By Jean Halliday and Kris Oser
Moves Tighten Online Inventory and Boost Ad Rates
DETROIT (AdAge.com) -- Automakers have already gobbled up more than 80% of available ad space for 2006 on independent, third-party auto research sites, tightening inventory and raising prices. A year ago, the auto marketers had purchased only about 50% of the inventory, according to media buyers and auto-research publishers.
The trend reflects the auto industry’s growing appetite for online advertising and a decrease in spending in more traditional mediums, since many 2006 automotive budgets are expected to be flat.
“Ford was the first to contact us in early May” about 2006 inventory, said Mike Darrow, exec VP-sales and business development at auto research site Edmunds.com. (Darryl Hazel, VP-marketing in North America for Ford Motor Co.’s Ford, Lincoln and Mercury brands, recently told Advertising Age that the automaker will allocate more dollars to digital ad spending in 2006 while he expected his total ad budget to be flat.) “By September or October [automakers have] made their orders” for 2006, Mr. Darrow said. “They seem to start sooner and drag out longer.”
CPMs up almost 30%
Because of demand, cost-per-thousand-consumer prices for 2006 ads on the third-party auto sites have jumped an average of between 20% and 30% over 2005 rates. Some of the larger ad units offering rich media or video have increased prices by more than 50%, said Mitch Lowe, CEO of Jumpstart Automotive Media, San Francisco, which represents a slew of the sites involved, such as J.D. Power and Associates’ JDPA.com; consumerguide.com; eBay Motors and others.
However, some online auto publishers, such as Edmunds.com and Kelley Blue Book’s kbb.com, which get some the heaviest traffic among car sites, put the price raise for 2006 placements at 5% to 10%, and closer to 20% for the most prime locations.
“There are only so many ads you can put on a site,” said Julie Ask, senior analyst, Jupiter Research, who specializes in the online auto market. The crush is coming as automakers seek targeted placements, reaching consumers they know are shopping for their make of vehicle. “Automakers want to be in front of consumers who are in the process of making a decision,” Mr. Darrow said, but “there are limits to the inventory.”
So the premier placements on the publishers’ home pages are snatched up first. That includes the home page header ad and the unit to the right of the top bit of content. “These carry the highest value,” Mr. Darrow said. “We’re sold out for all of 2006.”
Among the other hottest areas are sections on new cars, vehicle categories and vehicle make. Kelley finds that many consumers click to the “used car” tab to find out what their old car’s trade-in value is.
While some 70% of consumers research auto purchases online, the buying funnel isn’t straightforward. People don’t just move from the publisher’s home page to the new-car section, category section, make/model section, and finally a dealer's Web site. “We bookend the process,” said Robin Cooper, VP-advertising and business development, Kelley Blue Book. She said consumers visit kbb.com to check their trade-in price and peruse new cars, and then go elsewhere, to manufacturers’ sites and car-buying sites and then, later, come back to Kelley.
That finding makes it all the more important to target ads. “Almost 80% of our users are undecided as to make and model,” Ms. Cooper said. “You can’t push them, you can’t surface dealers early in the process or they feel offended.”
Manufacturers have handled the inventory competition not by shifting dollars back to traditional media, but by jostling harder for an online ad position. While they used to “conquest” -- buy up all the inventory on their make’s pages -- now they consume all inventory that is available anywhere their brand appears on the site.
Behaviorally targeted ads
Auto publishers handle the inventory shortage by selling more behaviorally targeted ads, a method of online ad serving that tracks a consumer to identify which car they are interested in and then serves an ad to them wherever they may go on the site -- even if they are no longer on a page featuring that make or model. So if traditional placements are sold out, an ad can still be sold via this method. Both Kelley’s and Edmunds use behavioral targeting firm Revenue Science and report good results. “We’ve probably doubled or tripled our business in behavioral,” Ms. Cooper said.
Another method Mr. Darrow mentioned for Edmunds is revolving ads. So if 2 million users view the sport utility vehicle section on his site a month, he can serve an ad for one type of SUV to 1 million of those users that the advertiser wants to reach, and an ad for another type of SUV to the other million.
But the only foolproof way to bolster inventory is to add more. Kelley’s is rolling out a redesign in 2006 that will offer video for the first time, along with blogs and podcasts.
Adding video content
Edmunds is also adding more content, especially video. Edmunds has plans to jack up the 200,000 video plays a month to 1 million. “Video is becoming a bigger and bigger tool for consumers,” Mr. Darrow said. “People like to look at the cars, crawl into them and really get a sense of the vehicle visually.”
Edmunds will build a video center where people can see multiple clips, and use more links embedded in text research content to drive them there.
Mr. Darrow said next year’s strategy also calls for attracting more traffic to view inventory that is already there, to pull in 11 million monthly visitors by the end of the year, up from the current 5 million to 7 million. To do so, Edmunds will spend more on paid search, which consumes nearly all its marketing budget now, and invest in display ads for the first time.
Many car and truck marketers publicly discussed their shift to online advertising in 2005 in the wake of fewer media choices, lower TV audiences, digital video recorders' ad-skipping abilities and increasingly hard-to-reach segments of the population. Purchasing and finance departments at carmakers have insisted that advertising provide a stronger return on investment, leading to more attention to online advertising, which is measurable.
Among the carmakers that have been increasing online advertising in recent years and intend to continue this year are General Motors Corp.; Ford Motor Co.; Chrysler Group; Toyota Motor Sales USA; and Nissan North America.
Total U.S. auto advertising, which had risen steadily every year for a decade, except one 4% slump in 2001, will go flat in 2006, Merrill Lynch predicted late last year. John Casesa, auto analyst at the investment company, cited “intensifying turmoil in the domestic auto industry will put increased pressure on ad budgets.”