Facebook and Google Have a Problem With Crappy Advertising

(Bloomberg Gadfly) -- When the world's biggest spender on marketing warns that online advertising is broken and ineffective, people from Madison Avenue to Silicon Valley should listen.

In a recent speech, Marc Pritchard, chief brand officer at Procter & Gamble Co., called for sweeping changes in how technology companies such as Facebook Inc. and Google operate, as well as to the opaque billing practices of ad agencies like WPP Plc and Omnicom Group Inc. He laid out a five-point plan on how to fix things and issued an ultimatum: P&G will no longer pay for any digital ads, tech, or agency services that don't meet its standards. Oh, and Pritchard thinks much of the marketing online is "crappy" and the viewing experience “even crappier”.

Given that P&G spends about $7 billion every year on promoting brands such as Tide, Tampax and Pampers, this is a big deal. With spending on online ads set to eclipse television for the first time this year, marketers want more accountability. They've been complaining about this for a while, but now they're really starting to turn the screw.

Here are the best bits from Pritchard:

• "Together, we're now spending $70 billion on digital ads... The times of giving digital a pass are over… It's time for action."
• "We serve ads to consumers through a non-transparent media supply chain with spotty compliance to common standards, unreliable measurements, hidden rebates, and new inventions like bots driving fraud. Which all leads to an even bigger problem: we're not growing fast enough. Despite spending $200 billion on advertising in the U.S. alone, the growth rates of our collective industries are really pretty anemic.”
• "We make decisions involving billions of dollars on where to invest our media money. These are big bets so we need objective validated measurements to make sure we're getting the audience and reach we pay for."

Pritchard was too polite to call companies out by name, but I'm not. He demanded an end to letting internet companies measure the effectiveness of their ads without outside verification (hello Facebook!). He said P&G would review every ad agency contract to get rid of sketchy practices in purchasing ad space (hello Omnicom, WPP and others!). He called for everyone to use the same standard for whether a video ad had actually been viewed and for how long (hello Google and Facebook!)

With Snap Inc. expected to file the prospectus for its IPO this week, investors considering backing the Snapchat owner might also want to listen up. Snap has grand ambitions to build an ad business on the ephemeral messaging app that will one day bring in billions yearly, justifying its potential $25 billion valuation. But it might not enjoy the same patience from advertisers as its rivals did in their early days given the mounting skepticism around online ads. And some of Snap's ad formats are novel so it's not easy to judge how well they work.

Yet P&G's broadside shows us there's only so much digital mucking about that big advertisers will swallow without results. If the dollars they spend aren't delivering, budgets will be revisited. The flow of money from TV and print to the web could slow or reverse. Nor will the agencies be spared. If they can't be transparent about how they spend money, contracts will be cancelled or revised.

As Pritchard puts it: "It's time to grow up."

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Leila Abboud is a Bloomberg Gadfly columnist covering technology. She previously worked for Reuters and the Wall Street Journal.

To contact the author of this story: Leila Abboud in Paris at labboud@bloomberg.net.

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net.