FMCG giants still waste $50bn a year on digital despite media clean up

Over the past two years Unilever and P&G have concentrated their efforts on bringing transparency to their online media buys / Unilever - Instagram

Despite aggressive media transparency drives from some of the biggest players in space, some 60% of FMCG brands’ digital marketing spend is wasted – resulting in annual losses of close to $50bn for the industry.

According to a study from global consulting from AlixPartners, which asked 1,110 decision-makers from unnamed FMCG companies across the UK, US, China, India and key European markets to rate their organisation’s digital proficiency, execs are seeing low ROI when it comes to online investment.

Based on their responses, the report extrapolated that in 2018 of the $79bn spent globally by FMCG’s on digital marketing (including ads and trade spend like online coupons) a total of 60%, or $47bn, failed to deliver any noticeable ROI.

Breaking down the figures further, AlixPartners found that FMCG ad spend in 2018 was $242bn, of which pure-play digital ads on the likes of Facebook and Google accounted for $60bn. It stated that half of that digital ad spend reported by execs posted either a negative return or one that wasn’t even measured.

Drawing on the survey responses from execs at food, heath, beauty and household brands, just $25bn of this was reported to have yielded a positive ROI. $27bn saw a negative return and ROI on the remaining $8bn wasn’t even measured – underscoring a further issue consumer goods firms are grappling with in trying to extract value from their media spend.

Cleaning up a 'murky at best' supply chain

Over the past two years, FMCGs like Unilever and P&G have concentrated their efforts on bringing transparency to what the latter’s top marketer Marc Pritchard described as the “murky at best, fraudulent at worst” digital ad supply chain.

The two giants have spearheaded efforts at company and industry levels designed to tackle issues like ad fraud, viewability, immeasurable media spend and ad misplacement; culling agency partners, in-housing and holding digital platforms to account in the process.

Pritchard has since praised the Facebook-Google duopoly for getting its house in order and improving third-party measurement. During its latest results call, meanwhile, Unilever’s chief executive Alan Jope said it was "miles ahead of the pack in eliminating ad fraud", reducing the nefarious practice to single-digit proportions of spend, compared with what he claimed was 20-30% for many peers.

The figures from AlixPartners, however, indicate that consumer goods brands need to fine-tune their digital and media transformation strategies to draw out greater value from online investments.

Progress is being made, though. Leaders in the survey who identified themselves as monitoring digital ROI said they were now 70% more efficient in driving positive returns versus those beginning their digital transformations.

Of all the decision-makers questioned, the majority cited IT and technology (83%) as the business function most likely to change due to digital transformation. 79% said logistics would see the biggest shift, followed by marketing and insights (78%).

Commenting on the findings, Brian Major, managing director in the consumer products practice at AlixPartners, said: “Many companies, in an effort to chase the promise of growth through digital, have simply thrown money at the problem, leading to billions in wasted investments.

“However, digital for the sake of digital will serve no one, and as our survey shows, there are many expensive mistakes being made in pursuit of digital nirvana. Success is achievable over time by using more precise and targeted methods, which have greater opportunities for consumer engagement and data analytics.”

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