According to an Insights Brief from Jon Swallen, SVP Research, Kantar Media, automotive advertising, which has been at the forefront of the recovery in ad spending, has slowed sharply during the
second quarter. After a 20% jump in category spending for 2010 and a 23% increase during Q1 2011, growth rates are now pacing at one-fourth to one-half these prior levels according to preliminary data
from April-May.
While that is still strong performance, auto's importance to the media advertising economy which accounted for more than 11% of all measured ad spending in Q1, means that any
significant change in rate of spending has far reaching impact on media sellers.
advertisement advertisement Change in Automotive Ad Spending vs. Previous Year |
| Percent
Change | | |
Media | Q1 2011 | April 2011 | May 2011 |
Total | 23% | 6.7% | na |
National TV | 37.2 | 6.6 | na |
Spot TV | 3.4 | 1.6 | na |
Newspapers | 12.2 | 6.9 | 6.5 |
Magazines | 31.3 | 12.8 | -8.4 |
Internet display | 41.9 | 18.4 | na |
Radio | 22.2 | 9.6 | na |
Outdoor | 34.1 | -2.3 | na |
Source: Kantar Media, July 2011 |
TV typically accounts for 50-60% of auto category spending. Although TV expenditure information is not yet
available for May, full data on the volume of ad time aired by auto marketers points to a slowing pace:
Percent Change in TV Automotive Advertising vs. Previous Year |
| Percent Change |
Media | Q1 2011 | April 2011 | May 2011 |
National TV | 34.0% | 1.3 | 9.7 |
Spot TV | 11.6 | 7.0 | 0.8 |
Source: Kantar Media, July 2011 |
This advertising slowdown is partially explained by the March earthquake and tsunami that struck Japan. It led to
U.S. inventory shortages for major Japanese automakers, most notably Toyota, because of reduced manufacturing capacity at damaged plants and disrupted supply chains. With a dwindling number of
vehicles on dealer's lots, April media spending for Toyota was cut across all tiers, including factory, dealer associations and local dealerships:
Toyota Automotive Ad Spending vs. Previous Year |
| Percent Change |
Media | Q1 2011 | April 2011 |
Factory | 30.3% | -13.9% |
Dealer association | 13.3 | -21.6 |
Local
dealers | 19.9 | -2.8 |
Source: Kantar
Media, July 2011 |
In the immediate aftermath of the Japanese earthquake, non-Asian automakers with significant exposure to Japanese parts suppliers also had
to assess the impact on their own vehicle production. It seems probable that these manufacturers scaled back advertising budgets until they had a handle on production capacity and maintaining
deliveries to their dealers.
The ad expenditures stats for April give credence to this hypothesis. Factory industry spending was up just 0.9% versus last year as compared to 24.2% growth in
Q1. By contrast, spending from local dealers, focused on building customer store traffic, surged 25.9% in April, a pace similar to Q1.
Advertising aside, May was also notable for a sudden drop
in the rate of new vehicle sales:
Percent Change in U.S. Light Vehicle
Sales |
Month (2011) | Change (M/M) |
Jan | +17.2% |
Feb | 27.2 |
Mar | 16.8 |
Apr | 17.7 |
May | -3.9 |
Source: Ward's AutoInfoBank/KantarMedia, July 2011 |
Swallen concludes that, "... as much as anything else, the current
pace of auto advertising may be a reflection that the sales climate is a bit cooler right now and ad budgets are being scaled back to reflect near-term sales potential... "
For more of the study, and access to the PDF file, please visit Kantar Media here.