The global supply-chain crisis is spreading to Madison Avenue.
Many companies have been struggling for months to get products to consumers, as they face shortages in everything from raw materials to labor to cargo containers, among other problems. Some are questioning whether it makes sense to promote products they can’t adequately stock.
“It’s...
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The global supply-chain crisis is spreading to Madison Avenue.
Many companies have been struggling for months to get products to consumers, as they face shortages in everything from raw materials to labor to cargo containers, among other problems. Some are questioning whether it makes sense to promote products they can’t adequately stock.
“It’s not wise to drive demand when shelves are bare,” said Susan Cantor, chief executive officer of branding firm Sterling Brands.
Chocolate giant Hershey Co. and household-goods manufacturers Kimberly-Clark Corp. and Church & Dwight Co. in recent days said they cut back on ad and marketing spending in the third quarter because of supply-chain issues.
“The supply-chain challenges just wouldn’t enable us to be able to meet further demand that we would create through our very impactful advertising,” Hershey Co. Chief Executive Michele Buck said on an investor call. “It just didn’t make sense.”
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Kimberly-Clark Chief Financial Officer Maria Henry said her company, which makes Kleenex facial tissues and Huggies diapers, had more demand than it could meet at the moment. “We have challenges getting the product to our customers,” she said on an investor call.
Church & Dwight, the consumer-product company behind the Arm & Hammer and OxiClean brands, said Friday that it pulled back on third-quarter marketing for products most affected by the shortages, especially household products. The New Jersey-based company said it expects supply-availability issues to begin to abate in the first half of 2022 for most of its brands.
Two of the largest players in online advertising, Facebook Inc. and Snap Inc., said recently that they expected a slowdown in revenue growth in the fourth quarter, due in part to macroeconomic factors such as supply-chain bottlenecks and labor shortages. Both companies said their advertising business’s performance was also hurt by Apple Inc.’s new privacy rules, which make it harder for advertisers to target their ads at audiences.
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The retreat comes as the ad market has been booming, thanks in part to strong consumer confidence and the end to some restrictions intended to slow down the spread of Covid-19. The fourth quarter of the year is typically the most lucrative for media entities as brands and retailers rely heavily on the critical holiday shopping season.
Jason Wagenheim, president and chief revenue officer at Bustle Digital Group, which owns publications Gawker, Nylon and W Magazine, said his company is seeing “temporary but significant advertising pauses” from many clients because of severe product shortages across many sectors including cars, diapers, toys, food and consumer electronics.
“I think large media organizations are going to see short term significant impacts in these categories until the supply-chain issues right themselves, which should be early in 2022,” Mr. Wagenheim said in an email.
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Some digital publishers are planning for ad spending to shrink by at least 5% in the fourth quarter compared with their previous projections, according to media executives.
Not all platforms are expected to be affected equally by the ad pullback. Digital ad sellers often can be the first to see an advertising retreat because online ads are easier to cancel. Those ads are often bought in real-time or closer to their run date and are unlike TV ads, which are often sold well in advance of when they air.
Still, some TV networks are also seeing some softness in spending from several ad categories including auto manufacturers, according to ad buyers and TV network executives. Some fast-food chains also aren’t spending as much as expected because of the labor shortage, a TV executive said.
Fox Corp. CEO Lachlan Murdoch said his company had seen advertising pullbacks from car makers and telecommunications companies.
“It’s a supply issue, not a demand issue,” Mr. Murdoch said at a conference in September. “So we expect those clients and those partners to come back strongly once they have the supply of their cars to be able to sell.”
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Fox and Wall Street Journal parent News Corp share common ownership.
The auto sector has been particularly hampered by the global chip shortage. This has caused manufacturers to cut production, resulting in car shortages at dealerships in the U.S.
General Motors Co. and Ford Motor Co. this week reported steep drops in third-quarter profit. They said supply-chain disruptions should slowly improve in the fourth quarter and throughout next year, although strong car demand will make it difficult to restock dealership lots. Neither company mentioned cutting back on advertising while discussing their results. In an email, GM’s chief marketing officer said the company planned to have “a hearty media presence” in the fourth quarter. Ford didn’t respond to a request for comment.
Advertisers tend to be reluctant to cut marketing expenditures too deeply. Many believe it is important to remain top of mind with customers and fear that deep cuts to advertising can allow rivals to be more visible, which can lead to the loss of market share.
Consumer-product giant Procter & Gamble , one of the largest advertisers in the world, said it would continue to invest in marketing despite the supply-chain crisis, which has led to escalating costs. “We continue to drive marketing spend,” said Andre Schulten, P&G’s chief financial officer, during a recent call with investors.
Ad-holding companies, which work on behalf of big advertisers, appear largely unaffected so far by the supply-chain bottlenecks.
“To date, we haven’t seen any impact from supply-chain disruption in our numbers,” said Mark Read, CEO of WPP PLC, the world’s largest ad-holding company by revenue, on a call with analysts on Thursday. Still, Mr. Read said his company had seen a “little bit of weakness” in automotive during the third quarter because of the semiconductor shortages.
WPP expects U.S. ad spending to surge 22% to $276 billion this year, according to a prediction made in June by WPP’s ad buying firm GroupM, and has no plans to downgrade its estimates.
“The factors which have driven the U.S. advertising market up so much, so fast, aren’t showing signs of abating, despite the issues with supply chains and Apple’s operating system,” said Brian Wieser, global president of business intelligence at GroupM.
Write to Suzanne Vranica at suzanne.vranica@wsj.com and Alexandra Bruell at alexandra.bruell@wsj.com