As Automakers Struggle, Advertisers Adjust

TV still has impact, but car buying has changed

While station executives believe they still hold the pole position for attracting auto-category dollars, they’re bracing for change, too.

With the three major Detroit automakers sputtering and the Internet continuing to draw an ever increasing share of marketers’ budgets, the future holds some uncertainty.

For decades, the automotive category has been a station’s bread and butter, as a rule accounting for up to a quarter of its revenues, while other segments have hardly reached double digits. And it remains healthy. Spot dollars in the category, which comprises manufacturers and their dealer associations, actually rose 6% in 2006 to $4.1 billion, according to TNS Media Intelligence.

“Spot TV is still a major player,” says Patrick McNew, executive VP at agency PHD. “It’s the way you get out a message to a number of people quickly.”

But last year’s growth came after 2005’s 9% decline in spending by manufacturers and dealer associations. And in 2006, Ford was the only one of the Big Three to up its spot spending at the manufacturer level.

Surging Toyota posted a 47% increase and, considered a savvy marketer, could inspire others to follow now. Also taking some of the sting out of the volatility, says TNS, was that each of the Big Three’s dealer associations spent more last year.

“Everybody’s looking to find a way to be bullet-proof when it comes to spot revenue,” said Mark Antonitis, president/general manager at Young Broadcasting’s KRON San Francisco. “We’re concerned, but we’re finding new ways to bring in revenue.”

KRON and Nissan recently inked a multi-year, multiplatform deal under which the station’s 21-year-old locally produced program is re-branded Nissan’s Bay Area Backroads. The host drives an Xterra that’s highly visible in the program, and Nissan is embedded in all on-air promos. At the conclusion of every show, the host directs viewers to a Nissan site where they can locate dealers and get more information.

Still, even Antonitis says selling traditional ads remains crucial and is “by no means dead. It’s the majority of our revenue, and we have to continue to concentrate on it.”

Scott Heath, general sales manager at CW affiliate KSWB San Diego, says spot inventory accounts for 20% of his channel’s revenue.

But his station’s sales force is charged with emphasizing multiplatform deals, partly as a way to outfox Internet-only competitors by offering a two-screen option. Viewers see the commercials on-air and are directed to the Web. The station is building a search platform on its Website, so that consumers easily can look for dealers and offerings.

Last summer, as Heath and his colleagues at the former WB network were confronted with introducing The CW in San Diego, they opted to turn it into a revenue opportunity. In a multi-tiered deal with General Motors, the automaker’s name was attached to all promos leading up to the September launch. Every on-air spot touting the network’s arrival included “brought to you by” messages from Pontiac or Chevy—the younger-skewing General Motor brands in line with The CW’s 18-34 target. The station used graphics that dotted across the screen’s lower-third during shows, plugging The CW as “powered by Chevrolet.” The Website carried banner ads, and there was a contest, too.

“It’s one of the most creative things we’ve done at the station,” Heath says. “It gave a big advertiser a real compelling reason to take ownership of something new and innovative.”

On the more traditional front, auto marketers use the spot market aggressively because it continues to occupy the top line on “the purchase funnel.” That’s what marketers call the process by which potential customers are first exposed to a brand and image. TV gives carmakers that wide reach, and then consumers conduct their own research on the Internet or elsewhere. “TV is dominant at the top end of the purchase model,” said TVB President Chris Rohrs.

But stations are increasingly interested in capturing a greater share of those Internet dollars. Auto online dollars jumped 38% in 2006 to $84 million, according to Borrell Associates. But that’s still a drop in the bucket compared with “spots and dots,” and only about a dozen stations were grossing more than $1 million.

One success story is Automall, featured on the site of Young Broadcasting CBS affiliate KELO Sioux Falls, S.D. The newspaper-style mini-site has become a second business for the station; it allows consumers to search an extensive database for cars, looking for a local dealer with a preferred offering.

KELO promotes Automall heavily with a separate on-air campaign. President/General Manager Gwen Kinsey says the goal is to use the equity KELO has state-wide and transfer it beyond: “To not play in a developing medium with the opportunity to leverage that brand would have been stupid.”

But as PHD’s McNew notes, TV’s biggest role is still to create that first buzz. If a manufacturer or dealer needs to tout a special offer, he says, stations “can turn on a dime for incentive deals.”

And unlike national ads, a chief benefit of spot is “geo-targeting.” A media plan can include a focus on trucks in Texas or more-upscale vehicles in urban markets.

Auto marketers also are news directors’ best friend. About 30% of all local car ads appear in newscasts. “It is and will remain a viable area for automotives as we know it today,” said Cathleen Campe, senior VP for agency RPA. “Consumers in local markets still turn to their news.”

Some marketers aren’t sure. Advertising on the local news is an effective way to reach younger consumers.

“You still reach an audience there,” says Steve Johnson, a director of the Northland Ford Dealers Advertising Association in Minnesota, “although, with everything we’ve seen with demographic changes, it’s really a mature audience watching news.”

So Northland Ford Dealers is shifting 10%-20% of its budget onto the Internet, although a strong TV commitment looks to remain for the long term.

Chrysler is testing new media with its national platforms, but spot TV is still important: For example, a recent campaign used TV in the top 100 truck markets.

Showing the effectiveness of an on-air local campaign is a two-year-old effort by Mercury, featuring a largely unknown actress who has drawn attention for her looks, enthusiasm and distinctive azure sweater. The spots featuring model Jill Wagner started on the local/regional level, but Mercury liked her image so much that her ads went national last year.

But stations know that trouble at the Big Three could cut into spot dollars. Domestic sales for the trio dropped 8% in 2006, according to Auto Data Corp. But booming Toyota saw sales rise 13% and will threaten the Big Three further this year with a stronger push into the lucrative truck market.

“We are concerned about the issues that the Detroit Three are facing, the need for GM to get back on track, the long-term viability of Ford, and who owns Chrysler and what does that mean,” says TVB’s Rohrs. “At the same time, there’s a lot of strength in the Asian brands led by Toyota.”

But even if there is a change in ownership at one of the major automakers, marketing will be a key plank in a turnaround strategy. At least, that’s the wish.

On a recent conference call with analysts, Bob Prather, COO of Gray Television , predicted, “They’re going to spend more money to advertise and get the thing back on its feet.”