FMCG giant P&G has cut its adspend for the third year in a row, down $350m (£290m) to $6.75bn, claiming to have reduced waste by in-housing, sprucing up its digital supply chain and reducing agency and production fees.
It’s much the same story elsewhere with Unilever, which claims to have saved even more, dropping out of the top five UK advertisers in 2018 with spend down 29.2 per cent from £116m to £82.8m. Amazon now spends more on main media in the UK with £87.5m. Unilever, of course, has its in-house U-Studios in a deal with Oliver but still needs to buy media.
At the same time a survey of big advertisers buy AlixPartners claims that £47bn of the £74bn they spent on digital advertising was, if not exactly wasted, ineffective – failing to deliver any noticeable return on investment (ROI.) This is, of course, subjective. You can argue that any ad serves a purpose if you define the purpose of advertising as awareness or even fame. These days it’s ROI which usually means sales.
P&G and Unilever may well be right to clamp down on what they see as waste. P&G’s latest financials show the company growing for the first time in years. But is cutting back agency fees good business management or a short term measure that in reality damages the communications ecosystem (never thought we’d write that) that has helped build its business (and that of others like Unilever) over the years and could do – presumably – in the future?
Agencies certainly have been wasteful operations in the past with some of thme charging too much for indifferent or worse work, in the process cheerfully marking up ridiculous production fees. There was a time when the average crew on a commercial could have made Gone With The Wind, including the burning of Atlanta.
But employing the best talent, especially creative, is an expensive business. If agencies or some other independent source don’t have that talent on their books then the quality of ad communications will suffer, as it arguably is already in some markets including the UK.
If you’re Apple or Google you can have it both ways: hire the talent you need directly (as Apple has done with a stream of top notch creatives) and turn to agencies to vary the formula when the mood strikes you, as Google has done in an excellent campaign from 72andSunny Amsterdam hymning the delights of the infinitely varied English summer (bit of a cheek going to Amsterdam but never mind.)
Increasingly rickety agencies, bedevilled by fee cuts and project work, are no longer the best place to work for many creatives. There’s a brain drain to broadcasters for example: 4Creative and BBC Creative in the UK.
But those companies, the vast majority including P&G and Unilever, who need agency services will eventually suffer. Arguably Unilever’s creative output has declined in quality already from its great days.
One might see this as killing the goose..