Report: It's Been A Tough Year For Auto Advertising

A new report from Borrell Associates indicates for ad sellers – especially broadcast TV – the bottom seems to have dropped out. For the buyers, the cutbacks reflect lower new-car sales, flat used-car sales, and greater cost efficiency in targeted marketing.

Dealers aren’t spending less on marketing, reports Borrell. They’re just spending less on advertising. Marketing budgets are swelling, particularly for digital “services” that help them manage their own direct-to-consumer media channels in social media, email, and their dealer websites.

Total automotive ad spending this year is down 7.3%, to $34.4 billion. For 2019, Borrell is forecasting a 3.4% bounce-back. But 2019 seems a long way off, especially for companies that still have their 2018 fourth-quarter numbers to hit. Our five-year outlook is for low growth, averaging 1.7% per year.

Nearly all of it goes to digital advertising.

It’s all the result of fundamental changes brought on by the Great Recession a decade ago. That economic trigger forced manufacturers and dealers to rethink marketing expenditures and align them with what potential car buyers were doing and where they could be found. As a result, 67% of all automotive advertising now goes to highly targeted digital media, stealing from traditional print and broadcast channels that are considered less efficient.

Dealers are now spending 41% less to advertise a new car than they were five years ago. It’s gone from $888 in 2012 to $518 this year. It’s now easier to hit a specific target, which means dealers can be more efficient with their ad buys. “Mass” media still plays a role in branding messages, but even that’s now being challenged as video advertising migrates to the digital environment.

In the new report,  Borrell recast their numbers to provide a picture of what automotive advertising might look like in 2023. These reborn forecasts point to striking changes in future spending. The new model predicts that, five years from now:

• Print advertising will be significantly lower than 2018 levels
• Broadcast TV advertising will be significantly lower
• Radio advertising will be lower
• Cable advertising will be higher
• Digital advertising will be significantly higher

All of this points to a very different marketing landscape for the automotive industry by 2023. The advertising piece of overall marketing expenditures is likely to remain in the $35-37 billion range, but marketing services are likely to get far more attention as manufacturers and dealers spend more time and money on their “owned media” channels.