Package-Goods Titans Talking Tough on Network TV Upfront

Unilever, P&G, Reckitt Remind Networks There Are Other, Less Expensive Options

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BATAVIA, Ohio (AdAge.com) -- A more-buoyant economy and strong scatter prices seem to signal a seller's market for what could be an $8.26 billion TV upfront, but heavyweight spenders Unilever, Procter & Gamble and Reckitt Benckiser are sending a far different message: We have credible alternatives to traditional TV advertising, and we're not afraid to use them.

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P&G, Unilever, RB spent $2.4B on TV last year.
Unilever is saying that its level of participation in the upfront will depend in large part on how pricey the market looks, noting that its success stories from other media, particular digital, give it plenty of options for putting money elsewhere.

Helping further the point, several Unilever executives will be making a field trip to Silicon Valley this week to visit all of its major players, not just as a learning experience but also in hopes of making deals, said newly minted Chief Marketing Officer Keith Weed.

Unilever isn't just jawboning ahead of negotiations, but simply reflecting reality, as Rob Master, director of North American media, sees it. "We're certainly seeing signs of life [in the economy]," he said. "But we're not out of the woods yet. And I think it's important for the marketplace to match today's economic reality."

Others, too, are talking tough in a manner that would seem to put a damper on the $8.26 billion prime-time TV upfront forecast by Barclays Capital analysts Anthony DiClemente and George Hawkey.

Leverage
P&G last month concluded a three-year pre-upfront deal with Oprah Winfrey's OWN network that includes considerable content integration. And on the company's earnings conference call April 29, Chairman-CEO Bob McDonald pointed to strong ratings and consumer post-testing for the company's joint production with Walmart of the "Secrets of the Mountain" movie on NBC last month, noting that it's an example of how the company's increased marketing spending this year doesn't necessarily show up just in conventionally measured 30-second spots.

RB last month also announced it's bumping its online video buy -- at a dirt-cheap $2 cost per thousand -- to $40 million from last year's $25 million, continuing a shift away from TV networks that company executives have said gives them an alternative and better leverage in upfront negotiations.

Those players, particularly P&G and Unilever, appear to have been spending more on all sorts of marketing, including TV, this year. P&G, Unilever and RB collectively spent $2.4 billion on TV last year, according to Kantar Media, down around $1 billion from 2008 thanks largely to more than $800 million in cuts by P&G. Unilever actually raised TV spending 3%.

But all three juiced digital spending significantly, with P&G and Unilever at least doubling their internet outlays, per Kantar. Unilever also hiked digital spending another 90% last quarter, it reported last week. The measured data doesn't pick up search, smaller websites, the full cost of behavioral targeting or most video, including RB's reported $25 million outlay. Digital or no, however, P&G and RB both cut measured spending sharply last year, while Unilever stepped up spending

Unilever's global ad spending as a percent of sales rose a strong 2.2 percentage points last quarter over last year; P&G's spending appears heavily back-loaded into this quarter, the last of its fiscal year. And while P&G isn't providing spending details, Chief Financial Officer Jon Moeller said "consumer impressions" would be up 20% over the last fiscal year, up from a 10% forecast in December, with a disproportionate amount of that increase coming this quarter.

But both also face growing pressure on profits in the year ahead from a rebound in commodity costs, even as they have reduced prices or seen consumers shift to lower-cost goods. The two companies posted nearly identical volume increases (P&G to 7% and Unilever to 7.6%) on only 4% organic sales increases last quarter.

Growing alternatives
Marketers have had a habit of touting the attractiveness of media alternatives in advance of the TV upfront over the years, but networks have long been confident that they can't really kick the TV habit. Unilever's Mr. Master, however, said he's looking at data suggesting Unilever can, and will, if the price isn't right.

"TV without question remains an important part of our media mix," he said. "But digital is clearly growing with us. It's not just the year-over-year growth, it's how digital has broadened for us over the past 12 months in terms of places we're spending money today that were not nearly as robust 12 to 18 months ago, like search and social and mobile and interactive TV. These are things that as we get back our marketing-mix models we're seeing enormous success in."

A lot of those digital buys are part of cross-platform deals with networks such as CBS or MTV during upfronts or in Unilever's "reverse upfront," where it presents initiative plans to networks and asks them to help build media plans around them. But he added that "probably most of those [digital] deals are done outside the networks, often with companies that didn't exist two or three years ago."

Between pre-upfront "reverse upfront deals," a growing number of TV deals concluded outside of regular upfront negotiations, and a growing amount of digital spending, less of Unilever's media is bought at the upfront than in the past, Mr. Master said, but he's not moving away from the process altogether as some, such as Johnson & Johnson, have tried.

One thing that gives Mr. Master growing confidence in Unilever's ability to shift spending to digital is the "Digital Data Mart" created by MindShare, which tracks campaign effectiveness in near real time and allows the company to make adjustments on the fly both to creative and media buys. It's a capability, he said, that TV and other media rarely afford simply based on the nature of the media and the deals.

Online video rates
He's less enthusiastic about buying large amounts of online video inventory at cheap prices, as some have. He said he believes savings in cost may be outweighed by lack of flexibility in having to commit to large amounts of inventory upfront.

But Mr. Master does say the CPMs of some other online video options, including those associated with TV networks, may be unrealistically high. "In some cases, we've taken hard lines and walked away from certain players when we didn't feel we were getting the appropriate rates," he said. "Part of it is just the amount of inventory out there. Some of these players just don't want to move on price point, so they run [public-service announcements] instead. Is that a sustainable business model? They would be better to tell you that than I would."

P&G is vowing -- vaguely -- to spend more too, but not necessarily on traditional TV or easily measured media.

Answering a question about P&G's ad spending plans going into next year, Mr. McDonald said: "I would caution [against] looking at TV advertising, because we're spending more in nontraditional channels," citing digital ads not always easily measured by third-party tracking services and the family-friendly "Secrets of the Mountain" project.

The latter was on NBC, but produced by P&G and Flyover Studios, a decidedly non-Hollywood outfit headed by former P&G executives who are also founders of a Cincinnati megachurch.

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