(Bloomberg) -- When Marc Pritchard speaks, the media industry listens.
Pritchard is the chief brand officer at Procter & Gamble Co., one of the largest advertisers in the world. The consumer-goods company, which makes everything from Tide detergent to Gillette razor blades, spent more than $10 billion on advertising and other marketing during its last fiscal year — the second-biggest ad buyer worldwide behind Amazon.com Inc., according to Ad Age.
Pritchard spoke to Bloomberg News about the surfeit of commercials on TV, why P&G is buying ads in new areas like gaming and how the traditional TV ad market relies on “information asymmetry.”
The pandemic changed entertainment and shopping habits. Has that made P&G rethink where it spends its advertising dollars?
The pandemic really accelerated trends — probably by five years. It accelerated the reduction of linear TV ratings, the increase in over-the-top streaming and a further increase in digital media to where it overtook TV.
We have been working for quite some time now on reinventing brand building in order to move away from the very traditional mass marketing with a lot of waste — to still mass reach, but with much greater precision. It’s a new way to engage consumers from an advertising standpoint so we’re more superior, useful and interesting.
How much of P&G’s ad spending goes toward television compared with streaming services and social media?
I can’t give you the exact breakdown. What I can say is we have certainly increased with over-the-top streaming and that is a definite trend. We continue to increase digital media. Within that, we have increased programmatic spending pretty substantially. We’ve also gotten into more audio because of the increase in podcasting. And we’ve also continued to increase spending on search, which is for e-commerce.
Is the overall budget staying the same?
We have increased advertising spending. More importantly, though, advertising spending is less relevant than increasing our reach. The way we view media is, ‘How many people can we reach?’ So, even in places and brands where we haven’t increased as much or haven’t increased at all, we still really focus on ensuring we can reach more people. We try to do that through data analytics and other technology that enables us to reach more people with greater precision so it’s more relevant and there’s less ad frequency. One of the scourges of the industry is too much ad frequency, which is wasteful and not a good experience for consumers.
Traditional TV ratings have been declining for years, but the total ad revenue at major media companies has held up surprisingly well. What does that say about the state of the TV ad market and pricing?
What it says is that the system is antiquated. There’s still a system where the advertisers and the ad agencies provide the broadcasters with all the data about what they’re going to spend. Then they can determine what the ad inventory is going to be and what the rates are. Somebody once called it “information asymmetry.” The information tends to be with the broadcasters. What we’re trying to do is shift toward a more modern view. Programmatic will be the future as things continue to get more digital because that enables you to find the right audience to target the right ad at the right time at the right price, and not do it with excess frequency.
Big media companies would argue TV ratings are down but advertiser demand is still high because TV is the only place to reach a big audience.
That’s still largely accurate in that television still provides mass reach. What I think we’re seeing, though, is the ratings continue to decline and there’s a greater shift to streaming, a greater shift to digital. It’s just a matter of time before it starts to get to a place where we’re going to be able to automate a lot of these things.
The one issue that continues to be a problem in the marketplace is that even though the demand is higher, when the ratings are down, you’ve got excess frequency in terms of ad load. When you see linear TV shows, in many cases, there are just too many ads on it. And sometimes the same ad over and over again. That’s something we would like to get away from. It’s not a good experience for consumers.
It looks like advertisers are paying a lot more for TV ads to reach the same number of viewers.
The way the marketplace has gone this year, the rates have been higher. Definitely. One of the things we have done is move away from the traditional upfront approach. We would rather have our own negotiations on a more direct basis. That enables us to do a better job of matching our audiences with the ad load we need at prices that we need. We really view the traditional upfront model as being past its prime.
A lot of streaming services with ads have entered the market this past year — Peacock, Discovery+, Paramount+, HBO Max. What’s attractive about these services and what do they need to do to get advertisers to spend more with them?
They’re attractive to advertisers because they’re attractive to consumers and viewers who are looking for great content they can buy on demand when it’s convenient for them to watch. There’s also a better ad experience — either the load is not as high or, in some cases, we’re working together to create ads that are more relevant for the particular show.
That’s what I think they can do a better job of — start thinking about how to work with companies to create content that can be appealing for the audiences the companies are seeking. We’ve worked with BET on the “Queen Collective” and the whole ViacomCBS networks on creating content where we work together. It leads to an overall experience that is better for the viewer.
Are there any streaming services, in particular, that stand out to you?
I can’t really say that I see one that has a major advantage over the other. It’s become a very competitive market, and we’re interested in working with all of them.
YouTube is making a big push to win more TV ad dollars. Do you still have concerns?
I actually have to say YouTube has made dramatic improvements over the years that have made them a very, very worthwhile partner. You remember a few years ago we had some brand safety issues. They’ve done a remarkable job of cleaning that up and figuring out a way that you can reach a clear audience, do it in a way that’s brand safe and make sure that it’s even got relevant content.
Are there alternatives to the 30- or 60-second TV commercial that you find particularly effective and want to do more of?
We do a lot of how-to videos. They’re almost like infomercials that we do with several of our brands like Microban 24, Dawn and Downy. They’re not traditional ads but they’re incredibly effective.
We’re also seeing a shift toward gaming. Gaming is becoming a more relevant platform for several of our brands — Gillette, Venus, Olay and even Bounty are into the gaming world. You’re engaging people in a context that they care about, and you can convey the benefit of your product pretty effectively. Podcasts is another area. We still end up doing ads that talk about the benefits of our products. But it’s different mediums that we’re finding are really helping us convey the superiority of our products in a very useful and interesting way that’s different from a traditional 30-second ad.
You spoke about trying to create “smart audiences,” or collecting your own data to target consumers more precisely. How does that work?
That’s the benefit of engaging consumers directly. For example, Pampers has an app. When mom and dad discover they’re pregnant they go online to search for information. We engage them and ask to download the app. Once they download the app, we start getting additional information. They opt into the consenting data, and then we learn more about them. From there, that allows us to be able to create this smart audience that you can then start extending to other places.
So you’re collecting the data yourself rather than relying on a media company or a social media network?
We can create those audiences ourselves, and we can match the profiles of the kind of audiences that we’re looking for with the Googles and the Facebooks. We still want to reach a lot of people but we want to do it with greater precision.
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