Are brands over-investing in digital?

As Sir Martin Sorrell claims brands are questioning the returns from digital marketing and P&G moves away from Facebook targeting, marketers are considering “rebalancing” their spend.

From a distance the digital ad sector looks to be in rude health. In the UK, internet ad spend was up by 17.3% last year, outperforming the overall market which saw increases of 7.5%, according to the Advertising Association and Warc’s annual expenditure report.

Many brands are bullish on the opportunities. Pete Jeavons, head of brand marketing at EE, believes that if brands “are brave” and happy to work collaboratively with people like vloggers then digital can do a “bigger, more powerful job than a TV campaign”.

That sentiment is echoed by Nationwide, especially when it comes to engaging younger audiences. The building society recently launched a Snapchat campaign to promote its new student bank account. And Alex Bennett, senior manager of digital marketing at Nationwide, believes that if the creative is right brands can “do as much with a Snapchat filter as a 90-second film”.

And yet there are growing concerns about digital, and in particular if brands might have moved too quickly to shift money away from more traditional formats and jumped on new digital tech too soon.

Issues such as viewability, ad fraud and ad blocking have all grown in prominence this year, with marketers realising these are not minor problems that can be swept under the rug but big challenges facing the industry. According to the latest IAB figures, a fifth of internet users are blocking ads, while data from Lumen shows that just 4% of digital display ads are viewed for more than two seconds.

Questioning digital spend

Procter & Gamble has raised the issue of over-investing in digital ad formats. While it doesn’t plan to cut spend on Facebook advertising, it is shifting its marketing spend away from Facebook advertising that targets specific groups of consumers after finding it did not always lead to the expected sales boost.

Read more: Why P&G is moving away from targeted Facebook advertising

Marc Pritchard, P&G’s chief brand officer, told the Wall Street Journal: “We targeted too much, and we went too narrow. And now we’re looking at: What is the best way to get the most reach but also the right precision?”

While P&G might not be cutting digital ad spend, some are starting to question if they should. WPP’s CEO Sir Martin Sorrell said some of its clients are considering cutting back as chief financial officers, procurement officers and media auditors demand improved metrics and proof of digital’s effectiveness in driving sales.

Sorrell explains: “What has really been happening is questioning digital growth. One of our major clients has talked about investment in Facebook and reducing that, not overall but investment on particular areas of activity.

“Some clients are looking at whether they have over-invested in some new media alternatives.”

The problem with Google and Facebook

Sorrell has criticised Google and Facebook for being “the players and the referees” – for being the ad platform and the one providing the analytics. This is not that surprising given that WPP runs its own analytics companies and in fact both have done a lot of work to improve access to their data.

Yet this is growing concern about the dominance Google and Facebook hold in the digital ad space as well. Digital revenues might be increasing, but almost all of that increase is going to the two market leaders while other publishers struggle to monetise online. That leaves marketers little choice in where to spend their digital ad dollars.

“The scale of the audiences available on Facebook and Google and the granularity of the targeting offering means that they can fulfil multiple roles for many different advertisers.”

Tim Pritchard, head of social marketing, Manning Gottlieb OMD

Rather than a single USP in the market they have several and marketers can effectively pinpoint many different audiences in many different ways to many different ends, this has cemented their role as the central core of a marketing plan,” explains Tim Pritchard, head of social marketing at Manning Gottlieb OMD.

Marketers are hoping that Verizon’s acquisition of AOL and Yahoo can provide a third option in the digital realm. The deals give Verizon ownership of the Brightroll ad network as well as native offerings through Tumblr. Yet Pritchard thinks the challenge will be to take these “divergent parts and give them a cohesive identity”.

Ultimately how much each brand decides to invest in digital, and where, will be up to their individual strategies and the outcomes they are looking for. But it seems the race to constantly shift more and more spend to digital could finally be coming to an end as marketers realise it might not be the silver bullet they were looking for and that, as with every other channel, digital must prove it is effective at the most important judge of success in marketing: sales.

BRAND VIEWPOINT

Paul Troy Confused.com

Paul Troy, CMO, Confused.com

Some FMCG clients surged towards digital, and now it needs rebalancing. This is more true of them than online or service brands who rely on generating site traffic.

What we’re seeing now is a new equilibrium in making marketing investment decisions. Pure play brands like Confused.com have always maintained a good balance between TV and digital channels. So we will continue to invest at current levels. We don’t see digital investment as purely short-term. Brand equity is no longer the preserve of TV and it can be gained with strong integration of digital channels within the marketing mix.

I expect digital channels to continue growing, fuelled by being the lifeblood of new online businesses like TransferWise and Deliveroo. However that growth will be constrained by the adjustment we’re now seeing from big FMCG and service brands, which over-invested as they followed into the digital space.

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Comments
  • Ray Gordon 9 Sep 2016 at 6:53 pm

    Wow, so they figure out in 2016 what indies like me have known since 1996. They rush to advertise with Google, Google me, find lies about me, don’t advertise with me, then wonder if maybe they made a mistake. It’s like apes thinking humans are stupid and weak. Feel free to advertise with me anytime, big corporations!

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