A new automotive advertising study from Borrell Associates has some bad news for radio.
For decades, media fortunes rose and fell with the success of the biggest advertisers in most towns — car dealers. When car sales rose, so too, did their ad spending. Even when car sales dropped, manufacturers might increase their ad spend, insulating local media from the results in leaner years, according to the research and consulting firm that tracks local advertising and works with local media companies.
That gravy train is over, according to the company’s “2013 Automotive Advertising Outlook.”
Digital media has whittled down what used to be a six-month-long car planning purchase by consumers to three months, with most of that research conducted online. Consumers are less likely these days to walk into a dealership just dreaming about a new car, but rather, they know exactly what model they want to buy and their target price, according to the data. The trend gives dealers less time to reach consumers before the purchase and therefore — less time for their advertising to become effective.
In addition more dollars being diverted to digital media, “the big shakeout of the Great Recession has given us fewer dealers, which means fewer competing commercials. Add the emerging threat of direct-to-consumer sales, the growing power of manufacturers’ websites as lead generators, and the dynamics of governmental regulation on what dealers can do with car loans, and it’s easy to see that the shakeout is by no means over,” writes principal report author Kip Cassino, executive vice president of Borrell Associates.
The company forecasts overall auto advertising to be a $32.8 billion category this year, up 2% from 2012.
Newspapers are getting hit the hardest with the migration of ad dollars to digital media, with auto advertising down 29.3% this year, forecasts Borrell. The company predicts broadcast TV will be down 16.7% and expects radio to see a 15.9% decline.
In contrast, online and mobile advertising are projected to rise 18.7% and direct mail, a big surprise, is expected to be up 22.9%.
Because of the ad dollar march to digital and away from traditional media, within five years, digital annual spending by auto dealers and manufacturers will go from $2 billion to more than $9 billion — “most certainly at the expense of local radio and TV,” writes Cassino.
Borrell offers a glimmer of hope, noting that its forecasts aren’t set in stone because the actual scope of the changes in the auto advertising market are still playing out.
The company advises educating auto dealers on the value of radio and to think beyond banner ads on a website. “Targeted advertising in any form — especially online — will generate a better return on investment.”
The full study is available for purchase from the company’s website.