Auto advertising continues to move online with Standard Media Index reporting that digital media’s share of the category rose 20% in 2015 while spot TV’s slice was down 8%. A large percentage of that digital money is going to auto verticals and a few broadcast groups have opted for an “if-you-can't-beat-'em-join-'em” approach and moved into that market as well.
Auto Ads Driving Steadily Toward Digital
When media buyer Jayme Loftus places ads for the Cadillac dealer association in the New York-New Jersey-Connecticut region, she often turns to Autotrader.com and Kelley Blue Book’s KBB.com, go-to sites for people looking to buy a car.
As for spot TV, it’s just not as big as it used to be.
“TV is still our No. 1 blocking and tackling medium, but we view it more now as a branding tactic than a retail tactic,” says Loftus, northeast regional director for the Martin Retail Group. “Because digital is a more important part of our mix, we’ve had to cut into some of our TV spending.”
Loftus is not alone among media buyers in diverting money to digital. Standard Media Index (SMI) reports that auto spending on digital media rose 20% in 2015, while spot fell 8%.
Kantar Media paints a slightly more positive picture for broadcasters. It shows spot down just 2%. (Kantar does not collect comprehensive digital media numbers.)
The media buyers are simply following the car buyers.
According to a 2013 Millward Brown study, digital media dominated a list of where consumers go for information when buying a car or light truck, accounting for nine out of the 10 most-mentioned sources.
Dealer sites (83%), manufacturer sites (81%) and search engines (77%) topped the list, followed by “third-party sites” (69%), professional review sites (62%), consumer review sites (57%) and regional dealer sites (56%).
TV was the non-digital exception among the top 10, but it was eighth on the list at 53%.
SMI breaks out the digital media into six categories, but just two get 80% of the auto money: pure-play content/search (47%), which includes Google and content sites unaffiliated with legacy media like the auto verticals, and ad networks, which aggregate audiences from across the Web (33%).
The auto verticals, which, according to SMI, account for about a quarter of the auto dollars that flow into the pure-play content/search category, provide professional and consumer reviews of particular car models; listings of what dealers have to offer; and price comparisons.
According to ComScore, more than 260 million unique visitors checked out vertical sites last December, up from 252 million during the same month in 2014.
So far, the impact of the shifting dollars on broadcasters is mitigated by the sheer volume of auto spending, a function of actual car sales. And car sales are booming in the U.S. There were 17.4 million sold in 2015, and the number is likely to increase to 17.8 million in 2016, according to Bill Rinna, LMC Automotive’s senior manager of North American.
Jason Gole, SVP of integrated investment at UM, says the digital mix for auto campaigns varies, depending on the socioeconomic groups the advertiser is pursuing. But the one thing they all have in common are the vertical sites.
“They’re a foundational play for us, to make sure our bases are covered,” he says. “And everything else is targeted to [a brand’s] audience. We layer on as much data as we can to make sure we’re hitting the right people.”
Some legacy media companies have taken the if-you-can’t-beat-’em-join-’em approach. KBB.com and Autotrader are owned by Cox Enterprises, which also owns Cox Media Group, the newspaper publisher and TV station group.
In October 2014, Tegna acquired full ownership of Cars.com, a vertical that the company says is doing well. “We’re pleased with the 10%-plus revenue growth projected at Cars.com [for 2016], which ramps up with normal seasonality,” Tegna CFO Victoria Harker told investors at a UBS conference last December.
Digital media is attracting a larger share of the auto spend not only because of the targeted verticals, but also because more and more sites are becoming adept at handling and streaming video, the format of choices for auto media buyers.
“People are moving away from banner ads and things like that,” says Kathy Doyle, managing partner of UM, a division of IPG Mediabrands, which represents six auto manufacturers and dealer associations.
BIA/Kelsey, which tracks local spending, expects steady growth in the popularity of so-called video display. The research firm estimates that in 2015 local online auto advertising nationwide totaled $2.11 billion.
Of that, 10.7% was spent on video display. By 2019, video display’s share will double to 21.2% out of total online auto ad spend of $2.97 billion.
Some of that growth will come at the expense of the verticals, BIA/Kelsey says. In 2015, 54.6% ($1.15 billion) of local online auto advertising went to online classifieds, which for the most part are the verticals. Their share of the digital mix will drop 50.3% by 2019, although its total take will rise to $1.49 billion.
The mix of TV and digital varies from one ad buyer to another.
Providing a manufacturers’ view is Duncan James, the EVP and global head of the Cadillac account at Carat.
Spot TV “has a massive role to play in terms of how we reach consumers,” he says, noting that Cadillac is “maintaining its commitment” to spot TV and “slightly increasing it.”
But Keith Harvey, executive manager of the largest Cadillac retailer in the Northeast, Gold Coast Cadillac, in Oakhurst, N.J., says he doesn’t buy any spot at all. “It’s not that we’re necessarily opposed to it. But here in the New York market, television is an incredibly expensive medium.”
Gold Coast’s budget is 50% digital, including third-party sites like the verticals and Google pay per click. “I see that shifting in the next six to 12 months, in that we’ll probably go 75% digital.”
Harvey foresees a time when the verticals will be less important, certainly for new car sellers. “I think you’ll see the need for those third-party sites diminish. A lot of the manufacturers are moving toward programs where there’s going to be so little room left to negotiate.”
He predicts that new-car dealerships of the future being somewhat similar to Apple stores – where the cost of a laptop doesn’t vary from one store to the next.
Despite the erosion, spot will continue to attract a large, if not growing, pool of auto dollars.
But Mark Fratrik, BIA/Kelsey’s SVP and chief economist, says it would be smart for broadcasters to follow the lead of Cox and Tegna and figure out ways to recapture dollars that are moving to digital.
“There isn’t just one recipe for every television station group,” he says. “It’s about the understanding that they’re more than just over-the-air television. And auto advertising is so important to television that it can be a key area where they broaden their appeal.”