The Quiet Revolution in Automotive Advertising

New Car ShowroomA new milestone is set to be reached in 2014.  For the first time, digital advertising will represent over half of all ad spending in the U.S. automotive sector.

That means that TV, radio, outdoor, newspaper and other print advertising, taken together, will represent only a minority of the roughly $36 billion advertising industry, the second largest advertising category in the United States (behind general merchandise stores).

This is great news for all of us who have suffered through high-decibel radio advertising, TV ads with sophomoric production values, and “carnival barking” poster-like print ads that have been so ubiquitous in the automotive category for so many decades.

A just-released report from media research company Borrell Associates, titled 2014-2015 Automotive Advertising Outlook, notes the following key factors that have influenced the “drive towards digital” in the automotive advertising category:

•     Over the past decade, the number of franchise auto dealers has dropped by ~3,500 (18%), even as the number of new vehicles sold per dealer has grown by ~18%. Fewer-and-larger dealerships reduce marketplace clutter and the clamor for audience attention.

•     Also contributing to reduced clutter, six major car brands have disappeared from the market over the past 10 years: Hummer, Mercury, Plymouth, Pontiac, Oldsmobile and Saturn.

•    The per-vehicle cost of advertising for a new car has declined ~20%.  No it’s only about $500.

•     More than 90% of auto purchases begin with consumer online research. This change in behavior has transformed auto dealerships from acting like showrooms to being more like fulfillment centers.

•     As their “media channel,” dealerships are able to use the Internet to offer special customer deals in the form of rebates, incentives and loyalty programs. These marketing schemes now amount to ~$2,400 per vehicle sold — dwarfing the amount spent on advertising.

Automotive print advertising is declining -- thankfully.
The end of an era? Thankfully, yes.

Thanks to these major trends and developments, we’re now spared the volume and intensity of intrusive automotive advertising that was so common before.

Instead, car dealerships are ready and waiting for us when we’re in the market to purchase a new automobile by using online ads, search engine marketing, social media and other digital platforms to be easily accessible and available when we go online.

According to Borrell, nearly $300 per vehicle will be spent on online advertising this year, whereas just a little over $200 will be spent on traditional advertising.

Five years ago, online ad spending was about one third the amount of traditional advertising.

The information-rich web is also changing another aspect of the car buying experience:  It’s making the job of automotive sales easier rather than more difficult.

Here’s proof:  Only a few years ago, more than half of all car shoppers would end up not buying a vehicle.  Today, that proportion has now dropped to just 25%.

When customers come into the showroom today, they’re better informed, they know what they want to purchase, and they’re up on various the options and pricing deals.  In short, they’re ready to buy.

Fewer intrusive ads … better educated consumers … less stress on sales personnel … satisfied buyers.  It seems like a win-win for everyone, doesn’t it?

The European Union Versus Marketers

EU e-Privacy Initiative attacks ad tracking via cookiesI wonder how many marketers are focused on what’s happening in Europe on the digital marketing front? While companies here are busily engaged in making sure ad tracking is being done to the nth degree, in the UK and Continental Europe, new legal restrictions on advertising tracking threaten to upend a lot of these efforts, particularly for multinational brands.

In short, the EU’s e-Privacy Directive restricts the use of “cookies” and virtually all other digital ad tracking methods. And the legal frameworks set up around this directive would require any marketer with users in any EU country to be subject to EU-wide and country-specific privacy legislation.

The new privacy initiatives are far more restrictive than the present US-EU “safe harbor” agreement, which merely requires American companies to notify users when cookies are used on a website. The new regs covering web pages, web apps and mobile apps would require giving notice each time a cookie is used, thereby setting up a flurry of endless notifications that promises to seriously degrade the online browsing experience.

The seemingly reasonable compromise of adding information to a “terms of use” agreement isn’t acceptable to the EU either, unless all users are issued the new agreement and they certify their acceptance.

And just to make sure everyone knows how serious all of this is, the new regs call for the imposition of financial and/or criminal penalties for the non-compliant use of cookies. But for the moment at least, only two relatively small countries besides the UK – Estonia and Denmark – have implemented controls to enforce the EU directives.

Here in the United States, privacy legislation slowly wends its way around Congress, with many legislators understanding that the key to successful commerce online is the ability for marketers to match marketing messages to interested consumers. It’s in Europe where governments appear more than willing to cripple the ability of marketers to do the job they’ve sought to do for decades: Target their audiences with as much precision as possible.

As a result, some European businesses are making noises about abandoning Europe for the United States. The problem is, in the digital age with so much of the branding and commerce blurred between countries, it’s impossible for restrictive moves in one region not to cause negative repercussions somewhere else.

Online Display Ad Clickthrough Rates Finally Bottom Out … Near the Bottom

Online Display Ad Clickthrough Rates Bottoming Out
Online display ad clickthrough rates have stopped declining ... bottoming out at 0.09%.
The latest news in online display advertising is that ad clickthrough rates have now leveled off after an extended period of decline – one that was exacerbated by the economic downturn.

So reports digital media marketing firm MediaMind (Eyeblaster). According to a report released this past week, one key reason for the decline being arrested is the greater sophistication of advertisers in targeting online advertising to audiences and groups that are more likely to be interested in them.

That being said, the overall clickthrough rate has leveled off at an abysmal 0.09%.

That is correct: less than one tenth of one percent. In any other business, this would be a rounding error.

If that statistic seems difficult to believe, consider this factoid: The average Internet user in America is delivered more than 2,000 display ads over the course of a single month. We might think that users would be inclined to click on more than just two or three of these ads during a month’s time.

But it’s important to realize that when users are in the mood to shop and buy, they’re typically going straight to the sites they like … or they’re using Google, Bing or some other search engine to find their way.

And it turns out there’s really no such thing as an “average” Internet user, anyway. Research conducted by digital marketing auditing and intelligence firm comScore, Inc. has found that around two-thirds of people on the Internet never click on any display ads during the course of a month. Moreover, only 16% of Internet users are responsible for around 80% of all clicks on display ads.

All the more reason why search marketing continues to be the online advertising powerhouse that it is. And why not? It’s putting your business in front of the customer when s/he is in “search-and-buy” mode … not when s/he’s doing something else.

Bing, Blekko, and more new developments in search.

Facebook + BingWhen it comes to the evolution of online search, as one wag put it, “If you drop your pencil, you miss a week.”

It does seem that significant new developments in search crop up almost monthly – each one having the potential to up-end the tactics and techniques that harried companies attempt to put in place to keep up with the latest methods to target and influence customers. It’s simply not possible to bury your head in the sand, even if you wanted to.

Two of the newest developments in search include the introduction of a beta version of the new Blekko search engine with its built-in focus on SEO analytics — I’ll save that topic for a future blog post — along with a joint press conference held last week by Facebook and Microsoft where they announced new functionalities to the Bing search engine. More specifically, Bing will now be displaying search results based on the experiences and preferences of people’s Facebook friends.

What makes the Bing/Facebook development particularly intriguing is that it adds a dimension to search that is genuinely new and different. Up until now, every consumer had his or her “search engine of choice” based on any number of reasons or preferences. But generally speaking, that preference wouldn’t be based on the content of the search results. That’s because the ability for search engines to deliver truly unique search results has been very difficult because they’ve all been based on essentially the same search algorithms.

[To prove the point, run the same search term on Yahoo and Google, and you’ll likely see natural search results are pretty similar one to another. There might be a different mix of image and video results, but generally speaking, the results are based on the same “crawling” capabilities of search bots.]

The Bing/Facebook deal changes the paradigm in that new information heretofore residing behind Facebook’s wall will now be visible to selected searchers.

The implications of this are pretty interesting to contemplate. It’s one thing for people to read reviews or ratings written by total strangers about a restaurant or store on a site like Yelp. But now, if someone sees “likes,” ratings or comments from their Facebook friends, those will presumably carry more weight. With this new font of information, as time goes on the number of products, brands and services that people will be rating will surely rise.

The implications are potentially enormous. Brands like Zappos have grown in popularity, and in consumer loyalty, because of their “authenticity.” The new Bing/Facebook module will provide ways for smaller brands to engender similar fierce loyalty on a smaller scale … without having to make the same huge brand-building commitment.

Of course, there’s a flip side to this. A company’s product had better be good … or else all of those hoped-for positive ratings and reviews could turn out to be the exact opposite!

Where are Newspapers Now?

Newspaper ad revenues continue in the doldrums.John Barlow of Barlow Research Associates, Inc. reminds me that it’s been awhile since I blogged about the dire straits of America’s newspaper industry. The twin whammies of a major economic recession along with the rapidly changing ways Americans are getting their news have hammered advertising revenues and profits, leading to organizational restructuring, bankruptcies, and more.

But with the recession bottoming out (hopefully?), there was hope that the decline in newspaper ad revenues might be arrested as well.

Well, the latest industry survey doesn’t provide much cause for celebration. A poll of ~2,700 small and mid-size businesses conducted this summer by Portland, OR-based market research firm ITZBelden and the American Press Institute finds that ~23% of these businesses plan to cut back on newspaper advertising this year.

The kicker is that these revenues are being spent, but they’re being put to use in other advertising media.

The ITZBelden survey found that a similar ~23% of companies plan to up their 2010 digital ad spending anywhere from 10% to 30%. This compares to only about 10% planning to increase their print advertising by similar proportions.

Moreover, the survey findings reveal that small and mid-size U.S. businesses have moved into digital marketing in a significant way. Not only do more than 80% of them maintain web sites, they’re active in other areas, including:

 ~45% maintain a Facebook or MySpace page
 ~23% are engaged in online couponing
 ~13% are involved with Craigslist
 ~10% are listed on Yelp! or similar user-review sites

One area which is still just a relative blip on the screen is mobile advertising, in that fewer than 4% of the respondents reported activities in that advertising category.

Where are these advertisers planning to put their promotional funds going forward? While newspapers should continue to represent around one quarter of the expenditures, various digital media expenditures will account for ~13% of the activity, making this more important than direct mail, TV and Yellow Pages advertising.

There was one bright spot for newspapers in the survey, however. Respondents expressed a mixture of confusion and bewilderment about the constantly evolving array of digital marketing communications options opening up … and they’re looking for support from media experts to guide their plans and activities.

And where do they see this expert advice coming from? Newspaper ad reps.

Perhaps the Yellow Book’s “Beyond Yellow” small business advertising campaign – you know, the one that touts not only the Yellow Pages advertising but also web development, online advertising, search marketing and mobile advertising – is onto something.

Novelty Reigns at Allure Bays (er … Microsoft)

Microsoft Office 2010 logoMicrosoft SharePoint 2010 logoIn the drive to “engage” customers, some companies are going to pretty great lengths to try something new and novel.

Take Microsoft and its soon-to-be-released Microsoft Office® 2010 and SharePoint® 2010 versions. Burned by the negative customer reaction to some of its earlier introductions (Vista®, for example), the company is trying some new tactics this time around.

Will they succeed? You be the judge.

You can start by visiting www.allurebays.com. This is a “pretend” site put up by Microsoft’s direct marketing agency-of-record (Wunderman), and attempts to generate awareness for the new Office 2010 and SharePoint 2010 versions without ever mentioning the products by name.

“Allure Bays Corporation” is a fictional company whose name is a riff on the Internet meme all your base are belong to us from an erroneous English translation in a Japanese video game that spread throughout the web in the early 2000s. The bogus site offers infomercial-type videos and other content. Special hidden clues are peppered throughout the site, with content that only alludes to the Office and SharePoint products and their feature/benefits.

What’s going on here? Jerry Hayek, a Microsoft marketing group manager, reported that the company wishes to reach an audience of developers that he characterizes as “jaded”: “It’s a fairly jaded audience. There are a lot of companies that want to talk to them,” he said.

In order to spark visitor engagement, a leaderboard on the “Allure Bays” web site allows registered users to compete for the honor of finding all of the 45 hidden clues on the site. So far, the site has attracted ~25,000 registered users.

“When we look at the developer audience, getting an engagement of 150,000 to 200,000 (spread across several videos) … is a win,” Hayek noted.

What’s the reaction of visitors? If the comments left by viewers of the “Allure Bays” video channel on YouTube are any gauge, it’s mixture of criticism and confusion. To wit:

 “This is one big, expensive, utterly failed attempt of Microsoft to go viral. Please thumbs-down this video.”

 “AYBABTU is a cornerstone of Internet culture. Microsoft appropriating it to hawk the newest version of their bloated Office Suite is loathsome. Anyone up-voting any of these videos should have their Internet license revoked.”

 “I don’t get it … is it supposed to be funny?! Or what the h*ll is going on here?”

“It could be the new TV show like Lost or Fringe or Fantasy Island 2?”

 “WTF.”

Sheri McLeish, an analyst with Forrester Research who covers Microsoft, reported that she found the “Allure Bays” site confusing. “I’m not sure what it’s supposed to do. But maybe there’s something I’m missing.”

In the end, whether or not this initiative will be declared a success depends on how the folks at Wunderman and Microsoft view the results in terms of before/after awareness, audience engagement, and positive product perception.

But the early indicators don’t look all that promising.

Internet privacy legislation: What are the implications?

Internet privacyThe issue of online privacy – the degree to which publishers are allowed to capture and use information derived from consumer online behavior – has been an undercurrent of concern since the very early days of the Internet. What is the right balance that allows the web to be used for marketing and commerce … but that also allows for an acceptable degree of consumer privacy?

The privacy issue has gathered steam in recent years. Today, proposed legislation affecting EU countries would dictate that web cookies (snippets of computer code) cannot be placed on a user’s computer unless it is strictly necessary for the purposes of enabling the use of a service explicitly requested by the user.

If such legislation is enacted, the implications for web publishers would be far-reaching. After all, cookies are currently used for many purposes, including web analytics, session management, content management, personalization, managing preferences, and calculating advertising revenues.

Cookies are the means by which all of these functions give the web its commercial foundation and functionality. Without them, the web would be little more than another broadcast medium for viewing non-customized information on a computer screen instead of on paper or on a TV screen.

And now those same privacy discussions are beginning to happen among U.S. lawmakers. Legislation is being crafted in Congress that may restrict the use of cookies along with other forms of “personally identifiable” information.

Is this a good development, or not?

It’s certainly true that some unscrupulous web sites and publishers have used cookies as a means to engage in nefarious behavior. But in an attempt to eliminate those exceptions, is it wise for legislation to wipe away all of the very real benefits web users derive from services that utilize cookies as the means to deliver them?

It’s pretty clear that one of the obvious impacts privacy legislation would have is on publishers who earn revenues from advertising. The inability to utilize cookies when serving online ads would affect the way the ads perform. Without cookies, ad servers are unable to perform the most basic functions such as fraud analysis and frequency capping (limiting the number of ads shown to a viewer).

In addition, publishers would lose the ability to measure “conversion” rates – tracking specific actions tied to ad revenue calculation such as downloading a white paper or to make a purchase – that is the foundation for many ad compensation packages. Or to serve a specific ad to someone who has expressed prior interest in a topic or product.

The data that these and other cookie-enabled actions provide is the basis of most online advertising programs. Without cookies, advertisers would have to purchase far more impressions served to swaths of people who may or may not be interested. Web analytics would also become more challenging; third-party services such as Web Trends and Google Analytics tap into cookies as a way to provide information and answers.

The claim that without legislation, people don’t have ways to limit the proliferation of cookies on their computers is just not accurate. Not only do many publishers provide ways for consumers to opt out of targeting techniques, surveys show that a significant proportion of Internet users — perhaps one third — routinely delete cookies from their computers. And ~10% have them permanently blocked.

It’s good for lawmakers to be looking at the privacy implications of the Internet. After all, the web continues to evolve at a quick pace, with new functionalities coming to the fore every day that may have implications on consumer privacy. But at the same time, it’s important to really think through the full ramifications of laws that, while well intentioned, would have negative consequences on everyone if enacted.