Detroit Buys Digital Media in More Places

Yahoo’s Sept. 19 announcement that it anticipated a slowdown in revenue growth from auto advertisers made big headlines, hurt the company’s stock and led many to wonder if Web ad spending was near the end of its hyper-growth phase. (Yahoo also reported a pullback in financial services ads.)

Many observers worried Yahoo’s forecast meant a slowdown in online ad growth or that carmakers are curtailing Internet ad budgets just as they have trimmed their offline ad spend. But growth in auto spending appears to be holding strong, even if individual portals don’t see the revenue increases they anticipated.

“Yahoo’s situation does not mean there is less auto marketing money going online, only that Yahoo has more competition than they expected” because dealers and carmakers have more digital choices, said Mitch Lowe, CEO of Jumpstart Automotive Media.

Despite cuts in overall ad spending of up to 13 percent, automotive remained the top ad category for traditional media during first half 2006, per Nielsen Monitor-Plus. On the Internet, however, automotive held a distant second place to retail, which some experts see as sign of pent-up growth potential.

EMarketer estimates that auto companies will nearly double their online spending in two years, going from $1.4 billion in 2005 to $2.7 billion in total online advertising in 2007. By the end of 2007, the auto industry will account for 15 percent of total U.S. online ad spending, said Lisa Phillips, eMarketer Senior Analyst.

In some cases online budgets this year were helped by automotive cutbacks in print and TV, as carmakers switched more ad spending online. For instance, struggling Ford boosted its Internet spending by 57 percent in the first seven months of the year, and Suzuki tripled its online spend in the first half of the year, according to TNS Media Intelligence. Suzuki’s online spend is projected to climb to about $7 million this year from $1.7 last year, out of a total ad budget of $107 million, which will remain flat. GM launched a $400 million campaign this month to support the redesign of its truck lines with a large share going to the Internet. GMC marketing director Steve Rosenblum told Autoweek it is “the largest integrated marketing campaign we’ve launched to date.” Another sign of increased online auto spending is the fact that ad space is sold out up to a year in advance on car sites that attract consumers researching a new car purchase, said Jumpstart’s Lowe. To stay two steps ahead of the competition, Suzuki bought all its 2007 space on auto sites back in August, several months ahead of its rivals. “Being early was more efficient, and gave us the most choice. Rather than just taking what was available, we could talk to the sites about what we needed,” said David Harris, Suzuki’s e-business and database marketing manager.

Lowe blames Yahoo’s downbeat auto marketing forecast on overly optimistic projections. “At the beginning of the year, when these estimates were made, Yahoo was one of the best sources for the kind of [mass market] reach that auto marketers needed. Now there are many comparable options: MSN, AOL, New York Times online, CBS Marketwatch, Facebook and others,” he said.

Niche sites are also grabbing a bigger piece of the pie. Automakers are spreading their ad dollars across more online platforms and smaller sites, said Merrill Lynch analyst Lauren Rich Fine in a forecast to analysts this month. Category leader GM, for example, is placing online ads in a greater variety of portal and lifestyle sites than in 2004-2005. “Site selection is driven by relevance — be it content or behavioral — and the ability to drive the metrics that matter most to GM’s business,” said Kurt Unkel, director of data and analytics at GM Planworks. “That has and may continue to lead GM to advertise on sites that don’t necessarily pop to the top for total traffic or some other traditional reach metric.”

Suzuki finds that behavioral marketing on small lifestyle sites delivers dealer leads and branding benefits at a reasonable cost. Mass-market TV ads position the brand as active and free-spirited and the online work reinforces that image by sponsoring and appearing on sports enthusiast and similar lifestyle sites. “Rather than a frontal assault we prefer to pick off specific targets,” said Harris. “We slice and dice the research on online users and find our target in plenty of places.”

The numbers back him up. Among auto advertisers who use Jumpstart’s ad network, conversion rates are 40 to 100 percent higher with behavioral targeting than contextual targeting, said Joe Kyriakoza, VP of product development. It seems the move away from putting ads only on major portals and car-related sites is only beginning. With the Internet turning the car-buying process upside down, online campaigns that use behavioral targeting “look like a light on the horizon,” says eMarketer’s Phillips.