Commentary

Automobile Ad Spending On the Rise

According to a new report from Borrell Associates monitoring the pulse of local ad spending by U.S. auto dealers, dealer associations, and manufacturers, 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%. The total effect will result in an 11.4% increase in new-vehicle online ad spending next year.

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, following a precipitous drop in automotive ad spend of 31% in the first half of 2009, during which  Chrysler and GM declared bankruptcy and the recession forced a significant decline in new auto sales.

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US Total Local Ad Spend For New Cars

Year

Ad Spend (Billion $)

2008

$22.1 B

2009

18.4

2010

19.2

Source: Borrell Associates, Auto Ad Outlook, November 2009

Online ad spend, says the report, 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.

Borrell says in the report that "Revenue from display banners, pop-ups and classifi­ed 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, but it is streaming audio and video that will show the most growth this year and is positioning itself for "break-out" growth in 2010."

In assessing the impact on other media, the report shows that 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, growing 3.8% year-over-year in 2010, while broadcast TV will rise 1.9%. Directories, (-8.1%) and other print media (-0.5%) will continue to see negative growth in 2010. Though a relatively small piece of auto advertising, cinema advertising is expected to experience the highest growth rate, 18%, and rise from $65 million this year to $77 million in 2010.

Projected 2009 New Vehicle Ad Spending, by Media Choice (All Projections in $ Millions)

 

Ad Spending by Revenue Source

Media Choice

Dealers

Dealer Associations

Auto Manufacturers

Newspapers

$20.43

$4.29

$14.72

Other Print

$4.32

$1.38

$9.18

Directories

$1.05

$1.05

$0.74

Broadcast TV

$7.59

$12.47

$31.26

Cable

$4.71

$6.07

$2.31

Radio

$5.55

$2.54

$0.91

Outdoor

$1.06

$1.39

$1.39

Cinema

$0.82

$46.28

$0.89

Direct Mail

$17.55

$1.99

$1.72

Online

$8.20

$2.74

$41.77

Telemarketing

$1.11

na

$1.60

Source: Borrell Associates, November 2009

Citing a study from Northwood University for AutoTrader.com, Borrell notes that the increase in expected Internet spending is  the result of the fact that the internet is the leading media driver of walk-in traffic. MediaBuyerPlanner added that, 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,

Sanford C. Bernstein says smaller dealers are being squeezed out of the market by economies of scale, with only 20,000 dealers are left in the US. And, 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 spending, will account for 51.3% of all ad spending on new vehicles.

Projected 2009 Per Vehicle New Car Ad Spending By Dealership Employee Range

Dealership Employee Range

Ad $ per Vehicle Sold

Vehicles Sold

2009 Ad $(Million)

Ad $ Share

Under 5

$500

53,980

$0.45

0.6%

5 to 20

 $548

134,870

$0.99

1.4%

21 to 50

$530

1,348,350

$7.69

10.6%

51 to 100

$440

3,454,380

$17.60

24.3%

101 to 200

$425

2,188,810

$8.10

11.2%

201 or More

$400

9,695,780

$37.56

51.9%

Average/Total

$427

16,876,170

$72.39

100%

Sources: NADA, 2009; Dun & Bradstreet, 2009; Borrell Associates, 2009

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

Projected 2009 New Motor Vehicle Sales by Dealer Employee Range

Employee Range

 

Under 5

5 to 20

21 to 50

51 to 100

101 to 200

200or More

US New Car Totals/Averages

New Car Dealership Locations

120

60

90

90

 30

600

990

Average Cars Sold: 2009 Projection

450

2,248

14,982

38,382

72,960

16,160

17,047

Total Cars Sold: 2009 Projection

53,980

134,870

1,348,350

3,454,380

2,188,810

9,695,780

16,876,170

Projected New Car Sales Share

 0.3%

 0.8%

8.0%

20.5%

13.0%

57.5%

100%

Sources: NADA, 2009; Dun & Bradstreet, 2009; Borrell Associates, 2009

For complete information and access to charts and graphs, please visit Borrell Associates here.

2 comments about "Automobile Ad Spending On the Rise".
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  1. Stephen Mcneely from Tantara Capital Partners, LLC, November 27, 2009 at 8:01 p.m.

    What am I missing here??? Projected new cars sold in 2009 16,876,170....they will be lucky to sell 10-12M max. Where did this number come from???

  2. Peggy Lee from PPL Consulting, November 29, 2009 at 9:26 a.m.

    What about Social Media? What is the industry doing here?

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