March 16, 2005: Clicking for Cars

The paradigm's now in place -- a gradual shift in automotive advertising toward the internet and away from traditional mass media.

Buying a car for many of us used to rank right up there in popularity with getting a root canal or visiting the proctologist. It was time-consuming and stressful. If purchasing a new car, you had to drive around town from dealer to dealer, be forced to shmooze with pushy sales people, spar with the dealer's bean counters to negotiate a good price and interest rate (and no matter what the final figure was, you always felt as though you could have done better), and fill out what seemed like mounds of paperwork.

The internet has helped lower the sales pitch din and stress levels a few decibels. Auto dealers, dealer associations and manufacturers are implementing innovative online ad and promotional campaigns both on their websites and via portals and related lifestyle sites to increase the noise levels for their car models, while simultaneously helping to generate brand awareness, educate consumers and entice them with various promotions.

Colby Atwood, a partner and vice president of Portsmouth, VA-based Borrell Associates, a market research firm that tracks internet advertising, says car shoppers are now empowered by the internet. The firm recently released a study on online automotive advertising, "2005 Outlook: The Boom Continues for Online Auto Ads," which revealed some rather startling findings. Most of the estimated 61 million consumers who bought new or used cars in 2004 initiated their search online, with websites generating about 22 percent of all new car sales. Among internet users, 11 percent said they found the used car they bought online; while nine percent said they found it in a classified newspaper ad.

Borrell Associates has categorized the automotive sites into four distinct categories:

Portals -- Major traffic sites like AOL, MSN, Yahoo!. The company says these sites use their huge traffic pipelines to build up an audience for their automotive sites, then lease out space in those sites to used-car listings 'aggregators' (see below) and to sell new-car referrals to franchised dealers.
Aggregators -- Includes AutoTrader.com, Autobytel, CarsDirect.com, Cars.com, and media company sites, including newspapers and TV stations.
Reference -- Kelleybluebook.com, Edmunds.com, NADA.com, etc. These sites provide a lot of rich content for car buyers researching price/feature comparisons.
Advertisers -- All the manufacturers and scores of local dealer sites. Dealer associations are just getting into the game. Dealer association online spending was only $58.3 million last year, but is expected to increase more than 26 percent in 2005. General Motors, for instance, helped its dealer groups build dozens of sites last year to increase their advertising reach.

Atwood says there is a significant shift in automotive advertising towards the internet and away from traditional mass media. Automotive advertisers spent more than $9.8 billion last year on online advertising, which represented 3.9 percent of the money they spent on advertising in the United States. About 76 percent of that was spent by businesses in local markets to reach automotive consumers in those same markets.

"In talking with local car dealers, we encounter many who have scaled back their expectations for online advertising from the days when it was going to transform the way people bought cars," says Atwood. "They now see it as simply another channel for bringing customers into their showrooms."

Atwood adds that one of the biggest challenges they face is disciplining their sales forces to follow up on leads that originate online.

"Dealers that have set up specialists to handle these leads have been more successful with them than those who distribute them to their 'traditional' sales forces," says Atwood. "This pattern parallels the experience of the real estate industry, in which brokers and agents who 'get' the internet are using it to extend their branding presence into the medium that consumers are coming to prefer for the shopping and research phases of the buying process."

Atwood says Borrell Associates expects online video infomercials to become an important resource for car shoppers.

"TV stations -- with their affinity for video and their existing relationships with the dealer associations and manufacturers that are producing video car ads -- see the rise of broadband penetration as opening the door for them to move into online automotive advertising and take share from the newspaper websites in their markets," he says.

Newspaper sites, he notes, are also beginning to implement video capabilities that will keep them competitive, especially as the manufacturers and dealer associations make those expensive ads available for local deployment.

eBay Motors has also become a considerable online presence. Borrell Associates says eBay Motors generated about $7.5 billion of eBay's transactions in 2004 and is carving out a niche in hard-to-find specialty vehicles and parts.

Of course car companies themselves are ratcheting up the noise level online. Todd Riley, who spearheads interactive marketing for Volkswagen of America in Auburn Hills, MI, says VW has been advertising online since 1998. Last year about two percent of VW's budget was dedicated to online advertising/promotions; this year Riley says that percentage will more than double to about five percent (VW declined to provide actual dollar amounts).

In addition to touting models and promotions on its site (http://www.vw.com), the company regularly advertises on Yahoo!, MSN, AOL, Edmunds, Autobytell, Cars.com, Autotrader, Weather, Monster, CBS Marketwatch and Gorp. Riley says one of VW's most successful programs last year was a PointRoll execution of the Touareg SUV.

"We used the format to replicate the first few steps of our 'configurator' process (build a car)," says Riley. "After consumers started the process in the rich media environment they were invited to click through to vw.com where their data was passed on to complete the process. We saw very high levels of interaction within the media and high levels of completed configurations and lead submissions on vw.com. Our click-through rates to vw.com were 12 times the industry average."

Riley adds that the criteria used in selecting websites to advertise on varies.

"We align our objectives to the level of consumer involvement in the car buying process and select sites that match up," he says. "Our strategy for a launch vehicle (broad reach/content association) will be very different than that of a message promoting an incentive (deep in-market content). In addition, behavioral targeting across networks will become even more important. Search will continue to grow, but key word purchases will become more strategic and selective."

Although VW works with a network of dealers nationwide, Riley says that dealer association online spending needs to grow.

"Some dealers get it, but many still have a ways to come. There are so many efficiencies to gain. Lead purchasing will become more centralized which will cut down on waste and duplication and free up funds for other campaigns," he says.

Another car manufacturer, Subaru, recently partnered with interactive agency R/GA in launching an online campaign touting its new B9 Tribeca, a seven-passenger luxury vehicle. Key elements of the program included a mini-site on b9tribeca.com, sweepstakes and interactive kiosks that provide the car maker with opt-ins at top auto shows nationwide.

In addition to the online campaign, Subaru, similar to Volkswagen, has also targeted its web-based advertising to popular auto interest sites such as Yahoo! Autos, AOL Autos and Edmunds.com.

The paradigm's now in place -- a gradual shift in automotive advertising toward the internet and away from traditional mass media.

"The marketplace has changed and media choices have changed. Auto advertisers are recognizing this and demanding more efficient and more effective ways to put their messages in front of potential car buyers," says Atwood said.

Neal Leavitt is president of Fallbrook, CA-based Leavitt Communications, an international marketing communications company with affiliates in Paris, France; Hamburg, Germany; Hong Kong; London, United Kingdom; Bangalore, India; and Sao Paulo, Brazil. He writes frequently on Internet and high technology topics.

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