For what reasons is P&G choosing to move away from Facebook’s targeted ads?

 Inc. has spent years developing its ability to zero in on consumers based on demographics, shopping habits and life milestones. P&G, the maker of myriad household goods including Tide and Pampers, initially jumped at the opportunity to market directly to subsets of shoppers, from teenage shavers to first-time homeowners.

Marc Pritchard, P&Gs chief marketing officer, said the company has realized it took the strategy too far.

We targeted too much, and we went too narrow, he said in an interview, and now were looking at: What is the best way to get the most reach but also the right precision?

Mr. Pritchard said P&G wont cut back on Facebook spending and will employ targeted ads where it makes sense, such as pitching diapers to expectant mothers. He said P&G has ramped up spending both on digital sites and traditional platforms. One category the company is scaling back: smaller websites that lack the reach of sites such as Facebook, Google and YouTube.

On a broader scale, P&Gs shift highlights the limits of such targeting for big brands, one of the cornerstones of Facebooks ad business. The social network is able to command higher prices for its targeted marketing; the narrower the targeting the more expensive the ad.

P&G could be the bellwether on how consumer goods companies and big brands use digital advertising. Over the past year some marketers, specifically consumer product companies, have discovered they need to go much more broad with their advertising on social media sites such as Facebook, said James Douglas, executive director of social-media agency Society, which is owned by .

Mr. Douglas said case studies show that companies can receive a bigger sales increase if they reach a more significant portion of a platforms overall audience.

For instance, P&G two years ago tried targeting ads for its Febreze air freshener at pet owners and households with large families. The brand found that sales stagnated during the effort, but they rose when the campaign on Facebook and elsewhere was expanded last March to include anyone over 18.

A Facebook spokeswoman said its partnership with P&G grows every year and the two companies learn from one another. That has always been the spirit of how we work together and challenge one another, she said.

Facebook started working on a targeted ad system in 2007, when it was an unprofitable three-year-old startup with less than 60 million active users. At the time, its  through which companies promoted their products.

ENLARGE

Facebook has since emerged as a marketing platform of singular scale. Last year, Facebook raked in $17.08 billion in ad revenue, up 49% year over year, as advertisers sought the attention of its 1.7 billion monthly active users.

Advertisers can pinpoint their target audience precisely. Political candidates can focus on users in congressional districts, restaurant chains can run campaigns to spicy food lovers, and moving companies can find users who are very likely to move to another home.

If you could run an ad and reach a million people or run a targeted ad to reach 5,000, you have to have pretty impressive returns on that 5,000 to make it worth it, said Peter Daboll, chief executive of Ace Metrix, which tests ads for effectiveness and works with Facebook.

Cincinnati-based P&G spent roughly $7.2 billion on advertising globally in the year that ended in June, up about 1% from the previous year, according to company filings. P&G said it plans to increase it around 5% for the year that started July 1. Prior to last years increase, the company cut spending two years in a row.

P&Gs push to find broader reach with its advertising is also evident in the companys recent increases in television spending. Toward the end of last year P&G began shifting money back into television, according to people familiar with the matter. During the first quarter of 2016, the companys ad spending jumped 11% to $429 million from the year earlier, Kantar Media said.

For many of the largest advertisers in the world, the precise targeting tools touted by Facebook are less of a draw, said Pivotal Research analyst Brian Weiser.

The bigger your brand, the more you need broad reach and less targeted media, he said. Targeting is paramount for advertisers trying to get users to download a game app or a small business trying to appeal to local customers.

Facebook has started offering new tools specifically for large advertisers, including  by showing ads to people who are more likely to pay attention to them. On Tuesday, it introduced changes that  from appearing on its desktop website.

The cornerstone of our ad strategy is a mix of mass reach and personalized targeting that lends well to mobile consumption and is a strong complement to TV, the Facebook spokeswoman said.

Not all big advertisers are pulling back on Facebooks targeted marketing.

 Inc. said it expects lower returns in the current quarter from bookings generated from its advertising, much of which goes through  Inc.s Google. As a result the travel company plans to increase spending on Facebooks targeted ads.

We found that a number of things weve done on Facebook works well, Chief Executive Jeffery Boyd said. We would like to spend more money on Facebook going forward.

Corrections & Amplifications: 
The correct name of the CEO of Priceline Group Inc. is Jeffery Boyd.An earlier version of this article misstated his name. (Aug. 17)

  contributed to this article.

Write to Sharon Terlep at  and Deepa Seetharaman at 

SUMMARY: Procter & Gamble, the world’s biggest advertising spender, will move away from ads on Facebook that target specific consumers after deciding they have limited effectiveness.

CLASSROOM APPLICATION: It’s somewhat counterintuitive to think that ads that are less targeted can, in some cases, be more effective for advertisers, so it would be a useful activity for students to justify why P&G is moving away from Facebook’s targeted ads. You could also challenge students to develop a list of criteria for advertisers to use to determine if they should use Facebook’s targeted ads or the ads that are not targeted.

QUESTIONS: 
1. In your own words, explain how Facebook’s targeted ads work.

2. For what reasons is P&G choosing to move away from Facebook’s targeted ads?

3. Describe the type of calculations you would recommend that P&G and other advertisers to use to evaluate whether to use targeted ads or ads that reach a broad audience.

4. What criteria would you recommend that advertisers consider in determining whether to run targeted ads or ads with a broad reach?