Borrell Report: More Bad News For Auto Ads

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By: E&P Staff

If you sit in on enough quarterly earnings call, you learn quickly that the drop in automotive advertising revenue is (partly responsible) for mucking up results. A new report from Borrell Associates reveals the slide will continue.

?The fat times are over for automotive advertising,? Borrell analysts wrote. ?Manufactures and dealers are plowing more money into their own Web sites, disintermediating traditional media by letting consumers get price-and-item information directly.?

In the past five years, auto advertising grew at a compound annual growth rate (CAGR) of 3.7 percent to $31 billion. Over the next five years, auto advertising is expected to slow, growing at a CAGR of 1.7%. Borrell predicts that by 2009, online auto advertising will hit $4 billion and will surpass newspapers, cable, radio, and direct mail.

Newspapers are projected to lose 24.6% of auto advertising when comparing 2011 estimates to 2006 spend. In 2006, Borrell estimated that auto advertising was at $4.3 billion, by 2011 that number will drop to $3.2 billion.

There is bad news for direct mail marketers too. The category is expected to lose 21 percent of its auto revenue over the next five years as dealers turn to e-mail lists.

The report finds that shoppers looking to buy a new car are going directly to the source, visiting manufacturers? Web sites, rather than third parties. Local dealers are getting into the game, by launching Web sites of their own, with a full list of inventory and financing information.

However, the Internet is not yet an effective branding tool for, as Borrell coins it, people in the ?dreaming? stage. TV is still the best method for selling a brand but Borrell expects manufactures will drive traffic to their Web sites via TV spots.

Borrell analysts predict that by 2012, online video and paid search will dominate ad dollars spent by auto dealers.

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