Adweek reports that troubled FMCG giant Johnson & Johnson (it’s facing a barrage of health-related lawsuits among other issues) is slashing its ad budget after setting up a new structure involving bespoke units from Omnicom and WPP. J&J used to spend some $1.6bn in the US.
In doing so it joins bigger rivals Procter & Gamble and Unilever in making the agencies take the strain as such legacy companies struggle in an online world.
Another once-mighty entity (two actually) Kraft Heinz is also floundering, restating some of its financial numbers after its zero-based budgeting programme of cutbacks hit its stable of old, old brands (to no-one’s great surprise apart from, maybe, theirs.)
A senior marketing executive told me the other day that most companies these days focus almost entirely on costs, not revenue. They assume, wrongly, that revenue will look after itself. And cutting costs is easier.
It’s not the same across the board of course: tech giants like google, Facebook, Amazon and even Microsoft are spending ad money like drunken sailors but they have the revenues and vast profits to do so. Mark Zuckerberg is able to hire tens of thousands of new people (he says) to try to tame his particular online OK Corral, without affecting performance markedly. To these companies a big ad campaign is a drop in the ocean although the relationship they have with their agencies is significantly different from the ones agencies used to enjoy with their FMCG clients – where they had a role in strategy as well as execution.
But are the big FMCG companies actually any better off after slashing their creative agency budgets and moving as much work as they can in-house, with eager help from the “better, faster, cheaper” merchants? Arguably they’re just accelerating their extinction.
The same, obviously, can be said of the big agency-based holding companies. The likes of J&J cut back and lots of seasoned agency folk lose their jobs.
It’s looking increasingly like “lose, lose” all round.
