The Marketplace Report: P&G Cuts Ad Buys

Madeleine Brand talks to Bob Moon of Marketplace about consumer goods giant Procter & Gamble's decision to cut its commitments to buy television commercials in advance. The move by the top American advertiser comes amid questions about the effectiveness of television ads.

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MADELEINE BRAND, host:

Back now with DAY TO DAY. I'm Madeleine Brand.

The country's biggest advertiser, Procter & Gamble, is cutting back on TV commercials next season. That's according to a report in today's Wall Street Journal. A growing number of advertisers are questioning the effectiveness of TV commercials. Joining us is Bob Moon from the "Marketplace" news bureau in New York.

And, Bob, the country's biggest advertiser. That sounds significant.

BOB MOON reporting:

Well, it is. Out of its estimated $3 billion advertising budget last year, Procter & Gamble spent about 80 percent of that, $2 1/2 billion, on TV. And the way that a lot of advertisers decide to market and advertise their products is influenced by the direction that P&G goes in promoting its wide array of consumer products, from Pampers to Pringles.

The Wall Street Journal is reporting that this move by Procter & Gamble has been disclosed to TV executives in recent weeks as advertisers bargain in advance for what they call `up-front commercial slots.' And this is a commitment in advance. We don't know if P&G might spend more money later in the season. The Journal cites people familiar with the situation as saying that P&G's spending on broadcast networks will be trimmed about 5 percent, its commitments to cable channels will drop by as much as 25 percent and its commitment to daytime syndication will also be reduced somewhat.

This is likely a response to concerns expressed by many big advertisers in recent years that traditional TV commercials are really losing their effectiveness in light of challenges from other media and new technologies, like digital video recorders, TiVo, that lets you skip over commercials and that sort of thing.

BRAND: So if P&G does cut back on buying time for TV commercials, where else would it spend its advertising money?

MOON: Well, today's report is suggesting that P&G is looking at several different forms of TV marketing, especially they're looking in the direction of this increasingly popular tactic of placing products inside the TV programming. Product placement has been used more and more to have advertisers' products woven into the plot of a TV show, for example. One P&G executive was quoted as telling a conference of media-buying executives last year that there must be, and there is, life beyond the 30-second TV spot. And he did suggest that advertisers need to embrace the consumer's point of view and create ads consumers choose to watch. I don't know if product placement qualifies as something that you choose to watch, but that's one of the directions that they're going.

BRAND: And, Bob, how are broadcasters and newspaper publishers reacting to this?

MOON: Well, there's a report today that traditional media companies have been stepping up their purchases of Internet rivals. The Financial Times says today that the value of acquisitions of Internet companies purchased by media companies--such as newspapers and broadcasters--last year was up to nearly $1 billion. That's more than double the purchases recorded the year before. Analysts attribute that to expectations for continued strong growth in Internet advertising.

And today in the "Marketplace" newsroom, we're speaking with the former head of the 9/11 victims fund.

BRAND: Bob Moon of public radio's daily business show "Marketplace." And "Marketplace" is produced by American Public Media.

Thanks a lot, Bob.

MOON: Thanks, Madeleine.

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