The Auto Advertising Spend Will Increase In Q4, But The Question Remains Where Will The Money Go?

The kind of promotion that keeps sucking money away from the traditional media spend is like the one just announced this week by Mitsubishi Motors for its Outlander compact SUV. Sure, there’s money for print and broadcast, but what really seems to excite Mitsubishi is that it is establishing what it calls an Interactive Microstite to boost the new car.

“The Microsite was designed to drive dealer traffic and create excitement among online car buyers and enthusiasts,” a company PR release says. “The Outlander site features dramatic styling and design elements with the car taking center stage.” And on and on it goes.

The good print news falls to campaigns starting in November in automotive magazines such as Road & Track, Car & Driver, AutoWeek, Motor Trend and other such publications, all of the advertising tied into complementing the web site. There’s no mention how/if newspapers are involved.

Magazines will welcome the extra spend. According to the Publishers Information Bureau (PIB), automobile magazine advertising in the US this year, through September, is down $165 million (- 10.1%) over the same nine months of 2005. The number of pages bought is down 2 million (-12.7%).

ftm background

Is Anybody Home? More Mobility Hits Media Measurement Hard
The hot prospect exciting the advertising people today is mobile media. They will not sleep until ads appear on your mobile phone. Their simple logic: the most desirable audience is not at home.

When Yahoo’s Shares Are Hammered 12% Because A Drop In Auto Advertising Hurts 3rd Quarter Ad Revenue Forecasts Then You Begin To Understand The Enormity Of The $750 Million Tip Of The Print Auto Iceberg
A $750 million drop in US auto print advertising this year by domestic and foreign auto companies has already hit bottom lines with double-digit percentage revenue declines at most newspapers and generalist magazines, but the prevailing view was that print’s loss was the Internet’s gain. So when Yahoo announced that a slight drop in auto and financial advertising would adversely affect its 3rd quarter revenue forecasts Wall Street went into a tizzy.

US Automakers See Sales Drop Dramatically
For Newspapers Experiencing a Near 50% Drop in the Auto Spend “It’s A Melting Ice Cube All The Way Around.”

The Good News For Newspapers Is that More People Than Ever Before Are Reading Their Online News Sites.
The Bad News Is that One of Their Major Advertising Sectors – Automotive – Is Moving Much Of Its Spend to The Web, Too, But Not Necessarily To Newspaper Sites

Can Newspapers Maintain Their 20% Plus Margins in 2006 On Print Ad Revenue That Could Actually Decline By 1.5%?
The Answer May Rest On The Advertising Opportunities Their Own Web Sites Provide.

Those kind of numbers help explain the turmoil at Time Inc where 500 employees are already gone this year (Time Magazine was the largest recipient of automobile magazine for a generalist magazine) and why publications like Car & Driver have imposed hiring and expense freezes.

There can be no doubt that additional auto dollars are finding their way online. PQ Media, says automakers increased their online spend in 2005 by 37% to $1.23 billion compared to 2004. The prognosis going forward is that automobile makers are going to budget at least 20% of their spend on non-traditional media. Dodge, for instance, will spend 20% of its Caliber ad budget online. General Motors is said to be allocating 50% of its Aveo compact launch budget for alternative media, with much of that going online.

Chrysler is planning eight additional new model launches before the end of the year, and says they will be accompanied by an ad blitz spend of more than $1 billion. But one question it has to work out is whether to continue with its Dr. Z ads or get more fundamental.

DaimlerChrysler CEO Dieter Zetsche plays Dr. Z, an affable, funny mustachioed German with the message that combining the benefits of the Daimler and Chrysler brands promotes a positive quality brand. The ads were entertaining but the trouble is they didn’t sell many cars. Auto consultant Susan Jacobs summed it up best, “There’s too much personality and not enough nuts and bolts about what German engineering means for Chrysler cars.” Chrysler, meanwhile, announced a third quarter loss of $1.5 billion (€1.2 billion).

One problem for the media has been that the automakers have been shifting their advertising money to pay for promotions to clear new cars out of dealerships. Free or low interest loans, price cuts, etc. all have to be paid somehow and much of that missing advertising spend this year has been used to fund those promotions.

So while there are new car models to roll out this quarter, there are also unsold models that must be cleared out. But September gave some sign that perhaps Americans are buying gas guzzlers again. With gas prices down, sales of large pickup trucks and sport-utility vehicles (SUVs) – the very models that the automakers make the most profit –picked again, albeit slowly.

And the more those sales pickup without the automakers having to resort to big sales promotions then the more that money originally intended for advertising will end up in media hands.