Automotive Digital Advertising: The Story in Charts

Why is the Auto Industry shifting billions away from traditional offline media into online digital advertising
strategies and media?

The following slides are a collection of recent data, research, marketing studies, acts and figures that have been assembled to enable seeing a collective vision and research summary of why so much automotive related marketing money is being shifted from offline media into online media
Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com
Who are the Biggest Advertising Spenders?
The Automotive Industry lags behind most other major industry marketing categories in the shift to digital This will be resolved as OEMs find ways to shift Tiers 2 and 3 into online advertising medias.
Why is the Auto Industry shifting billions away from traditional offline media into online digital advertising strategies and media?
40.0%
35.3% about
35.0%
Which one of these information sources was most important when making decisions buying your first new vehicle?
30.0%
24.9%
25.0%
20.0%
15.0%
13.4%
10.0%
8.2% 4.4% 3.6% 1.1%
5.0%
0.0%
te In
t ne r
am
ily i Fr
s nd e
TV M
a ag
ne zi Ne w
pe pa s
io ad R
Source: Polk Center for Automotive Studies 2007 New Vehicle Sales Study
Where does Automotive Buying Influence occur? What are the most important types of information sources to car buyers with Internet access? OEM sites are replacing 3rd Party sites! Dealer sites are now more important than Independent sites
What About Automotive Buying Influencers?
A Harris Interactive survey of people who considered themselves very or extremely knowledgeable about cars found that 63% had used the Internet as a resource for their most recent car purchase, while magazinespresumably enthusiast titleswere a distant second, at 33%. Newspapers ranked only slightly ahead of television.
When we exclude Paid Search and Video Advertising, the most recent 3 year growth in online automotive display advertising is dramatic
Todays Biggest Dealer Advertising Challenge

Overspending on Newspaper, Radio, Outdoor & Mail Relative to Usage
The Average Car Dealers Advertising Spend Does Not Match The Car Buying Consumers Media Consumption Behaviors Average Dealer Advertising Spend vs. Consumer Media Consumption
40%
30% 25% 20% 15% 10% 5% 0%
Dealer Ad Budget Efficiency Gap
35%
Dealer
Consumer
Newspaper
Radio
Television
Internet
Other
Source: NADA
The Auto Industry continues to shift Advertising funds into the Online and Interactive Media space at a rapid pace
Respected research firm, Borrell Associates, predicts that online auto ad spending will increase by 13% over the next five years, compared with less than 2% for total auto industry spending. By 2009, digital spending will hit $4 billion, surpassing every other medium except broadcast television.
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The Automotive Industry continues to shift advertising funds into the Digital Advertising space From less than $2.5 Billion in 2007, the industry will grow Digital Ad budgets to over $5 Billion during the next 4 years.
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Automotive Ad Spending Shifts Online

Overall spending may be stagnant, but automakers and dealers will continue to shift it among media channels. Between 2005 and 2007, advertising spending moved from traditional media into digital and out-of-home initiatives, according to TNS Media Intelligence data supplied to eMarketer. Hardest hit were newspapers (-30.3%) and magazines (-12.5%), while TV (-6.3%) and radio (7.6%) experienced smaller by similar declines. At the same time, spending for online display ads rose 109.1%, while outdoor climbed a modest 1.9%.
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At the OEM level (Tier 1), budgets are skewed towards an over reliance on TV relative to the influence TV has on car buyers. While Internet is budgeted at less than the impact it has.
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New vehicle franchise dealers in the USA spent $7.86 billion on advertising last year, with the average ad spend per dealership increasing by 4% to slightly over $378,000.
Source: National Automobile Dealers Association (NADA), "2008 NADA Data: Economic Impact of America's New-Car and New-Truck Dealers, May 2008
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The chart below reveals changing trends in media buying at the local dealer level. Total ad spending dropped 13.5% between 2005 and 2007, to $4.9 billion. Newspaper spending fell by almost 22% in that time, followed to a lesser extent by radio and outdoor. Magazine spending, although a modest $29.2 million, actually rose 71% in the same time periodand online display ads surged 189% to $114 million and a 2.4% share of the total advertising budget.
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Consumer Behavior and Attitudes

In 2008 and 2009, the question for both OEM and dealer marketers is not who is using the Internet to shop for cars, but who isnt? Capgemini reports that 80% of in-market vehicle shoppers go online at some point in their search. The firm reported that percentage was 71% in 2006 and 64% in 2004. According to Borrell, in-market car buyers spend an average of five hours researching vehicles on the Internetand less time with traditional media. CarGurus, a third-party auto site, reported that online prospective buyers spend more than 60% of their time looking at photos and videos of new cars and the rest of the time reading articles, user reviews, vehicle specifications and pricing.
Even so, according to TNS data, in 2007 automakers were still pouring the majority of their ad budgets, about 60%, into TV. That is money they cannot afford to waste in 2008, 2009 and beyond.
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For Car Dealers

Marketing, Selling and Servicing Vehicles
The Internet dramatically changed the dynamics of selling and servicing cars by offering shoppers transparency in pricing and vehicle specs. Today, consumers expect dealers to respond to e-mail inquiries in about 2 hours not four days. They want to schedule service appointments online, check dealer inventory on new and used cars, and be able to buy them.
In the coming years, more and more consumers will want to conduct the entire buying process online, and dealers will have to provide the tools to facilitate the sale, including links to loan applications, inventory selection, buyers orders, deposits, down payments and car insurance.
Web sites will make or break a saleand an ongoing relationship. Sales contact with new customers will be limited to a one-time showroom visit for pickupand then continue via the Web site for accessory sales, ongoing promotions, service and maintenance appointments.
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Automotive Digital Marketing

Online Media Tools
Knowing that millions of potential automobile buyers are online is one thing; understanding which tools to use to reach them is another. But savvy auto marketers are learning.
Search Engine Marketing

Once online, most people turn to a search engine for auto research. A global survey from Capgemini showed that 78% of car buyers visited sites found by using a search engine.
Online Advertising
Used to cost effectively inform, invite and guide car buyers to the right tools. Targeted Placements based on visitor demographics, sequential displays and Behavioral Targeting create ability to deliver right messages to right people.
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What Do Automotive Consumers Search For?

According to a survey published by Autobytel and conducted by the Kelton Research firm
Searches for new vehicle related information, such as MPG, prices, photos, videos, features, equipment, colors, specifications and local dealer inventory topped the list of automotive categories for broadband internet users.
Finding information about local dealers such as location, business hours, phone numbers, email addresses, vehicle inventory and pricing was the second-mostpopular use of search engines Used-car searches related to availability and pricing ranked as the third most frequently used automotive search activity by car buyers.
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What About User Generated Content (UGC)?

Social Media Marketing
Every day, conversations that used to take place with friends and family are shifting to the Internet. Capgemini found that, with the spread of social media, shoppers are now looking for opinions and reviews from total strangers about specific brands, makes and dealers, as well as to discuss their own impressions and experiences. The New Autoshopper.com Study from J.D. Power found that nearly 69% of online new-vehicle buyers used one or more types of user-generated content. Consumer ratings and reviews were the most popular form, and enthusiast sites, online forums, blogs and photo-sharing sites were considered helpful but had lower usage rates.
Word-of-Mouth Online
A few short years ago, price and vehicle specs were the main pieces of information sought online. Today, shoppers turn to the Web for recommendations and reviews. Word-of-mouth has always had a great influence on vehicle purchase decisions, but now the Webthrough blogs, user reviews, discussion groups, automotive wikis and other social mediais replacing recommendationsMarketing, 505-301-6369, ralph_paglia@adp.com Ralph Paglia; Director Digital from friends and family.
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What About User Generated Content (UGC)?

Online Media Tools
A joint comScore and Kelsey Group study showed that 78% of Internet users who read an online review in the automotive category said it influenced their offline purchase decision.
Social Media as Word of Mouth

Not surprisingly, Capgemini found that younger Internet users are more likely to check out automotive blogs. About one-third of respondents ages 18 to 34 did so while researching a purchase, compared with 22% of respondents ages 50 and older. Toyota was an early entrant in the blogosphere, employing staff to, among other things, blog back. Bruce Ertmann, corporate manager of consumer-generated media, told Brandweek he checks Autoblog, Jalopnik, Autoextremist.com and fan sites. As an example, when Al Gore III, son of the former vice president, was pulled over in July 2007 for driving his Toyota Prius at 100 mph, the automaker responded to blog entries about the incident. We dont advocate traveling at 100 mph on our nations highways, or anywhere for that matter in any of our products, but weve also heard from some of our Prius owners that say its kind of nice to know the car is not a slug at all but has the power to move fast if needed. Just what is the top speed of a Prius? Its actually 103 mph. Buy a Priusbut obey the law, Mr. Ertmann wrote on his blog. In a six-month study of online behavior conducted in 2007, CarGurus found that new-car shoppers spent a majority of their time online looking at photos or watching videos. Reading articles and user reviews or comparing prices and vehicle specifications occupied 38% of their time.
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Greatest Gains Greatest Reductions
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Where is the traditional Advertising money being spent within the Automotive channel? Non-digital ad spend is declining as Automotive moves from offline to online advertising, with Automotive Tier 2 (dealer associations) and Automotive Tier 3 (dealers) in the top 3 for both volume and shift towards digital.
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With 4 of the top 10 offline media buyers being car companies, despite having shifted billions of dollars into digital, even the car companies still spend a disproportionately large amount of money on traditional media channels This spending will increasingly come under fire and will be further eroded as more OEM dollars shift into the digital and interactive media formats. This is important for Tiers 2 and 3 which are influenced by OEMs.
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When Search Advertising is excluded, and we look at where OEMs have shifted budgets into online advertising in the most recent 3 year period, we can see where the dealers will most likely pull their dollars from as they see the need to invest in online digital marketing. We believe that Tier 1 is a leading indicator for spending shifts at Tier 2, and Tier 2 is a likewise leading indicator of advertising shifts at Tier 3.
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When we look at the overall growth in Digital Advertising and Online measured media spending, we can see the growth is outpacing the Automotive Industrys shifting of media buys at Tier 2 and Tier 3 to date This is an indicator that there is a lag in Automotive Tiers 2 and 3 which shows that there is a gap between what dealers are spending there advertising money on and where both consumers and the rest of the business world has gone.
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When we look at pure Tier 3 Advertising spend per the most recent NADA numbers, we see that dealers currently show various expenses that they categorize as Internet Advertising using up less than 13% of their total advertising budget. We believe that this share of dealer advertising spend will more than double to over 25% within the next 4 years
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How will dealers respond to the Digital Advertising Gold Rush?

A survey from The Kelsey Group indicated that 59 percent of dealers said they would utilize Internet video on their Web sites in the next 12 months, versus the 33 percent who already use the technology. Additionally, the number of dealers who implement online customer ratings and reviews is expected to rise from 29 percent to 43 percent, officials indicated. Meanwhile, 33 percent of franchised dealers indicated they will use social networking sites, an increase from 15 percent.
"These findings point to a significant disruption in the auto dealer advertising space," explained Neal Polachek, CEO of The Kelsey Group.
"There are valuable opportunities for traditional and new media companies that tune into dealers' adoption of Web 2.0 technologies and align with dealers' online media-buying intentions," Polachek added. Dealers are also shifting the manner in which they advertise. Sixty-two percent of dealers surveyed plan to boost online media spending in the next 12 months. Only 17 percent said they will do the same for traditional media. Likewise, only 8 percent of dealers intend to cut online spending, while 46 percent will decrease traditional media spending.
SOURCE: The Kelsey Group gathered information for the study in February/March 2008. Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com
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Where will these shifting advertising dollars flow into? It is fairly certain that the largest segment will be spent on Search Advertising, with well over half of that going to Google Adwords, followed by online video based advertising and online website placed display advertising combined equaling paid search advertising Classified (Autotrader.com, Cars.com, etc.) will be the 4th largest spend category, followed by purchased leads and email marketing.
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When dealers were asked in January 2008 where they would shift their online advertising investments, Search Advertising was followed by Display Advertising and Video Advertising. This shows a clear justification for ADP Digital Marketing to invest and grow capabilities in these 3 areas.
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What Types of Online Video Based Advertising Will Sell?
What types of online video advertising should ADP develop? It is obvious that click-to-play, expanding and video built into display advertising space capabilities are what we need to offer
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The Last Ten Years of Change in the Way Dealers Advertise
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How Many Dealers Have Started Buying Search Advertising During Past 24 Months?
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Which Dealers are Using SEM?
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Winners and Losers in Automotive Advertising

Automotive Retailer Investment in Online Advertising is Projected to Increase 84% During the Next 5 Years
2006 through 2011

Overall Automotive Advertising by Media Channel ($ Millions)
Declining Investment in Less Effective Media include:
Newspaper Direct Mail Yellow Page Directories Local Magazines 44
Auto Industry Takes a Digital Turn
The best auto retailers are shifting their budgets into Digital Marketing
"Automakers and dealers pulled dollars
out of television, newspaper and magazine media buys and redirected them to digital media in 2006 and 2007,"
- Lisa Phillips, eMarketer senior analyst
eMarketer data shows the automotive
category accounted for $2.69 billion, or nearly 14%, of the $19.5 billion that was spent on Internet advertising and marketing in 2007.
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All Customers are Internet Customers Majority of Car Buying Research is Done Online
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Why Allocate Digital Advertising Budget? Car Buying Decisions are Made with Online Information
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Online Information Drives Consideration Web Out-Influences TV, Newspaper, Radio & Outdoor
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Car Buyers Request Quotes at Multiple Points RFQs are now more likely to originate at Dealer Websites
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Which Industry Segments are Best Poised to Grow?
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In 2008-2009 the Internet will impact automotive shopping more than ever before!
Automotive Internet Usage: Used1 Vs. New2 Vehicle Buyers 9 Year Trend
80%
Used
New
67% 68% 59% 54% 53% 70%
64% 60% 60% 54% 47% 40% 40% 33% 26%

1Based
64%
60%
61%
47%
43%
20%
2Based
to new-vehicle buyers. Source: J.D. Power and Associates 1999-2007 New Autoshopper.com Studies to used-vehicle buyers. Source: J.D. Power and Associates 1999-2007 Used Autoshopper.com Studies
1999
2000
2001
2002
2003
2004
2005
2006
2007
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Independent sites are decreasing in likelihood of being the first site visited
First Auto Site Visited by Online Car Buyers
Independent Sites
70% 60% 50% 40%
Manufacturer Sites
61% 58% 51%
Dealership Sites
66% 62%
48% 46% 47% 46%
45% 40% 34% 31% 36%
30% 20% 10% 0%
3%
2%
2%
2%
3%
5%
6%
2001
2002
2003
2004
2005
2006
2007
Based to new-vehicle AIUs. Source: J.D. Power and Associates 2001-2007 New Autoshopper.com Studies
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Only 22% submit an Internet Lead, but 39% visit a dealership showroom because of online information
Submit an Online Request for Quote
Visit Dealer Based on Online Information
Yes, 22% No, 88%
No, 61%
Yes, 39%
Based to all new-vehicle buyers. Source: 2007 New Autoshopper.com Study
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Gen Y and Gen X buyers are more likely to submit an online quote request
Lower Funnel Activities by Generation (Based to All Buyers)
Submit Quote Request
Gen Y 29%
Lead to Dealer Visit

Gen Y 55%
Gen X
30%
Gen X
51%
Boomers
24%
Boomers
40%
PreBoomers
0%
13%
PreBoomers
40% 60% 80%
0% 20%
22%
20%
40%
60%
80%
Source: J.D. Power and Associates 2007 New AutoShopper.com Study
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Search engines can be an effective way to reach consumers looking for auto shopping sites
Web Sites Found By Search Engines
100%
Percentage of Web Site Results
80%
77% 59% 49%
60%
40%
20%
0%
Manufacturer Web Sites
Independent Web Sites
Dealership Web Sites
Based to AIUs using search engines; 2007 J.D. Power and Associates New Autoshopper.com Study
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Consumers use search to find vehicle images

Information Found By Search Engines
100%
82%
80%
60%
42%
40%
24%
20%
0%
Images
Directions/maps to local dealerships
Videos
Based to AIUs using search engines; 2007 J.D. Power and Associates New Autoshopper.com Study
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Google continues to dominate and grow in AIU search usage

Top 5 Search Engines
58%
Google
Yahoo!
30%
MSN Search
14%
2007 2006
AOL Search
8%
Ask.com
0%
4%
10%
20%
30%
40%
50%
60%
70%
Percentage of AIUs Visiting Search Engines

Based to AIUs; 2006-2007 J.D. Power and Associates New Autoshopper.com Study
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Good Things Happen When You Combine Display and Search! When combined, Search and Display Advertising deliver profoundly better results than when used independently. Together, they provide: 1. Significant lift in onsite engagement 2. Increase in online and offline purchasing by consumers who are exposed to integrated campaigns Display improves Search performance. Interest generated from Display advertising carries over to consumer Search behavior: 22% increase in CTR when advertisers run both Search and Display over just Search 26% increase in related trademark term searches brand name, company or product names Higher click-to-conversion rates in Search campaigns makes individual Search clicks more valuable Search improves Display Performance. When users are exposed to both: 244% increase in purchases of advertisers products online 89% increase in purchases of advertisers products offline 68% increase in page views on advertisers site 66% increase in time spent on advertisers site Advertisers who approach their marketing holistically drive greater engagement, generate more purchases both online and offline and steal share from their direct competitors.
Greg Coleman Executive VP of Sales, Yahoo
Sources: 1. Atlas Digital Marketing Insight Report 2. Yahoo! Paglia; Director Digital Ralph Report, January 2007
Marketing, 505-301-6369, ralph_paglia@adp.com
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Jupiter Research 2007 US Automotive Consumer Survey Yahoo! Search Marketing Proprietary and Confidential. 2007.
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How do we know what types of campaigns to offer online consumers so that dealers will want to use ADP Digital Advertising solutions?
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Automotive Digital Advertising: The Story in Charts

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Why is the Auto Industry shifting billions away from traditional offline media into online digital advertising

strategies and media?

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Who are the Biggest Advertising Spenders?

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

8.2% 4.4% 3.6% 1.1%

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

What About Automotive Buying Influencers?

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Todays Biggest Dealer Advertising Challenge

30% 25% 20% 15% 10% 5% 0%

Dealer Ad Budget Efficiency Gap

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Automotive Ad Spending Shifts Online

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Consumer Behavior and Attitudes

For Car Dealers

Automotive Digital Marketing

Search Engine Marketing

What Do Automotive Consumers Search For?

What About User Generated Content (UGC)?

What About User Generated Content (UGC)?

Social Media as Word of Mouth

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Greatest Gains Greatest Reductions

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

How will dealers respond to the Digital Advertising Gold Rush?

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

What Types of Online Video Based Advertising Will Sell?

The Last Ten Years of Change in the Way Dealers Advertise

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Which Dealers are Using SEM?

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Winners and Losers in Automotive Advertising

2006 through 2011

Declining Investment in Less Effective Media include:

Newspaper Direct Mail Yellow Page Directories Local Magazines 44

Ralph Paglia; Director Digital Marketing, 505-301-6369, ralph_paglia@adp.com

Auto Industry Takes a Digital Turn

"Automakers and dealers pulled dollars