Online Ad Spend to Jump 11.4% for New Autos

November 16, 2009

This article is included in these additional categories:

Automotive | Financial Services | Media & Entertainment | Newspapers | Radio | Television

In good news for online advertising in 2010, US auto manufacturers will increase their online local ad spending by 14% in 2010, while new- and used-car dealers will increase their ad spend online by 8.6%, according to a new report from Borrell Associates. The total effect will result in an 11.4% increase in new-vehicle online ad spending next year.

Overall Growth

Overall, Borrell Associates predicts that US ad spend for new cars will rise to a total of $19.2 billion from the low of $18.4 billion in 2009, experiencing a 4% growth rate across all media. These numbers represent declines from 2008 spending, which was $22.1 billion following a precipitous drop in automotive ad spend of 31% in the first half of 2009, a year in which? Chrysler and GM declared bankrupcy and the recession forced a significant decline in new auto sales.

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The report noted that online ad spend – which grew only 5.2% in 2009 – will likely surpass all other media for new-vehicle advertising next year, driven by email, social networking and especially streaming audio and video campaigns, which will grow significantly. “The web is having a profound effect on automotive advertising,” the report said, adding that there is no going back to the “good old days.”

“Revenue from display banners, pop-ups and classfied listings is dropping 20%? this year, while spending by auto marketers on email and social networking campaigns is growing by 20%; a cross-over is expected next year,” Borrell Associates said. “However, it is streaming audio and video that will show the most growth this year and is positioning itself for “break-out” growth in 2010.”

Other Media

Not surprisingly, newspapers (-28.5%) and broadcast TV (22.8%) have been hit the hardest this year, though they are expected to experience slight recovery in 2010. Borrell predicts newspapers will grow 3.8% year-over-year in 2010, while broadcast TV will rise 1.9%.
However directories, (-8.1%) and other print media (-0.5%) will continue to see negative growth in 2010.

Though a relatively small piece of the auto advertising pie, cinema advertising is expected to experience the highest growth rate, 18%, and rise from $65 million this year to $77 million in 2010.

Internet Drives Walk-in Traffic

The increase in expected spending spending is? the result of the fact that the internet is the leading media driver of walk-in traffic, per a study from Northwood University for AutoTrader.com, which Borrell cited in its report.

Though most customers interviewed by Northwood University stated it was ads on the web that instigated their foot traffic, dealers themselves attributed 30% of foot traffic to the web, with the rest coming from newspapers, radio and direct mail, writes MediaBuyerPlanner.

Additional findings from the Borrell report:

  • New-car sales are down 39% from 2005, and only 20,000 dealers are left in the US to sell them. However, demand for new autos is expected to rise this year, according to Sanford C. Bernstein.
  • At least four factors are combining to keep dealer ad spending down
    • Smaller dealers are being squeezed out of the market by economies of scale
    • Auto ad spending is down 16% this year over last.
    • Newspapers and TV have been hit the hardest.

Signs of Recovery

Despite a difficult last few years, the report does point to additional signs of a marginal recovery and lasting change that will begin in 2010:

  • Dealerships are getting leaner and, as a result, cars sold per dealership are increasing.
  • Manufacturer co-op spending is turning the corner and will begin to rise.
  • Independent dealers are finding new sources of revenue.
  • Large dealers will continue to gain share in the used-car arena.

Borrell reports that in 2010 the dealer share of online ad spend will be 39.4%, the association share will be 9.2%, and the manufacturer share, including co-op spenidng, will account for 51.3% of all ad spending on new vehicles.

Big Players

General Motors announced in August that it planned to increase ad spend for the rest of 2009 and 2010, after having cut ad spend by 15% in 2008. GM is now the third-largest advertiser in the country, behind Procter & Gamble and Verizon.

About the research: The report,? “Auto Advertising Outlook 2010: Running on Empty,” is based on Borrell Associates’ Automotive Data Table,? which monitors the pulse of local ad spending by US auto dealers, dealer associations, and manufacturers. The report, which is available for purchase, also includes an appendix of online auto ad spending projections for 2009 detailed for more more than 900 local markets.


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