In the automotive space, the responsibility for advertising is shifting from car makers to car dealers, and that means significant boost for local media, especially online, according to a report looking at the auto category from Borrell Associates. And even though print classified dollars in the auto category continue to fade, the local-ad-market researcher says that newspaper sites’ display placements are likely to remain a focal point for new and used car dealers.
Along with phamaceuticals and packaged goods, auto ads have always been a bellwether advertiser — when spending is up for car companies, the general market is likely to be up as well. And vice versa.
As Borrell analyst Kip Cassino notes in the report (summary, pdf), the business is going through major changes that will ultimately mean less advertising from the industry. But despite the shrinkage — since 2007 and the recession that followed, an average of 86 new- and used-car dealerships have closed every week, leaving roughly 17,000 fewer advertisers media companies can rely on — auto ads will still be strong enough to influence markets, particularly around local, social media and mobile.
As the economy appears more wobbly than ever and oil prices remain high, auto advertising would appear to be headed downward. But so far, despite the dangers, the worst that will likely happen is that auto ad spending may grow more slowly than it would otherwise. After all, car makers are in the business of selling cars, and it’s harder to do without advertising. Plus, given the troubles that Japan’s automakers have had from the disasters resulting from the earthquake last spring, not to mention the lingering consumer worries over Toyota’s recall last year, American car makers may be able to seize an opportunity to grab more market share.
Either way, online is pulling ad spending from car companies and dealers at a more accelerated rate, and display is likely to remain a key beneficiary. As WPP’s Kantar reported earlier, autos were a key driver of display advertising in Q1 and that trend is sure to continue throughout the year.
As for Borrell’s projections for the auto space, here are some of the findings:
— Over $7.3 billion will be advertising vehicles for sale on the web this year — an 11 percent gain from 2010. Since 2009, when online surpassed newspapers, it has been the top marketing channel for auto advertisers as they try to meet buyers conducting price- and-features research at the lower end of the buying funnel.
— Newspapers have seen their print classified advertising automotive dollars sink 75 percent to $1.2 billion in 2010 from $4.8 billion in 2001. Meanwhile, online media have absorbed much of the fall-out and now receive the lion’s share.
— Dealers are earmarking 32 percent of their budgets for online media buys. About 36 percent of dealers claim to be familiar with mobile advertising opportunities, twice the rate of other local advertisers.
Local media companies who serve dealerships with everything from listings, photos, leads, website development, keyword buys and search engine optimization will be the ones to rake in the bulk of local auto ad spending.
— Among the biggest names expected to get bigger as a result of increasing online auto ad spending include Autotrader.com, with revenues of $720 million last year; daily newspapers (including Cars.com), with online automotive revenues of about $525 million; and local TV stations, with revenues of $300 million1. Other competitors are Vehix, Autobytel, Dealer.com, Source Interlink Media (Automotive.com and MotorTrend.com), eBay (NSDQ: EBAY) Motors and Yahoo (NSDQ: YHOO) Autos.
— Only 13 percent of auto advertisers said they did not plan to buy online banners or listings from any local media company this year. That percentage is considerably smaller than for local retailers, health care professionals and real estate agents, who shun local sites at a higher rate.