Auto Ad Spending to Fall, but Online to Grow

May 11, 2007

This article is included in these additional categories:

Automotive | Local & Directories / Small Biz | Paid Search | Radio | Retail & E-Commerce | Television

Traditional media won’t be raking in the money from automotive advertising any more, as vehicle buyers spend less time with traditional media and more online – five hours’ worth, on average – researching vehicles, according to a new report from Borrell Associates.

Also, manufacturers and dealers are spending more on their websites, cutting out media middlemen by providing product and price information directly to buyers, according to the report, “2007 Online Auto Advertising Shifts Into High Gear.”

Some key findings from the study:

  • Automotive advertising has grown into a nearly $31 billion category, with a compound annual growth rate (CAGR) of 3.7% in the past five years; however, Borrell projects a CAGR of 1.7% in the next five years.
  • Online automotive advertising, though, has grown at a 13% CAGR in the last five years and is projected to reach $2.8 billion this year, accounting for 7.6% of all automotive advertising.
  • By 2010, online will reach $4 billion, becoming “the second-largest medium for automotive advertisers, surpassing newspapers, cable, radio, direct mail – everything but broadcast TV,” according to the Borrell report.
  • Moreover, at the local level, used-car marketers will spend most on online media, surpassing newspapers for the first time. Used-car dealers have already allotted a greater share of their budgets – 19.6% in 2006 – into online than manufacturers.

ClickZ also provides data from the report:

  • In 2001, total new and used car ad spending was around $25 billion, and is forecast to reach more than $33 billion in 2011.
  • Automotive ad dollars going to cable and telemarketing are expected to increase over 40% each in the next five years; spending on newspapers, direct mail and directories are forecast to drop over 20%.
  • Email spending on local online advertising is also set to rise; however, banner units will undergo a decline in spending.
  • Approximately one-third of car dealers – mostly larger ones – are buying search engine advertising, and 80% of those doing so say it works to drive traffic to their websites.
  • Some 76% of local online ad dollars are projected to go to video and paid search ads in 2012, compared with 29% in 2007.
  • Thirty-second video spots in auto dealer directories, mainly on newspaper sites, cost between $150 and $350 per week, according to the report; such efforts have generated from $160,000 to $600,000 in ad revenues annually in mid-size markets.
  • Spending on used car advertising online will constitute 39% of all new and used vehicle advertising in 2007.

The internet will soon become the number one media channel for private used-auto sales. In 2006, $421 million was spent on used-auto sales by private individuals, of which $114 million – 27% – was spent online, Bizreport adds, citing the Borrell report.

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