P&G Tells Digital to Clean Up, Lays Down New Rules for Agencies and Ad Tech to Get Paid

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Marc Pritchard speaks at the IAB Annual Leadership Meeting.
Marc Pritchard speaks at the IAB Annual Leadership Meeting. Credit: IAB

Procter & Gamble Co., the nation's and world's biggest advertiser, is laying down the law for digital media players and agencies in a five-point program that will take effect this year as outlined by Chief Brand Officer Marc Pritchard on Sunday evening at the Interactive Advertising Bureau's Annual Leadership Meeting in Hollywood, Fla.

"The days of giving digital a pass are over," Mr. Pritchard said, urging the rest of the ad industry to follow P&G"s lead. "It's time to grow up. It's time for action."

The heavily influential marketer's program includes a thorough review of all media-agency contracts after the company found a surprise in its dealings with at least one agency, plus requirements that everyone use industry-standard viewability metrics, fraud protection and third-party verification.

And to enforce all of those steps, Mr. Pritchard said the company has vowed to no longer pay for any digital media, ad tech companies, agencies or other suppliers for services that don't comply with its new rules.

"We've given them plenty of notice," he said, according to transcript of his prepared remarks that was provided by P&G. "More than a full year for many."

P&G doesn't "want to waste time and money on a crappy media supply chain," he said. And he urged others in the industry to follow suit.

"Don't accept the excuses," he said. "Don't wait for someone else to move. …There is tremendous power in the collective force of our industry."

Contract confusion

Problems in what he called the "media supply chain" may help explain why the U.S. has anemic economic growth despite $200 billion in annual ad spending, including $72 billion on digital, Mr. Pritchard said. The IAB is 21 years old now, he noted, and digital collectively gets more money than TV.

Mr. Pritchard has been relatively sanguine publicly about his own media agencies' transparency practices, despite a wild industry debate since former Mediacom CEO Jon Mandel nearly two years ago leveled blistering accusations of undisclosed incentives to media rebates. But on Sunday he acknowledged that P&G encountered some unexpected findings as it dug into the matter.

"Not long ago, we discovered one of our agencies was using media money as float," Mr. Pritchard said, according to the transcript. "We were incensed -- they're supposed to be an agent. How could they use this money as 'principal?'" A spokeswoman declined to provide details on the agency or media involved.

But when P&G looked at its contract, it made "an interesting discovery," he said. It stipulated that P&G would pay the agency, which would make the purchase and accept all liability with publishers, and had no provision that prevented the agency making money on the float, or difference between what it paid the publisher and what it got from P&G.

"Our response was humbling -- 'Oh. I didn't realize that.' The agency was acting 100% in compliance with the contract," Mr. Pritchard said.

New rules

"So we are now poring over every agency contract for full transparency by the end of 2017 to include terms requiring funds to be used for media payment only, all rebates to be disclosed and returned, and all transactions subject to audit," he said, according to the transcript of his prepared remarks. "We've had some surprises. It's taking time to complete, and we're often using outside counsel."

At the same time, P&G is re-examining its media-agency fee structure "to make sure we're paying appropriately for services rendered," he said. "When we asked why the agency used the money for float, they said, 'Your fee doesn't cover our expenses.' Another humbling moment. 'Oh, I didn't realize that.' Having unprofitable agencies is not good business, and can lead to practices we don't want, so we're taking a closer look at matching fees to services."

Mr. Pritchard also said P&G is fully endorsing the often controversial Media Rating Council viewability standards for digital media -- which defines display ad impressions as "viewable" if at least 50% of pixels are on-screen for at least one second and video as viewable if at least 50% of the player is on-screen for at least two seconds.

An MRC-accredited viewable impression metric has been around in some form since 2010, and the current MRC standard was adopted in 2014. "Is it adopted broadly yet?" Mr. Pritchard asked, according to the transcript. "No! Because every time a new technology gets developed, the case is made that 'My platform is special' or 'My product needs a unique viewability metric' or 'My agency has a better standard for our unique clients.' That means every publisher needs to measure different viewability approaches for dozens of platforms, agencies and clients -- complexity, time and money we're all paying for."

Knocking rivals

The comments are an oblique criticism of, among others, GroupM and P&G rival Unilever, which have adopted a stricter standard that counts display impressions only where 100% of an ad is in view for any length of time, and video only when 100% of the player is in view for half the purchased ad time, when the video's sound is on and and a person actually clicks to start it.

But Mr. Pritchard said P&G also spends "enormous amounts of time trying to understand, analyze and explain the differences between Facebook, Instagram, Twitter, Snapchat, Pinterest, Pandora, YouTube and the dozens of different viewability standards claimed to be the right metric for each platform."

Viewability simply means the "opportunity to see an ad," he said. He compared it to Nielsen TV ratings, which aren't perfect. "But since 1950, we have all accepted a shared level of error in order to conduct business together across all TV platforms."

He acknowledged legitimate reasons for various players wanting different viewability standards, but said, "The human mind can register an image into memory in 0.25 seconds. Regardless, it doesn't matter enough to warrant the complexity and the tremendous resources spent to deal with the differences. We'd rather spend time working on better advertising than debating the viewability standard with another publisher or agency."

P&G expects everyone it deals with to accept the MRC standard by year-end, he said. "Time is up. We will no longer tolerate the ridiculous complexity of different viewability standards."

Likewise, he said P&G expects all publishers to accept MRC-accredited third-party verification this year.

"What finally put me over the edge was a conversation with a top executive from one of the major companies," Mr. Pritchard said. "After a long discussion, the executive said, 'I know you want us to get third-party verification from an accredited source, but you should know that there are many companies, including your competitors, who are 'leaning forward' and spending billions with us without that measurement.' At that moment, the image of my dad popped into my mind saying, 'If all of your friends jumped off of a cliff, would you jump too?"

"I had a moment of clarity," Mr. Pritchard continued," and replied, 'Well, hundreds of millions of dollars may not seem like a lot to you, but it's a lot to us. We've been leaning forward for the past several years. And it's going to stop unless you get validated, accredited third-party verification.'"

P&G also has had an awakening on digital ad fraud, after an audit by consulting firm White Ops found that it didn't have the problem controlled nearly as well as it thought, Mr. Pritchard said. So one step that P&G is taking is to require "any entity touching digital media" it buys to get accredited during 2017 by the Trustworthy Accountability Group, a joint initiative of the Association of National Advertisers, 4As and IAB.

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