Ad Agencies Get Hammered (Short Don Draper)

Changes Afoot as Large Corporates Like P&G Shift Spend

Draper never would’ve made it in the age of #MeToo anyway.

This week, Proctor & Gamble ($PG) announced that it cut its digital ad spending by approximately $200mm, a shot across the bow of certain undisclosed big ad players (cough, Google) and a major blow to the middlemen ad agencies that seem to be caught in a maelstrom of disruption. Back to that in a sec. More on P&G,

P&G, however, has not cut overall media spending. Funds have been reinvested to increase media reach, including in areas such as TV, audio and ecommerce media, a company spokeswoman told Reuters.

Not yet, anyway. P&G intends to cut an additional $400mm in agency and production costs over the next 3 years. In so doing, they’re also going back to the old school after realizing that the 1.7 seconds of eyeball view time doesn’t necessarily translate into sales. Podcast producers take note.

So what about those middlemen? Judging by WPP’s 10% stock price plummet this week ($WPP), investors are bearish. WPP is a British multinational advertising and public relations company besieged by the ease with which advertisers can publish directly on Facebook ($FB) and Google ($GOOGL) and, in an instant, receive performance metrics. Ad agencies, therefore, are no longer needed as much to connect brands with end users. Per the Wall Street Journal:

For their part, big ad agency companies that have traditionally bought advertising space on behalf of marketing clients are under pressure to reinvent themselves to remain relevant as the industry changes. Advertisers are demanding that their agency partners be more transparent about media-buying, so it is clear that agencies are getting the best possible deal for the clients and aren’t receiving rebates from sellers.

Disrupting kickbacks too? Rough.