will have to do many different things to reach the scale they need online. As a result, traditional media's heavy weighting of the media-to-creative spending ratio in favor of media may well be turned on its head in digital.
"The digital marketing model is not take one thing and do it a million times," Mr. Woffington said. "It's do a million things one time."