Tired of waiting for the Internet to live up to its potential, Procter & Gamble Co. is agitating to make the Web an effective advertising vehicle now.
This week, the nation's largest advertiser is hosting a summit at its Cincinnati headquarters that will bring together senior executives from leading marketers, technology companies and advertising agencies to figure out how to jump-start Web advertising effectiveness. The two-day summit is dubbed FAST, or Future of Advertising Stakeholders (AA, May 11).
P&G, which spent roughly $3 million on U.S. Internet advertising in the fourth quarter of the fiscal year ended June 30 -- out of an annual $3 billion worldwide advertising budget -- is in effect saying that until the Web proves itself as a medium, it won't get the ad dollars it deserves.
SPENDING TO POTENTIAL
"There's no question P&G will spend to potential," said Denis Beausejour, VP-advertising for the package-goods giant, during an interview with Advertising Age at P&G headquarters earlier this month. But "we don't have the ad models, the bandwidth or the richness that we think will be required to have this medium replace television."
P&G's conservative stance is in contrast to the one it took in the early days of TV, when its commitment to the medium jumped from 2% of its measured-media ad spending in 1950 to 61% five years later.
"I think [a sharp increase in Internet spending] will happen, but not if we don't make some evolutionary and related changes to bring it along," Mr. Beausejour said.
One of the objectives of this week's summit is to create some sort of mechanism, such as a new industry association, to foster collaboration among the various sectors of the industry in order to propel the medium's development.
"It's a watershed mark in the history of online advertising when you have the world's biggest advertiser finally getting serious about online -- particularly when that big advertiser is a brander as opposed to somebody who is going to sell a lot of product from its Web site," said Peter Storck, VP-research at analyst Jupiter Communications.
Mr. Storck said other leading marketers, such as Unilever (see story on Page 30), are also beginning to view the Net as a viable advertising medium.
While P&G won't disclose its 1998 Internet ad budget, the company has created an internal Interactive Marketing Team to develop, test and place Internet advertising for about a dozen of P&G's 300 brands.
A look at how the team is structured and operated, as well as how it works with P&G's other brand lines, underscores the commitment the marketer is making to the Internet. It also highlights the obstacles the industry has to overcome before more marketers like P&G sink bigger bucks into the Web.
CLOSE TO A START-UP
Housed on the second floor of P&G's main building, six floors below the ad department, the 15-person interactive team has its own budget and enjoys relative autonomy. The team reports to Mr. Beausejour.
"This is as close to a start-up as anything you'll find within P&G," said Pete Blackshaw, digital brand manager at P&G and chairman of the FAST summit.
Interactive team Associate Director Vivienne Bechtold said that although "you can't make a business case" for new media yet, P&G Chairman-CEO John Pepper and North American President Wolfgang Berndt approved the team's budget without argument.
"It's an unusual time when P&G's senior management recognizes there is [a group] that has more expertise and knowledge than they do," she said. "They are listening and looking for direction to come from this team as opposed to their having all the answers."
Last year, the interactive marketing team created 100 interactive ads for P&G brands, including Always, Bounty, Cover Girl, Crest, Millstone, Olean, Pampers, Pantene, Pringles, Scope and Sunny Delight.
With four digital brand managers, whose job is to develop interactive marketing strategies for P&G brands in categories including healthcare, laundry, paper and pharmaceutical, the team identified models that worked and those that didn't.
To develop creative, the digital brand managers work with P&G's line brand managers and their traditional and new-media agencies. Then they test the ads in a laboratory environment before Media.com, New York, P&G's interactive media agency, places them in a paid environment.
Finally, ad effectiveness analysis is performed using data from ad serving company MatchLogic, as well as P&G's own marketing research.
Since one of the key obstacles holding P&G back from spending more on the Internet is finding effective ad models, much work is being done in this area. And the company may be learning more about the medium's capabilities from ads that don't work than from those that do.
"A good portion of what you develop, you cannot execute," said Ms. Bechtold.
One example of that can be found in the company's experience last year trying to develop an interactive ad for its Bounty paper towel brand.
"We wanted to test the proposition of how to make the Internet work for a low-involvement brand," said Mike Wege, P&G associate director of advertising development.
Believing such brands didn't need to develop a "destination" site to draw consumers to, the interactive team set out to create stand-alone ads that would effectively communicate the Bounty brand message.
"We're not going to have a Bounty portal," said Louis Goldner, digital technologies manager at P&G.
One of the roughly 40 ads developed involved a virtual "spill" that would flow across the user's screen before being wiped up with a virtual Bounty paper towel. The ad was developed by the interactive division of Jordan McGrath Case & Partners, New York. Jordan McGrath also handles traditional advertising for Bounty.
But while a variation of the ad ran on the PointCast push network and a mock-up was created for America Online, no other sites would take it because of issues such as long download times, third-party server integration and incompatible browsers.
"We all thought it was neat and had a lot of potential, but it forced a big process discussion on how to negotiate with different sites," said Mr. Wege.
NON-TRADITIONAL AD PROGRESS
Other P&G campaigns illustrate the progress the marketer is making with non-traditional ads.
In June, P&G sponsored a contest -- funded by a technology partner it declined to name -- for agencies to produce an interactive campaign for any P&G brand. Eight agencies, traditional and interactive, pitched; the winner was Blue Marble, New York, a sister unit to D'Arcy Masius Benton & Bowles, New York, the agency of record for P&G's Scope mouthwash brand.
The theme, "Get kissably close online," played off Scope's TV campaign. The concept was to run a banner ad that allowed users to deliver an e-mail kiss to a loved one.
After testing it in a mock online environment, P&G placed the ad on sites such as Tripod.com, Regards.com and HomeArts.com, where it got a 20% overall average click-through.
The campaign developed a word-of-mouth buzz that resulted in more exposure than the ad impressions paid for by P&G.
"E-mail is the killer app of the Web," said Mr. Goldner.
Developing the online Scope ad also involved various technological challenges, such as a large file size, e-mail within the ad and ad serving from MatchLogic.
The issue of technological hurdles is just one of the key points P&G expects to raise at the FAST summit. Another is developing models to measure return on investment for online ad spending.
"ROI is very difficult to prove on any advertising front," said Mr. Wege. "We're not able to see it with the Internet advertising."
To try to measure overall return on investment, or at least ad effectiveness, P&G uses data from its interactive lab, as well as actual usage data from MatchLogic to try to calculate the effectiveness of its online ads.
P&G communicates its findings within the company and to its agencies in part through a quarterly series of luncheon meetings about new media. Eventually, it hopes to share its findings through its corporate intranet, MarketSpace.com.
The next steps for P&G in new media are to integrate interactive efforts into its brands' overall marketing drives and to begin exploring more advanced technologies, such as the convergence of TV and computer screens.
"We're encouraging the development of an environment that would facilitate P&G brands to put more marketing funds into [the Internet]," said Mr. Beausejour.
P&G has set up a fund that is part of the interactive team's budget, called Incent, to offer incentives for brands to spend money on interactive media. To date, 85 P&G brands and their agencies have applied for the funds to develop and execute interactive ads; between five and 10 will eventually be selected by the interactive marketing team.
And while their interactive ad efforts will initially be funded through Incent, within two years interactive spending should be part of those brands' regular marketing budgets, said Mr. Beausejour.
Beyond developing and placing Internet ads, P&G is also partnering with sites such as CondeNet's Phys.com and Time Warner's ParentTime. It's currently in talks with ThirdAge, a Web community targeted at the 50-plus crowd that focuses on dining, travel and fitness.
"This is a wonderful example of a common demographic and psychographic group, and the targeting opportunities it gives for P&G brands," said Mr. Beausejour. "There will be something happening there."
He also said P&G is interested in collaborative filtering software, which makes recommendations to users on things such as music purchases based on previous orders and the consumer's likes and dislikes.
FAST AS CATALYST
Short-term, the company wants to use the FAST summit as a catalyst to get technology companies to develop the infrastructure and applications to facilitate Internet marketing, and to get agencies and marketers to develop compelling online campaigns.
"We really want to get, in a more formal way, the stakeholders in this medium together . . . to shape the development of this medium in a way that goes beyond what was possible with TV," Mr. Beausejour said.