General Motors Cut Its Time Inc. Ad Spend In 2006 By $48 Million, But the Automaker Sponsors Three New AOL Online-only Programs – A Clear Example Of Ad Spend Drifting To Emerging Media

Philip M. Stone - January 26, 2007

The Three Big US automakers – General Motors, Ford, and Daimler Chrysler -- cut their ad spend with Time Inc last year by more than $100 million which is one reason for the magazine group cutting 289 jobs this week, but the automakers weren’t just pocketing all of that unspent cash but rather they were directing more and more money to what is becoming known now as emerging media.

And as good an example of what they are up to launched this week on AOL’s Living Channel where GMC is sponsoring 78 episodes on three programs – one to do with cooking, another with home entertaining and the third on home improvement, all hosted by well-known personalities in their fields.  GMC gets product placement with a different car used for each program with plenty of video showing the cars carrying out chores on-the-road. There’s a brief advertising video at the start and banner ads.

“We are looking to and devoting more time to emerging media (online advertising and advertising sent to personal electronic devices), according to Mary Kubitskey, GMC advertising manager. “It’s more cost effective to get someone to interact with your product more and more online than in a 30-second television commercial.”

And there is no question where she believes GMC gets more advertising bang for the buck. “Partnering with AOL provides us with the perfect opportunity to interact with our target consumer in a new way through innovative programming at an interactive level,” she said. Neither she nor AOL said how much GMC was paying for the campaign.

And Mike Jackson, GM’s North American vice president of marketing and advertising, let it be known last week that while GM may increase its advertising spend this year the bulk is going digital.

‘Our spending is going to be up slightly, with the bulk of the spending going into the digital space,” he said.

The GMC campaign is a perfect example of what Jackson says is GM’s goal this year – finding ways to connect emotionally with its consumers. He freely admits that GM is shifting away from traditional media and is focusing strongly with advertising presence on web sites used by auto enthusiasts.

Seeing GMC embark upon such an emerging media campaign while at the same time TNS Media Intelligence announced the huge cutbacks that Detroit dealt Time Inc. last year is a very clear indication of how ad money is shifting. Detroit, and foreign carmakers, still spend in the hundreds of millions of dollars each year with Time, Inc. but now it is around $100 million less.

That’s a huge shortfall not made up elsewhere, which is why Time Inc has been busy over the past year cutting back on staff and closing down foreign and domestic news bureaus. This week it announced 289 layoffs that hit most of its most popular magazines such as Time, People, and Sports Illustrated and it also said it was putting more resources into its digital properties.

Last year Time Inc, the largest US magazine group, saw a 4.8% drop in ad pages. While Time Magazine finished the year with an increase less than 1%, Other titles didn’t do so well – People was off 2.9%, Sports Illustrated down 3.5%, Fortune down 6.4%, Entertainment Weekly down 7.6% and Money off 9.6%.

As another measure of getting its house in order Time announced Thursday the sale of its 18-magazine Parenting Group and Time4Media group to the Swedish Bonnier Group, but it doesn’t look like it got the money it initially sought.  When the magazines such as Field and Stream, Outdoor Life, and Yachting were put up for auction Time Inc let it be known it was looking for bids above $300 million, but the thinking in New York is that the final price was somewhere around $240 million, definitely less than the $300 million and a far cry from the $475 million that Time paid Times Mirror for the titles in December, 2000

Ann Moore, Time Inc. Chairman and CEO, made clear her future plans for the magazine group. “”This transaction underscores Time Inc.’s commitment to focus our energy, resources, and investment on our bigger and most profitable brands.”

The switch in spend away from traditional media is causing many problems elsewhere, too. Jim O’Shea, the new editor at the Los Angeles Times, told staffers this week they had to change the way they did things and become more Internet intelligent. He said that automobile advertising in the print edition will be about $47 million less in 2007 than it was just three years ago.

He said that only about half that loss will be recovered with new online ads. "For every $2 we lost," he said, "We are recouping only about $1." And that is the story of traditional media today. It is losing advertising money to the Internet faster than it can make that money back from s own digital platforms.

And unless Time can find new advertising revenues to replace what the automakers used to spend, and with the automakers already having given fair warning they are moving more and more of their spend to the Internet, then there will be undoubtedly more layoffs to come this year, too.

Maybe that explains why job outplacement tracking firm Challenger, Gray and Christmas says the media planned 17,809 job cuts in 2006, up 88% from the year before, and it sees no let-up in the trend for this year, too.

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