The Online Automotive Upfront, Part One

Imagine you’re a media buyer for an agency representing a major auto manufacturer. It’s late morning, and today you’re preparing your online media buys for Q4 2003. Coffee and bagel in hand, you settle in and make your first call, to Edmunds.com. The sales rep informs you apologetically that all category sponsorships, all homepage takeovers and most detail pages are sold out for the quarter.

Hanging up, you clean the fine spray of coffee from your monitor and calmly dial Kelley Blue Book… only to hear the same story. Fighting a rising panic, you call Yahoo’s automotive category, Autobytel, and NADAguides.com. Sold out. Sold out. Sold out.

Sorry, marketer. You’re a victim of the online automotive upfront.

Fearful that inventory on auto sites will be bought up before they get to it, car makers are now engaging in a form of online media buying that resembles television’s upfront, with buyers securing ad inventory a year in advance rather than on an ongoing basis.

Online Up… Front?

This news will come as a shock to many digital marketers. After all, Web advertising is only beginning to emerge from a multi-year slump, and the notion that a handful of publishers in one sector are selling out much of their inventory a year in advance seems improbable at best.

But it’s true. General Motors began the trend several years ago when it opted to secure its online buy a year ahead of time, buying spots on popular auto sites such as Edmunds.com and Autobytel. Other carmakers quickly followed suit, including Ford, Daimler-Chrysler and a number of Japanese manufacturers.

“Every year, two or three players have jumped into the fray,” said Mitch Lowe, president and CEO of Jumpstart Digital, an online media agency that represents automotive publishers such as NADAguides.com. “Now, about two thirds of manufacturers are doing it, and I expect that two years from now, all of them will be making year-long buys specific to auto publishers.”

According to Brian Hafer, VP of advertising sales for Autobytel, upfront buys for online automotive have now become the norm: “Five years ago only one OEM made an upfront online buy; today over 90 percent of Autobytel’s inventory is booked upfront.”

But why automotive?

Lowe, along with a number of analysts, are saying the trend in upfront media buys has been driven by “in-market” consumers’ use of the Web to aid their consideration process.

Various surveys have found the Web has had widespread impact on the car buying process, both here and abroad. In the United States, 77 percent of respondents to a November 2002 survey by Jupiter Research said they had searched for car information online in preparing to make a purchase; Cospirit Research found the Internet aided 83 percent of U.K. car shoppers who recently bought a car; and according to Ipsos-Reid, 63 percent of online Canadians have used the Web to search for vehicle prices and features.

“If you calculate by category the influence of the Internet on retail purchases in the U.S., you’ll find that automotive is one of the largest,” said Julie Ask, a senior analyst with Jupiter Research.

“Auto companies recognize that buying a car is a consideration process, one that can last up to six months,” she said.

There are three main reasons consumers use the Web as a car-buying tool: to compare vehicles and prices (42 percent), to get reliable information (31 percent) and to avoid dealing with sales people (28 percent).

Or to simplify even further: Buyers are online because cars are expensive and salesmen can’t be trusted.

“I think everyone was surprised by how quickly consumers went online,” said Lowe. “It’s well-known that consumers tend to be put off by the car shopping experience, but I don’t think anyone knew how much.”

Add to that the fact that most ads on auto-focused Web sites reach consumers who are currently in the market to buy a car — while only about one percent of TV ads reach in-market car shoppers — and you begin to see why car companies are scrambling to buy on auto sites. These sites include Kelly Blue Book online, Edmunds.com, NADAguides.com, and the auto sections of the three major portals.

“Probably two thirds to three-quarters of the dollars are going to online automotive sites, which can promise and deliver in-market consumers to the manufacturers,” Ask said. “This is the kind of inventory being secured a year in advance.”

Two Very Different Upfronts

The television upfront is a decades-old institution.

Beginning in 1962, ABC premiered all its new shows in the week following Labor Day, a practice which became widespread when CBS and NBC grouped together their own premieres in the mid-sixties.

Around this time, TV production costs escalated, making full sponsorship of programs difficult for advertisers and creating an impetus to make package buys. The first upfront buys were package deals the networks made via individual meetings with buyers. Once they discovered buyers would pay premium prices for guaranteed buys, they began pushing the model in earnest.

Since then, the upfront has evolved into a large-scale party with lots of schmoozing, usually in a big venue in New York. Special events, clips of upcoming shows, and perhaps some of the shows’ stars are typically on display, all with the aim of getting advertisers excited about the premieres and pre-selling as much inventory as possible.

About the only thing the nascent automotive online upfront has in common with the above spectacle is that both types of media buys are driven by scarcity.

“An upfront happens when there’s a scarcity of supply,” said Charlene Li, principal analyst of media and marketing for Forrester Research. “When key positions become available, and a number of advertisers want the same inventory, the sites are able to ask advertisers to commit long-term.”

In most other respects the online upfront now being invented by the auto industry is a very different beast. First and foremost, it’s a much more discreet affair; no big party, just isolated phone deals.

“In our case, there are no drinks and no big venue,” said Lowe. “[Upfront] just signifies that car manufacturers are trying to lock in a 12-month buy on a bunch of automotive sites.”

Additionally, online media buying is inherently more complicated than television, where ads and sponsorships come in only a few flavors. Web media buyers have many options to choose from, including home page takeovers, various banner ads, rich media executions and category sponsorships, not to mention the challenge posed by the complexities of targeting.

“A buy can be extremely detailed,” Lowe said. “The level of targeting possible from an ad serving perspective is sophisticated. You need to know what type of car, make and model a Web user is looking at, so you can deliver advertising based on those criteria.”

Carmaker Calendars

Another complicating difference with interactive upfront buys has to do with manufacturers’ schedules. Carmakers are committing upfront dollars at different times of the year, depending on their upcoming launches and financial models.

“We’re all on different schedules,” said John Gray, digital media supervisor for J. Walter Thompson, which represents Ford. “GM, Ford and Daimler Chrysler all buy on a calendar year cycle. The West Coast brands such as Honda and Toyota are on model year schedules. Some do October to October, others June to June.”

That’s one of the main reasons a single planning event, a la the TV upfront, would make little sense logistically, despite the fact that it could make coordinating the buys easier.

“It may help to arrange a gathering like that, but company budgets are based on different schedules, which would pose a significant challenge,” said Dov Herbstman, interactive strategy supervisor for TBWAChiatDay, which represents Nissan and Infiniti. “I don’t know if all the media sites or all the vendors could possibly join together.”

On the other hand, it took decades for the TV upfront to evolve into the big, centralized dealmaking party it is today, and it’s conceivable that the buyers and sellers of interactive ads could get there. But regardless of whether automakers’ current experiment in early online buying ever comes to resemble the TV upfront, it certainly bodes well for the digital marketing landscape as a whole.

Said Jumpstart’s Lowe: “What’s cool is this: One of the biggest categories in advertising, if not the biggest, finds interactive to be this important.”

This version of the story has been corrected to clarify Autobytel’s inventory sales.