Walmart U.S. CEO Bill Simon said on the retailer's prerecorded
fourth-quarter earnings call Feb. 21 that "we reached even more
consumers through even more channels during the holidays, while
lowering our overall advertising expense for the year by 10%."
Though Mr. Simon didn't specifically mention it, people close to
Walmart say digital has played a major role in applying the
company's "everyday low price" approach to marketing. That means
taking advantage of the lower cost-per-thousand of paid-digital
advertising, as well as increasing reliance on earned- and
shared-media impressions generated by social media.
Facebook, where Walmart now has 12.5 million fans, has been a
big part of the giant's getting loads of consumer impressions with
lower outlays. Walmart has ramped up spending on Facebook
advertising in recent quarters, according to people familiar with
However effective, Facebook advertising is cheap. The social
network was serving nearly a third of all digital display
impressions as of the first quarter of 2011, according to ComScore.
But Facebook's global display-ad revenue equals only about a fifth
of all display-ad revenue in the U.S., as tracked by the
Interactive Advertising Bureau. Some interactive-media executives
peg Facebook's CPM at a meager $1.
But investors sent Walmart shares down 4% as growth of 1.5% in
comparable store sales in the U.S. wasn't strong enough to dispel
concerns about a $100 million margin hit to roll back prices.
And all the discussion about digital and social media sometimes
confuses more than impresses investors.
One investment-portfolio manager attending CAGNY, recalling the
chief financial officer of a major packaged-goods advertiser
stating that Facebook "shares" are worth more than "likes,"
wondered aloud how well a CFO understands the value of either.
The portfolio manager said that , regardless of how much more
efficient digital spending might be, experience shows that when
consumer-goods companies cut marketing spending, they usually
experience share losses and slower sales. He pointed to PepsiCo, which has recently pumped up
its budgets after years of restraint.
"Investors don't give companies credit for margin gains that
come from cutting advertising," he said.
Ali Dibadj, analyst at Sanford C. Bernstein, said that
"investors have learned that when advertisers talk about spending
being more efficient, it's a euphemism for "cutting.' " As a
result, he said, "you have to take that with a big grain of
For all the conversation, Mr. Dibadj said, digital marketing
remains a relatively small part of most marketers' budgets, "so
there's skepticism about what it really means."
Deutsche Bank analyst Bill Schmitz sees the the talk as a smoke
screen for lackluster sales.
"You wouldn't be hearing all this about digital advertising if
there were any volume growth at all in North America," Mr. Schmitz
Not everything about digital is couched in discussions of
slashing or restraining ad spending, however.