Oprah Winfrey Deal With Procter & Gamble May Rock Old Advertising Model

April 29, 2010— -- The Oprah Winfrey Network, the 50/50 joint venture between Oprah Winfrey's Harpo Inc. and Discovery Communications, announced last week it had secured a significant commitment from Procter & Gamble, the world's largest advertiser.

P&G, the manufacturer of dozens of household name brands like Tide, Crest, Tampax and Pampers, committed to a deal reportedly worth more than $100 million over three years. The agreement, which includes the purchase of time and integration into programming, is unprecedented in that Winfrey's network (OWN for short) will not be on the air until January 2011, does not yet have a full programming lineup and has no audience and therefore no basis for ratings, reach or demographics.

Oprah and P&G: A Game-Changing Partnership

Yet this partnership between Proctor and OWN has the potential to change further the way the advertising agency media business operates.

On the surface, it is pretty straightforward.

Oprah Winfrey is arguably the most powerful woman on the planet and a manufacturer's dream spokesperson. It has been well documented that from automobiles to books on Zen, Oprah is the consummate salesperson to her daily audience of more than eight million viewers, predominantly women between the ages of 18 and 54.

Procter & Gamble, for its part, markets many of the world's largest and most successful consumer household products.

That said, two powerful brands coming together is generally a safe bet.

For the advertising industry, this mating dance usually happens in a different and more formal way. In the "upfront" season, commercial media put their best foot forward, showcasing programming line-ups for the upcoming season including shows that have yet to air. Advertising agency executives evaluate and carefully select shows to recommend to their clients based on anticipated ratings, market coverage, reach and demographics.

There are sacred ground rules. If the show does not perform, advertisers generally get some type of "make good," generally the right to run additional commercials. Although we have to assume the deal between OWN and P&G has laid out parameters based on some kind of performance measures, the truth might be more juicy.

P&G Makes A Good Bet on Oprah

Procter & Gamble is probably making a good bet.

First of all, the Winfrey deal is a mere morsel from their $2.71 billion dollar ad budget grand buffet. The onus is on OWN to make this work as advertisers have often followed P&G's lead. And if P&G is happy, other big advertisers are sure to follow.

It is likely therefore, that Procter can use this leverage to stretch its advertising dollars. The Chief Marketing Officer's role at Procter & Gamble is sometimes referred to as the most powerful job in advertising, and P&G is known as a conservative company that generally only makes sure bets.

Deal Between Oprah and P&G Suggests A New Model

It also suggests a new model: a future world in which producers and celebrities might bypass the traditional system and go directly to advertisers. It's a world in which personalities with a brand give up some of the cheddar in order to keep more of the cheese and have more control over their destiny. It is not difficult to imagine a scenario in which the ad dollars and the product are a couple and they sell themselves to the most attractive bider, whether it is TV or the Internet.

But I'm getting ahead of myself because first, OWN has to survive, and to do that it has to win in an already-crowded environment of networks targeting women. Leaders include the Oxygen Network and Lifetime (a joint venture that includes Disney, the parent company of ABC News).

These networks have a head start and are well-heeled. But even with the generous lead Winfrey has allowed them, she is a brand like no other and will, by all accounts, be very visible on the new network.

Ad Agencies May Have Bigger Worries

Advertising agencies, however, have potentially bigger worries. Like the record industry, which for years had a monopoly on the way to get wide distribution for music, the agency business is carefully watching every alliance being built that threatens the existing model.

When Oprah gave a car to each member of her audience, a promotion I was privileged enough to be a part of; the world was introduced to the gale force of Winfrey's marketing power. Now, ad agencies, networks, producers and celebrities are waiting with bated breath to see who she gifts this time.

Larry D. Woodard is president and CEO of Graham Stanley Advertising, a full-service advertising agency based in New York City. He is also chairman of the American Association of Advertising Agencies New York Council and the recipient of many prestigious industry awards, including two O'Toole Awards for Agency of the Year, the London International Award, Gold Effie, Telly, Mobius, Addy's and the Cannes Gold Lion. A blogger and a frequent public speaker, Woodard enjoys discussing the intersection of media, politics, entertainment and technology.