As the world’s largest advertisers, Procter & Gamble (P&G) and Unilever, slash the amount of money they spend online, L’Oréal will spend more of its budget across the likes of Google, Facebook and Amazon.
The cosmetics business said it has benefited from higher digital ad spending over the last four years despite growing concerns from its peers that their own investments aren’t working. During the past five years, digital’s share of its media budget more than doubled, to 30 percent in 2016 from 13 percent in 2013.
In the first six months of 2017, L’Oréal’s spend on digital rose 5 percent year over year to account for 35 percent of its media budget. From January to May, P&G’s digital ad spend dropped 41 percent year over year and Unilever’s plummeted 59 percent, according to MediaRadar.
L’Oréal’s confidence in digital stems from the internal expertise it has added. Since 2010, it’s recruited more than 1,600 digital experts. Nick Buckley, the company’s digital chief in the U.K. and Ireland, discussed why it’s pushing forward with Facebook and Google when others are cautious. Here’s our conversation, edited for clarity.
How does L’Oréal break down its digital media spend?
We base our digital spending around three numbers: 20 percent, 50 percent and 100 percent. We want 20 percent of total revenue to come from e-commerce, which covers our own site; retailers like Boots and Tesco that are now accelerating their digital growth; and the likes of Amazon and eBay, which is where we see the most opportunity for growth. The second part of the plan is [at least] 50 percent of our communications are personalized using CRM, optimized content on our owned channels and data. Finally, we want to have 100-percent loved brands. As fluffy as it sounds, it means that if we strip out all the paid activity, then we’d be left with strong organic metrics: Things like the percentage of traffic from natural search, bounce rates, dwell time, the number of pages browsed and organic engagements on our social channels.
P&G made headlines after cutting $140 million in digital spend in the last quarter had no noticeable impact on sales. Has L’Oréal contemplated something similar?
Some companies have more of a top-down approach [to digital investments] where they go, “you need to spend double digits.” That’s the wrong approach for us. We look at where the ROI is coming from, and not just sales; there’s a whole bunch of other metrics that help us to know whether consumers are engaging more with us than they were before. We’re putting more investment in digital because it’s working for us.
Surely, that confidence has been impacted by the brand-safety issues that L’Oréal got swept up in at the start of the year.
It was a reminder for all advertisers that if you take your eye off the prize, then things can go wrong. We reviewed the processes, and we’ve got far stricter processes in place now to know how our ads are being served across all the platforms. I’m not naive to think it [ad misplacement] won’t happen again, but it’s been really important for us that we work with third parties like Moat and Integral Ad Science to validate some of what we’re buying online.
What do you mean by “stricter process”?
It’s really with regards to how our ad targeting is handled, in terms of the creative and the channels we buy media on, whether it’s Google DoubleClick Bid Manager or buying ads on Facebook. Furthermore, having both people within Google and L’Oréal check on data to make sure there are no errors has been important.
Have Facebook’s and Google’s brand-safety problems made you think about working with private marketplaces? Or have recent troubles with the Pangaea Alliance or the dispute between the Guardian and Rubicon Project put you off?
We already do direct deals with various publishers. However, it’s a dynamic marketplace, and things that are out of our control can affect those. We’ve already seen that with the Rubicon and the Guardian dispute, which has meant that alliance from an advertiser perspective has suffered. Then, there’s the fact that Pangaea [Alliance] project is going through some difficulty at the moment. We’re open to it [private marketplaces] if it’s the right inventory and the right partners, but I’m yet to see one that’s super compelling for L’Oréal.