Smartphones Drive Billion Dollar Auto Industry Ad Shift : Study

Browsing for cars on your iPad has done more than speed up your car buying process, it’s forced a dramatic shift in how automakers are spending their ad dollars.

Behavior among new car buyers since 2008 has changed dramatically because of social media. Typical car buyers would spend about six months from starting to dream of a new car to actually buying one. Now, people just browse online and discuss what they want with their friends a month of two before going into a dealer. Shopping for cars is more direct and consolidated.

A new study from research firm Borrell Associates indicates that despite a bigger buyer base and higher volume in 2008, the ratio of inquiries to actual sales has been more concentrated in 2013. Because of that, you can expect advertisers in the auto industry to put less and less emphasis on traditional methods. Newspaper spreads are being replaced by YouTube videos and it seems to be working.

Historically, automobile dealers and newspapers have maintained a symbiotic relationship for decades. The papers generated huge ad revenue through dealers, which in turn relied on those publications to deliver their message. That’s changing quickly according to a new study that shows auto advertising in newspapers declining 29.3 percent between 2009 and 2013. Ad budgets now center on internet marketing.

The study shows advertisers spending just over $5.8 billion on online ads in 2009. Since then the figure has ballooned to over $14.3 billion predicted for 2013. Newspapers have sunk from $5.06 billion to $3.62 billion. Television, movie and direct mail advertising are enjoying increases, but none come close to spending on the online side.

In total, the auto industry is projected to spend almost $26.3 billion on advertising this year. More than half of that is reserved for Facebook campaigns, YouTube clips and ads that appear as banners on your browser. Not only can you expect to do more car shopping on a tablet in the future, but the sales staff will probably greet you with one too.

Industry trends are looking up despite the buyer base shrinking by roughly 25 percent since the recession set in. Auto sales are still far below their peak in 2000 above 17.8 million. Through June, the SAAR (Seasonally Adjusted Annual Rate) is at 15.98 million units, which reflects mostly steady increases since the industry bottomed out in 2009.

The ad spending reflects a change both in how people look for cars and how automakers are showing them. According to the study, traffic on automaker retail sites from tablets and smartphones is spiking. More importantly, those searches were often indicative of more than causal browsing.

Many were explicit to brands and even models, specifying color choices, prices and local availability. Imagine going on a blind date and knowing what the other person wanted before either of you met. This is the same idea. Dealers glean valuable information from what you browse for and that information is for sale.

Brands including Lexus and Cadillac are integrating the technology into their buyer experiences. Cadillac offers an interactive software demonstration for its new CUE infotainment system. Similarly, Lexus began recruiting staff from places like local Apple computer stores to serve as technology experts in showrooms.

Source: Auto Guide