BATAVIA, Ohio (AdAge.com) -- The first quarter of 2009 will be remembered for many things, mostly bad. But it may also mark a turning point when the world's biggest marketer and its broader industry finally got serious about digital media.
Even as Procter & Gamble Co. cut measured U.S. media spending 18% overall last quarter, it more than doubled spending on internet display ads, according to data from TNS Media Intelligence.
|Where P&G has been spending its money|
Or course, the jump is relative. P&G's big spike in internet spending, coupled with such factors as a whopping 44% decline in network-TV spending, still only brought online display to 4% of P&G's $672 million quarterly measured outlay. And because measured-media data don't capture many of the fastest-growing digital-spending buckets, such as online-video ads, behaviorally targeted ads, mobile or search, P&G's digital outlay as a whole probably exceeded 5% of its media spending last quarter.
But the implications beyond the quarter are huge. The ramp-up in digital dollars means many P&G brands are finally spending enough to have a measurable impact on sales, which could allow them to justify even more spending on digital down the road.
Time to model
Once a brand spends about 5% of its media on digital or any medium, it's usually possible to apply the package-goods industry's return-on-investment measurement of choice: marketing-mix modeling, said Gregg Ambach, managing director of the Cincinnati office of Analytic Partners, which handles such modeling for P&G and others.
"The general trend is that internet is becoming a bigger part of the advertising budget," said Mr. Ambach of his package-goods clients. "And we're definitely measuring more and more of it."
P&G isn't the only package-goods titan suddenly spending bigger online -- just the biggest. Rival Johnson & Johnson hiked its measured spending overall last quarter 28%, but it nearly doubled its internet-display spending to $15.5 million. That brought J&J, like P&G, to 4% of its $397 million outlay.
More broadly, consumer-package-goods marketers began a runup in digital spending last year by one measure. The Interactive Advertising Bureau, which gets data from digital media companies via PriceWaterhouseCoopers, estimated that CPG digital spending shot up more than 60% last year to $1.5 billion, increasing its still-modest share of all digital media spending by two percentage points in a year to 6%.
Executives familiar with Google and Yahoo said spending by CPG companies on search rose double- to triple-digit percentages last year and that 24 of the 25 biggest players spend heavily on behaviorally targeted ads, whose cost isn't fully reflected in measured media.
Better data ultimately will be what it takes to get package-goods brands to spend more on digital. Gian Fulgoni, chairman of ComScore and former CEO of Information Resources Inc., makes the analogy to the advent of scanner data in the 1970s. When CPG marketers suddenly could see the full impact of trade promotion, they started spending more on it, he said.
More recently, he's been beating the drum for stepped-up CPG spending on digital, and begun incorporating supermarket spending data from loyalty-card programs via Dunnhumby to show sales lifts from digital campaigns. Preliminary results from a study of two dozen CPG brands show that digital ads generate sales lifts better than those in past studies of TV ads in IRI test markets.
Mr. Fulgoni isn't quite ready to call an inflection point for the industry, but he said CPG is the fastest-growing segment of ComScore's client base.
A change in the way TNS tracks internet spending accounted for some of P&G's hike in measured spending last quarter. In March, it added 600 websites to the 3,000 it previously tracked, picking up many niche sites with monthly visitors of around 500,000. Even without that impact, P&G internet spending still more than doubled, up 146% in January and February vs. the same period last year.
But one thing particularly noteworthy for P&G is that it wasn't just a few brands getting in on the digital act. The spending also had considerable breadth, with a growing number of small outlays by several brands that weren't active in digital last year.
Several brands stood out as making digital a particularly large part of their mix last quarter. Those include CoverGirl, P&G's biggest spender on internet display, with about 10% of its $50 million media outlay going there via work from WPP Group's G2i, primarily for Outlast lip stain.
Bounce's $2.4 million outlay on internet display last quarter from Publicis Groupe's Digitas made up 35% of its media spending. Vicks put 45% of its $8.7 million quarterly spending on the internet via WPP's Bridge Worldwide, while bigger-spending Head & Shoulders put 18% of its $19.7 million outlay into internet display from Digitas.
The results appear mixed. CoverGirl, P&G's biggest internet spender, continued its run as one of P&G's best-performing brands of late. And it gained the most share where it focused its digital spending: in lipstick, up two points last quarter, according to IRI data from Deutsche Bank.
But Bounce, faced with rising sales of value and private-label brands, lost 2.4 share points. P&G also lost share in cough and cold, but Head & Shoulders appeared to continue a strong run in share growth.
Those numbers don't account for impact of promotional activity by P&G or its competitors or competitive spending and pricing -- factors marketing-mix models take into account.
To get a better read on digital effectiveness, P&G will have to stick with it beyond what was the worst quarter for the economy since the Great Depression. The IRI data also leave out as much as half of P&G's brand sales through Walmart, clubs and dollar stores.
Mr. Pritchard said P&G wants to increase its media weight -- not necessarily spending -- and is using marketing-mix modeling to do so more productively. "We like innovation as well," he said. "Obviously digital has a lot of opportunity for that. But we've been looking for that from our print partners as well as from our TV partners."
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