Borrell finds online is leading driver of dealer foot traffic, contributing value far beyond what dealers themselves believe.
A new research report from Borrell Associates shows that automotive ad spending is shaping up to be a solid, if unpredictable, performer for 2010.
The report, "Running On Empty," shows that franchised new and used car dealers account for the majority of all auto ad dollars spent online. They will spend about $3 billion online in 2009 compared to $1.7 billion for manufacturers. That franchise number will increase 8.6 percent next year for new car dealers, while manufacturers are expected to increase their spend by 14 percent. (The picture is not as clear for used dealers).
Borrell cites a recent study, performed by Northwood University for AutoTrader.com, that showed the Internet to be the leading media driver of walk-in traffic. The study, which surveyed 25,000 respondents, cited the Web as the "primary media source leading to [the] dealership" among 54 percent of the walk-ins interviewed.
Although the interviews showed the majority of customers had been propelled by the Web, dealers perceived that number to be closer to 30 percent. They attributed traffic to newspapers, radio, and direct mail.
"Many dealers are spending their ad dollars on the wrong media," the report states. "If they spent in proportion to audience, their newspaper ad spending would shrink by half, their TV spending would stay about the same, and their spending on Web ads would increase substantially."
In 2010, 62 percent of online spending for the category will come from the local dealer level. Paid search will command the biggest share of spend, despite a marginal decline in spending. It will be followed by display ads, video, and e-mail. Online direct marketing, characterized for the most part by e-mail and social networking campaigns, has begun to emerge as a major factor, according to the report. An estimated quarter of every online ad dollar spent by auto marketers will be put toward social media and e-mail, an increase of 20 percent over 2008.
In the current year, spending on paid search will come in slightly below online display (32 percent versus 33 percent). Both categories will decline compared with 2008 -- paid search far less than online display.
Spending on streaming audio and video ads will rise by more than a third this year, as most other categories decline, the report states. Borrell calls the channel a "wild card."
"All the pieces are in place for a [video and audio advertising] break-out to more common use next year," according to the report. "The equipment, storage capacity, and available bandwidth have all become manageable for even the smaller, less sophisticated auto advertisers, laying the groundwork for a forecast 80 percent increase in streaming A/V ad spending next year."Correction: An earlier version of this story stated dealers spent $3 million online this year, while manufacturers will spend $1.7 million. The actual figures are $3 billion and $1.7 billion.
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