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Can PG Put the Squeeze on Facebook’s Advertising Business?

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May. 2 2019, Published 2:13 p.m. ET

PG threatens to cut spending at Facebook

Procter & Gamble (PG) is the world’s largest advertiser and is one of the most important advertising clients for the likes of Facebook (FB). The consumer goods giant spends more than $7.0 billion on advertising every year, with digital platforms taking up one-third of the total, according to a Reuters report.

In April, PG threatened to cut its digital advertising budget on platforms that can’t guarantee the effectiveness and brand safety it wants, thereby putting companies such as Facebook and Google—which have struggled to rid their platforms of inappropriate content—on notice.

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Facebook derives less than 20% of its advertising revenue from top advertisers

How much damage could PG cause Facebook if it cuts or stops spending on its platforms? The impact may be difficult to estimate, but Facebook looks keen on reducing its reliance on major advertisers.

As of the end of the first quarter, Facebook had served more than 7.0 million active advertisers across its portfolio of advertising platforms, including Instagram and Messenger. According to Facebook, its top 100 advertisers accounted for less than 20% of its total advertising revenue in the first quarter, which shows that its advertiser base is now more diverse than it was a year ago.

Facebook generated $14.9 billion in advertising revenue

Facebook’s advertising revenue rose 26% YoY (year-over-year) to $14.9 billion in the first quarter. Twitter (TWTR) and Yandex (YNDX) reported advertising revenue increases of 18% YoY each in the first quarter. Advertising revenue rose 15.4% YoY at Alphabet (GOOGL) in the quarter.

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