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1Ralph Paglia; Director Digital Marketing, 505-301-6369, [email protected]
Why is the Auto Industry shifting billions away from traditionaloffline 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 toenable seeing a collective vision and research summary of whyso much automotive related marketing money is being shiftedfrom offline media into online media
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Who are the Biggest Advertising Spenders?
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The AutomotiveIndustry lagsbehind most othermajor industrymarketing
categories in theshift to digitalThis will beresolved as OEMs
find ways to shiftTiers 2 and 3 intoonline advertisingmedias.
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35.3%
24.9%
13.4%
8.2%
4.4%3.6%
1.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Internet
Family
Frien
ds TV
Maga
zine
News
pape
r
Radio
Source: Polk Center for Automotive Studies 2007 New Vehicle Sales Study
Why is the Auto Industry shifting billions away from traditionaloffline media into online digital advertising strategies and media?
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5Ralph Paglia; Director Digital Marketing, 505-301-6369, [email protected]
What are the mostimportant types ofinformation sources tocar buyers with Internetaccess?
OEM sites are replacing3rd Party sites!
Dealer sites are nowmore important than
Independent sites
Where does AutomotiveBuying Influence occur?
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A Harris Interactive survey ofpeople who consideredthemselves very orextremely knowledgeableabout cars found that 63%
had used the Internet as aresource for their most recentcar purchase, whilemagazinespresumablyenthusiast titleswere a
distant second, at 33%.Newspapers ranked onlyslightly ahead of television.
What About AutomotiveBuying Influencers?
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7/1317Ralph Paglia; Director Digital Marketing, 505-301-6369, [email protected]
When we exclude Paid Search and Video Advertising, the most recent3 year growth in online automotive display advertising is dramatic
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0%
5%
10%
15%
20%
25%
30%
35%
40%
Newspaper Radio Television Internet Other
Dealer
Consumer
Todays Biggest Dealer Advertising ChallengeOverspending on Newspaper, Radio, Outdoor & Mail Relative to Usage
Source: NADA
The Average Car Dealers Advertising Spend Does Not Match
The Car Buying Consumers Media Consumption BehaviorsAverage Dealer Advertising Spendvs.Consumer Media Consumption
DealerAdBu
dget
EfficiencyG
ap
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The Auto Industry continues to shiftAdvertising funds into the Online andInteractive Media space at a rapid pace
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The Automotive Industry continues to shift advertising funds into the DigitalAdvertising space From less than $2.5 Billion in 2007, the industry will growDigital Ad budgets to over $5 Billion during the next 4 years.
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Automotive Ad Spending Shifts OnlineOverall spending may be stagnant, but automakers and dealers will continue toshift it among media channels. Between 2005 and 2007, advertising spendingmoved from traditional media into digital and out-of-home initiatives, according
to TNS Media Intelligence data supplied to eMarketer. Hardest hit werenewspapers (-30.3%) and magazines (-12.5%), while TV (-6.3%) and radio (-7.6%) experienced smaller by similar declines.At the same time, spending foronline display ads rose 109.1%, while outdoor climbed a modest 1.9%.
At th OEM l l (Ti 1) b d t k d t d li TV
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At the OEM level (Tier 1), budgets are skewed towards an over reliance on TVrelative to the influence TV has on car buyers. While Internet is budgeted atless than the impact it has.
N hi l f hi d l i th USA t $7 86 billi
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New vehicle franchise dealers in the USA spent $7.86 billion onadvertising last year, with the average ad spend per dealershipincreasing 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
Th h t b l l h i t d i di b i t th l l d l
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The chart below reveals changing trends in media buying at the local dealerlevel. 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 extentby radio and outdoor. Magazine spending, although a modest $29.2 million,actually rose 71% in the same time periodand online display ads surged189% to $114 million and a 2.4% share of the total advertising budget.
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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 atsome point in their search. The firm reported that percentage was 71% in2006 and 64% in 2004.
According to Borrell, in-market car buyers spend an average of five hoursresearching vehicles on the Internetand less time with traditional media.
CarGurus, a third-party auto site, reported that online prospective buyersspend more than 60% of their time looking at photos and videos of newcars 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 theycannot afford to waste in 2008, 2009 and beyond.
Consumer Behavior and Attitudes
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Marketing, Selling and Servicing Vehicles
The Internet dramatically changed the dynamics of selling and servicingcars by offering shoppers transparency in pricing and vehicle specs.
Today, consumers expect dealers to respond to e-mail inquiries in about 2hours 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 thetools to facilitate the sale, including links to loan applications, inventoryselection, buyers orders, deposits, down payments and car insurance.
Web sites will make or break a saleand an ongoing relationship. Salescontact with new customers will be limited to a one-time showroom visit forpickupand then continue via the Web site for accessory sales, ongoing
promotions, service and maintenance appointments.
For Car Dealers
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Online Media Tools
Knowing that millions of potentialautomobile buyers are online is onething; understanding which tools touse to reach them is another. Butsavvy auto marketers are learning.
Search Engine Marketing
Once online, most people turn toa search engine for auto research.A global survey from Capgemini showedthat 78% of car buyers visited sitesfound by using a search engine.
Online AdvertisingUsed to cost effectively inform, inviteand guide car buyers to the right tools.Targeted Placements based on visitordemographics, sequential displays andBehavioral Targeting create ability todeliver right messages to right people.
Automotive Digital Marketing
Wh t D A t ti
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According to a survey published by
Autobytel and conducted by theKelton Research firm
Searches for new vehicle relatedinformation, such as MPG, prices, photos,videos, features, equipment, colors,specifications and local dealer inventorytopped the list of automotive categories forbroadband internet users.
Finding information about local dealerssuch as location, business hours, phonenumbers, email addresses, vehicle
inventory and pricing was the second-most-popular use of search engines
Used-car searches related to availabilityand pricing ranked as the third mostfrequently used automotive search activityby car buyers.
What Do AutomotiveConsumers Search For?
Wh t Ab t U G t d
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Social Media Marketing
Every day, conversations that used to take place withfriends and family are shifting to the Internet.Capgemini found that, with the spread of socialmedia, shoppers are now looking for opinions andreviews from total strangers about specific brands,makes and dealers, as well as to discuss their ownimpressions and experiences.
The New Autoshopper.com Study from J.D. Powerfound that nearly 69% of online new-vehicle buyersused one or more types of user-generated content.Consumer ratings and reviews were the most popularform, and enthusiast sites, online forums, blogs andphoto-sharing sites were considered helpful but hadlower usage rates.
Word-of-Mouth OnlineA few short years ago, price and vehicle specs werethe main pieces of information sought online. Today,shoppers turn to the Web for recommendations andreviews. Word-of-mouth has always had a greatinfluence on vehicle purchase decisions, but now theWebthrough blogs, user reviews, discussion
groups, automotive wikis and other social mediaisreplacing recommendations from friends and family.
What About User GeneratedContent (UGC)?
Wh t Ab t U G t d
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Online Media Tools
A joint comScore and Kelsey Group studyshowed that 78% of Internet users who read anonline review in the automotive category said itinfluenced their offline purchase decision.
Social Media as Word of MouthNot surprisingly, Capgemini found that younger
Internet users are more likely to check outautomotive blogs. About one-third of respondentsages 18 to 34 did so while researching apurchase, compared with 22% of respondentsages 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 Brandweekhe 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, theautomaker responded to blog entries about the incident. We dont advocate traveling at 100 mphon our nations highways, or anywhere for that matter in any of our products, but weve also heardfrom some of our Prius owners that say its kind of nice to know the car is not a slug at all but hasthe power to move fast if needed. Just what is the top speed of a Prius? Its actually 103 mph. Buya 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 userreviews or comparing prices and vehicle specifications occupied 38% of their time.
What About User GeneratedContent (UGC)?
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G
reatestGains
GreatestR
eductions
Where is the traditional Advertising money being spent within the
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Where is the traditional Advertising money being spent within theAutomotive channel? Non-digital ad spend is declining asAutomotive moves from offline to online advertising, withAutomotive Tier 2 (dealer associations) and Automotive Tier 3(dealers) in the top 3 for both volume and shift towards digital.
With 4 of the top 10 offline media buyers being car companies despite having
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With 4 of the top 10 offline media buyers being car companies, despite havingshifted billions of dollars into digital, even the car companies still spend adisproportionately large amount of money on traditional media channels Thisspending will increasingly come under fire and will be further eroded as moreOEM dollars shift into the digital and interactive media formats. This isimportant for Tiers 2 and 3 which are influenced by OEMs.
When Search Advertising is excluded and we look at where OEMs have
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When Search Advertising is excluded, and we look at where OEM s haveshifted budgets into online advertising in the most recent 3 year period, wecan see where the dealers will most likely pull their dollars from as they seethe need to invest in online digital marketing. We believe that Tier 1 is aleading indicator for spending shifts at Tier 2, and Tier 2 is a likewise leading
indicator of advertising shifts at Tier 3.
When we look at the overall growth in Digital Advertising and Online measured
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When we look at the overall growth in Digital Advertising and Online measuredmedia spending, we can see the growth is outpacing the Automotive Industrysshifting of media buys at Tier 2 and Tier 3 to date This is an indicator thatthere is a lag in Automotive Tiers 2 and 3 which shows that there is a gapbetween what dealers are spending there advertising money on and where both
consumers and the rest of the business world has gone.
When we look at pure Tier 3 Advertising spend per the most recent NADA
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When we look at pure Tier 3 Advertising spend per the most recent NADAnumbers, we see that dealers currently show various expenses that theycategorize as Internet Advertising using up less than 13% of their totaladvertising budget. We believe that this share of dealer advertising spend willmore than double to over 25% within the next 4 years
How will dealers respond to the
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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 percentwho already use the technology.
Additionally, the number ofdealers who implement online customer ratings andreviews is expected to rise from 29 percent to 43 percent, officials indicated.
Meanwhile, 33 percent of franchised dealers indicated they will use social networkingsites, an increase from 15 percent.
"These findings point to a significant disruption in the auto dealeradvertising space,"explained Neal Polachek, CEO of The Kelsey Group.
"There are valuable opportunities for traditional and new media companies thattune into dealers' adoption of Web 2.0 technologies and align with dealers' onlinemedia-buying intentions,"Polachek added.
Dealers are also shifting the manner in which they advertise. Sixty-two percent ofdealers surveyed plan to boost online media spending in the next 12 months. Only17 percent said they will do the same for traditional media.
Likewise, only 8 percent of dealers intend to cut online spending, while 46 percent willdecrease traditional media spending.
SOURCE: The Kelsey Group gathered information for the study in February/March 2008.
How will dealers respond to theDigital Advertising Gold Rush?
Where will these shifting advertising dollars flow into? It is fairly certain that the
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Where will these shifting advertising dollars flow into? It is fairly certain that thelargest segment will be spent on Search Advertising, with well over half of thatgoing to Google Adwords, followed by online video based advertising andonline website placed display advertising combined equaling paid searchadvertising Classified (Autotrader.com, Cars.com, etc.) will be the 4th largest
spend category, followed by purchased leads and email marketing.
When dealers were asked in January 2008 where they would shift their online
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When dealers were asked in January 2008 where they would shift their onlineadvertising investments, Search Advertising was followed by Display
Advertising and Video Advertising. This shows a clear justification for ADPDigital Marketing to invest and grow capabilities in these 3 areas.
What Types of Online Video
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What types of onlinevideo advertisingshould ADP develop?
It is obvious thatclick-to-play,expanding and videobuilt into display
advertising spacecapabilities are whatwe need to offer
What Types of Online VideoBased Advertising Will Sell?
The Last Ten Years of Change
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The Last Ten Years of Changein the Way Dealers Advertise
How Many Dealers Have Started
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How Many Dealers Have StartedBuying Search AdvertisingDuring Past 24 Months?
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Which Dealers are Using SEM?
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Winners and Losers in Automotive Advertising
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gAutomotive Retailer Investment in Online Advertisingis 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
Auto Industry Takes a Digital Turn
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"Automakers and dealers pulled dollarsout of television, newspaper and magazinemedia buys and redirected them to digitalmedia in 2006 and 2007,"
- Lisa Phillips, eMarketer senior analyst
eMarketer data shows the automotivecategory accounted for $2.69 billion,
or nearly 14%, of the $19.5 billion thatwas spent on Internet advertising andmarketing in 2007.
Auto Industry Takes a Digital TurnThe best auto retailers are shifting their budgets into Digital Marketing
All Customers are Internet Customers
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All Customers are Internet Customers Majority of Car Buying Research is Done Online
Why Allocate Digital Advertising Budget?
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Why Allocate Digital Advertising Budget?
Car Buying Decisions are Made with Online Information
Online InformationDrives Consideration
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Web Out-Influences TV, Newspaper, Radio & Outdoor
Car Buyers Request Quotes at Multiple Points
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y q Q p
RFQs are now more likely to originate at Dealer Websites
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Which Industry Segments are
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y gBest Poised to Grow?
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In 2008-2009 the Internet will impact automotive
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64% 64%67% 68%
70%
26%
33%
43%
47% 47%
54% 53%59%
61%
40%
54%
60% 60%
20%
40%
60%
80%
1999 2000 2001 2002 2003 2004 2005 2006 2007
Used New
Automotive Internet Usage:Used1Vs. New2 Vehicle Buyers 9 Year Trend
pshopping more than ever before!
1Based to new-vehicle buyers. Source: J.D. Power and Associates 1999-2007 New Autoshopper.com Studies2Based to used-vehicle buyers. Source: J.D. Power and Associates 1999-2007 Used Autoshopper.com Studies
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Independent sites are decreasing in likelihood
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6%
47%
48%51%
58%61%62%
66%
46%46%
45%
40%36%34%
31%
5%3%2%2%2%3%
0%
10%
20%
30%
40%
50%
60%
70%
2001 2002 2003 2004 2005 2006 2007
Independent Sites Manufacturer Sites Dealership Sites
Based to new-vehicle AIUs. Source: J.D. Power and Associates 2001-2007 New Autoshopper.com Studies
First Auto Site Visited by Online Car Buyers
of being the first site visited
Only 22% submit an Internet Lead, but 39% visit a
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dealership showroom because of online information
Visit Dealer Based on
Online Information
Yes,
39%
No,
61%
Submit an Online
Request for Quote
Yes,22%
No,
88%
Based to all new-vehicle buyers. Source: 2007 New Autoshopper.com Study
Gen Y and Gen X buyers are more likely to submit an online quote request
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Gen Y and Gen X buyers are more likely to submit an online quote request
Submit Quote Request
13%
24%
30%
29%
0% 20% 40% 60% 80%
Pre-Boomers
Boomers
Gen X
Gen Y
Lead to Dealer Visit
22%
40%
51%
55%
0% 20% 40% 60% 80%
Pre-Boomers
Boomers
Gen X
Gen Y
Source: J.D. Power and Associates 2007 New AutoShopper.com Study
Lower Funnel Activitiesby Generation (Based to All Buyers)
Search engines can be an effective way to reach
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consumers looking for auto shopping sites
Based to AIUs using search engines; 2007 J.D. Power and Associates New Autoshopper.com Study
Web Sites Found By Search Engines
77%
59%
49%
0%
20%
40%
60%
80%
100%
Manufacturer Web
Sites
Independent Web
Sites
Dealership Web Sites
Perc
entageofWeb
SiteResults
Consumers use search to find vehicle images
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Consumers use search to find vehicle images
Based to AIUs using search engines; 2007 J.D. Power and Associates New Autoshopper.com Study
Information Found By Search Engines
82%
42%
24%
0%
20%
40%
60%
80%
100%
Images Directions/maps to
local dealerships
Videos
Google continues to dominate and grow in AIU search usage
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Top 5 Search Engines
4%
8%
14%
30%
58%
0% 10% 20% 30% 40% 50% 60% 70%
Ask.com
AOL Search
MSN Search
Yahoo!
Percentage of AIUs Visiting Search Engines
2007
2006
Google continues to dominate and grow in AIU search usage
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
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When combined, Search and Display Advertising deliver profoundly better results thanwhen used independently. Together, they provide:1. Significant lift in onsite engagement2. Increase in online and offline purchasing by consumers who are exposed to integratedcampaigns
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 morevaluable
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, generatemore purchases both online and offline and steal share from their direct competitors.Greg ColemanExecutive VP of Sales, Yahoo
Sources:
1. Atlas Digital Marketing Insight Report2. Yahoo! Report, January 2007
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Jupiter Research 2007 US Automotive Consumer SurveyYahoo! Search Marketing Proprietary and Confidential. 2007.
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How do we know what types of campaigns to offeronline consumers so that dealers will want to use ADP
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online consumers so that dealers will want to use ADPDigital Advertising solutions?
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