Search Advertising Runs into the Recession

By Jessica E. Vascellaro

On Thursday, the public will find out how online search advertising – the biggest chunk of the Internet ad market – weathered the rocky fourth quarter when Google reports its results for the period.

The signals from one study, set to be released Tuesday, aren’t pretty.

U.S. search advertising spending fell 8% in the fourth quarter of 2008 from the same period in 2007, according to a new study from search advertising firm Efficient Frontier, which had been tracking mostly flat growth for 2008. The study — which covers an undisclosed portion the $750 million in annual spending the company manages globally — marks the first quarter of negative annual growth in the several years Efficient Frontier has been gathering such data, says James Beriker, president and CEO of the firm.

It’s difficult to predict exactly what the study might mean for earnings reports from Google and other tech giants that sell search advertising, like Yahoo and Microsoft. Google held its 76% market share from the third quarter, while Yahoo increased its market share during the quarter half a percentage point to 20%, Efficient Frontier found. Microsoft Live Search’s share dropped from 4.9 percent to 4.2 percent.

Analysts, who have been slashing their estimates, are still predicting that Google notched double-digit revenue growth in the fourth quarter. Industry research firm eMarketer recently projected that, despite the recession, U.S. search advertising will still grow 14.9% in 2009, down from a 2008 growth rate of 21.4%.

The Efficient Frontier study also found that retail marketers increased their spending 9% in the fourth quarter, compared to 2007, lending support to Google’s theory that some customers will respond to the recession by leaning more heavily on search advertising, widely considered one of the most cost-effective advertising methods.

Mr. Beriker says it is tough to predict whether next quarter will be better or worse but said there are some encouraging signs. He notes that many clients cut their budgets during the beginning of the fourth quarter after noticing fewer ads were converting to sales.

But he says spending started to pick up again towards the end of the quarter after clients adjusted their bidding strategies, modifying how much they were bidding for certain words and when. The last quarter “reconditioned the way advertisers think about the channel,” he says. “It could have been much worse.”

Some other highlights from the study:

Advertisers who spend less than $50,000 on search ads cut their spending by 23% year-over-year, while advertisers that spend more than $200,000 on search per month cut spending by 9% during that time. Purchases by advertisers who spend between $50,000 and $200,000 were relatively flat.

Finance and automotive advertising continued to deteriorate. Search-ad spending among financial advertisers fell 20% compared to the fourth quarter of 2007. Search spending from automotive advertisers declined 15% during that period.

Online TV, Automakers and Buyers

JULY 11, 2008

Will Detroit meet the buyers of its dreams on the Web?

Rising fuel prices have made 2008 a tough year so far for automakers in the US. As they examine every possible method to reach potential buyers, online television may benefit, according to J.D. Power and Associates' "2008 Power Auto Online Media Study."

Nearly seven out of 10 new-vehicle buyers surveyed said they went online to find information on TV shows. CNN.com was their top destination, followed by MSNBC and ESPN.

Arianne Walker, director of marketing at J.D. Power, told eMarketer that although survey participants were not asked about specific activity at those sites, they were asked if they watched TV content online—so it was logical to assume that some of them were watching shows and clips at the top sites, rather than just looking for information about programs and actors.

"As new-vehicle sales shrink, understanding which advertising mediums will provide the best balance of audience reach and composition is absolutely critical," Ms. Walker noted. "As more new-vehicle buyers seek information regarding television shows on the Web, advertisers can benefit from increasing their focus on this medium."

J.D. Power said that buyers of premium-brand vehicles were more likely to look online for TV content than average new-vehicle buyers.

More than three-quarters of buyers of midsize premium utility vehicles, compact premium crossover utility vehicles (CUVs) and midsize premium CUVs said they watched online TV.

For premium new-vehicle buyers, the online video connection makes sense, since Internet users tend to have higher incomes than non-Internet users. For automakers, a focus on online video viewers is practical because the group's population is growing. In the US alone, 190 million people are predicted to watch online video in 2012.

Moreover, an increased online presence by automakers is almost inevitable. Despite the auto sales slump in the US, the industry is not about to let up on online ad spending. Automakers are predicted to spend $5.61 billion on online ads in 2012, up from $2.98 billion this year.

Auto Industry Revs Up Online Spending

JUNE 11, 2008

No slowdown online

After consistently leading the US in advertising spending, the automotive sector has dropped into the number two spot behind retail. Ad spending in the sector is going in reverse—except on the Internet.

According to figures published in the new eMarketer report, Automotive Marketing Online: Negotiating the Curves, even as new-vehicle sales decline, automotive marketers will spend nearly $3 billion online this year, up 21.6%.

By 2012, automotive online ad spending will top $5.6 billion.

When eMarketer asked Scott Keogh, chief marketing officer at Audi, how much the automaker was increasing its online budget year-over-year, he replied, "We more than doubled our online ad budget in 2007 to about $1.2 million, and it looks like we'll double it again in 2008."

Auto marketers are changing media lanes and following their market.

Research from Capgemini shows that 80% of consumers now consult the Internet at least once during the car-buying process. The firm reported the percentage was 71% in 2006 and 64% in 2004.

In fact, recommendations from family and friends are being replaced in importance by online customer reviews.

Capgemini found that shoppers are now looking for opinions and reviews from total strangers about specific brands, makes and dealers, as well as to discuss their own impressions and experiences.

A joint comScore and the Kelsey Group study showed that 78% of Internet users who read an online review in the automotive category said it influenced their offline purchase decision.

What Early Ad Spend Says for the Rest of the Year

Grim Outlook as All but GM, Toyota Are Down in Expenditures

By Jean Halliday



Published: June 02, 2008
DETROIT (AdAge.com) -- Amid the U.S. industry's worst new-vehicle sales year in a decade, all but the top two automakers, General Motors Corp. and Toyota Motor Sales USA, hit the brakes on measured media spending in the first quarter -- and it doesn't look like they'll be letting up soon.

Both automakers beefed up TV spending through March: GM to $309 million from $297 million a year ago and Toyota to $141 million from $119.8 million. They also increased online-ad outlays: GM to $48 million from $30 million a year ago and Toyota to $22 million from $15 million, according to TNS Media Intelligence.

Ads outlays
Enlarge

Auto ad outlays: 2007 vs. 2008

Auto Marketing:
Ford, GM Give Retailers More Say Over Creative
Regional Groups Get a Stronger Voice in Advertising Process
Marketing Today: The Dealers' View
Retailers Give Ad Age Their Thoughts on What Moves Cars off the Lot
How About a Manicure With That Car?
Dealers Try Innovative Techniques From Airport Shuttles to Green Initiatives to Lure and Keep Customers
Ford Forecast: Bright Future or False Hope?
As Foreign Profit Grows, Economy, High Oil Prices Spell Trouble at Home
Experts disagree whether the industry's early-year expenditures will bring a cloud to the upfront for the segment.

"There's a lot of pressure on traditional media" at the car companies, said Ian Beavis, the former Kia VP-marketing who joined Carat in April in the new position of exec VP-exec global client director. Mr. Beavis, whose 30 years of experience is mostly in auto marketing, predicted the auto category in the upfront will be down this year from 2007, due to the "tremendous financial pressures" sparked by the expected decline of 1 million total U.S. new vehicle sales this year.

According to Mr. Beavis, the carmakers are paying more attention to their marketing return on investment, especially at companies that are trying to rebound in their home markets, including GM, Chrysler and Ford.

Dave Allen, principal of Richards Group, Dallas, predicted spending will fall by year's end. "The car companies are fighting for share, especially Detroit, which has to give up share for profits," said Mr. Allen, who headed Hyundai's national creative account at the agency until early last year. He also projected more online spending, with magazines and broadcast TV networks taking the hit.

Waiting for new models
Spending often depends on the cadence of new-product launches, and several automakers may hold their ad dollars until crucial models arrive, for example, Ford's redone F-150 full-size pickup and Chrysler's newest-generation Dodge Ram pickup, both coming this fall. Hyundai will launch the new Genesis sedan in late June with an effort one of its prominent dealers valued at a record $80 million, including heavy TV backing.

The companies with key vehicle introductions will spend big to insure successful launches, and competitors historically have beefed up ad support for their older models to maintain share.

In the online arena, Nissan spent only $3.5 million on ads through March vs. $12.8 million a year ago; Chrysler spent $12.8 million in the first quarter -- $4 million less than a year ago; and American Honda's spending was flat, according to TNS, though the figures do not take into account things such as websites and e-mail promotions.

But digital is becoming vastly more important. Some 71% of Americans shop online before buying a car, said Stephen Berkov, who joined auto site Edmunds.com as executive director-client strategy earlier this year after eight years in Audi marketing.

Automakers figure it's a waste of ad dollars in the current economic climate to try to convince Americans who aren't predisposed to buy a new vehicle, said Todd Turner, president of consultant CarConcepts.

He predicted an uptick in advertising in the third and four quarters -- if the economy starts to improve by the third quarter. But, he said, if the economy doesn't begin to rebound a bit by then, "we'll continue to see delays in marketing expenditures."

Google's view of autos for 2008

By Jodi Harris

The search giant's automotive director shares strategies for localized marketing and precision targeting and predicts some key industry trends on the verge of their tipping points.

Jodi Harris: It's been over a year since you joined Google as the automotive vertical market director. From your perspective, have there been any big changes to the category or to Google's automotive strategy, since then?

Bonita Stewart: We've seen major changes within the industry, such as soaring fuel prices, sales declines, market share fluctuations and reduced production; however, our automotive strategy remains the same. We work with our clients to demonstrate how technology, especially during turbulent times, aids ROI-driven media solutions.

Harris: Green marketing and reducing oil consumption seem to be major focal points for the coming year, and the rise in mobile technology and niche social marketing indicate that that localization will become a key marketing touchpoint for conveying brands' positions. What thoughts or best practice recommendations can you share to help automotive marketers strategize for these big issues in 2008?

Stewart: First, automotive marketers should implement localization on two levels -- brand and dealer. Brand marketers have the unique opportunity today to deliver relevant messages to their precise target, whether it's a potential hybrid customer or someone interested in fuel economy, through contextual targeting. Meanwhile, dealers have the opportunity to geographically target their products and services, and mobile technology offers the ability to connect with a dealer during the shopping process.

Harris: Focusing in on the idea of precision targeting, what strategies do you feel work best for brands to identify and target the right niches associated with their nameplates?
Stewart: Most brand marketers have defined targets, but it's critical to identify and then optimize their niche targets throughout the campaign, since some may have a higher ROI than others. We suggest placement targeting and taking advantage of niche sites to complement your brand strategy. If auto sales are expected to slow, it's critical to mine for potential consumers by targeting relevant content on niche sites. More than 76 percent of page views are in niche sites. (Source: AdRelevance)

Harris: Are there other key marketing trends do you anticipate will play a big role for automotive in 2008?

Stewart: Right now we are particularly keen on the benefits of online video. It's the new portable TV and offers the sight, sound and motion automotive marketers crave to differentiate their product and to evoke consumer emotion. In November 2007, U.S. consumers viewed more than 225 million auto/vehicle videos on YouTube. And several auto marketers have used online video to successfully launch new vehicles during the LA and Detroit auto shows, achieving views between 400,000 and 950,000 in a single day.

Harris: Video strategy also seems to be a top priority for the automotive market because so much of the purchase process involves getting a deeper feel for the car than just looking at pictures. Are there upcoming trends you see for video search and its ability to meet more tech-savvy consumers' needs?

Stewart: Assuming they have the appropriate digital rights we encourage all of our clients to upload their video content. Google's resources and expertise make YouTube's search experience the best it can possibly be. Recommendations, related videos, active sharing and subscriptions are very popular ways for people to find meaningful automotive-related videos. We will continue to make search and discovery of videos a priority in 2008.

Harris: Recently, you mentioned the concept of "atomization" in campaign distribution. What suggestions do you have for dealers who want to take advantage of multiplatform communications but may be limited in their budget or staff capabilities?

Stewart: Both brand marketers and retail dealer associations should consider atomizing their content and tools. Don't build it and wait for consumers to come to your site. Venture out, find them and communicate with them online through gadgets that provide dealer locators, photo/video galleries, build and price features directly to the consumers in a microsite format. Consumers control the dialog now, so make it easier for them to connect with your brand on their terms.

For dealers, I would recommend a stair-step approach to multiplatform marketing. Start with search, add contextual targeting, add geographically targeted display advertising and intermingle with video.

Harris: Obviously, at Google, search is a critical component of your marketing purview. So, what would your No. 1 piece of advice be for an automotive marketer looking to optimize its search presence?

Stewart: With U.S. vehicle sales expected to be 16 million or less in 2008, we recommend going back to basics with search marketing. All auto marketers should ask themselves if they are always on, 24/7, as consumers gather product information in today's virtual showroom. In a study we published with Compete last year on the automotive buying process, we found 65 percent of auto buyers research their products in one month or less. We also found the search engine is the No. 3 most important source for auto buyers, behind the OEM site and third-party auto sites, during the buying process. So if you are not attempting to engage your consumers on their terms, when they are ready to receive your message, you should expect diminished OEM site visits and fewer leads than your more aggressive competitors. And always remember offline plans (TV, major events) drive online activity. Be ready online for what's happening offline. Combine relevant search marketing with targeted display campaigns.

Harris: When we last talked, you spoke about the three-tiered approach for automotive marketing. But many say the funnel is eroding, and manufacturers no longer have the luxury of campaigns that simply build awareness. Are you finding this to be true? And if so, what can marketers do to streamline the purchase process for consumers who are embracing non-traditional purchasing and are more resistant to marketing tactics.

Stewart: True, the purchase cycle is condensing and the funnel is no longer linear. Nonetheless, marketers must strive to create connections at relevant moments and make it easy for the consumer to get to know the brand. When we address the three tiers, we encourage building a cohesive strategy from the brand, from the retail dealer association and from the individual dealer. All campaigns should align with a complementary message both national and local.

Lastly, don't ignore the data. Today it's more compelling than ever to follow the consumer and lead from behind. Consumer engagement is increasing and driving their behavior as witnessed by the growth in social networking, video, mobile and search. On the horizon I see integrated marketing moving to integrated accountability and ROI. Marketers will develop more cause and effect levers.

A great example is the Super Bowl. It's the all time favorite for mass reach, but how many are prepared for the aftermath? Can I search for the commercial, find it on YouTube, send it to my friends, rate the commercial, watch it on my phone, etc.?

Harris: GM made headlines recently when it announced that it would no longer be supporting the ad efforts of regional dealers. Is this a trend that you see other OEMs moving toward, as regionalization and more flexibility become key to automotive marketing?

Stewart: We see dealers realizing the reach of online marketing and its effectiveness. We see OEMs across the board stepping in to help the dealers with education, business guidance and best practices. This year will be a tipping point for retail dealer associations and we see more requests for assistance to understand the efficacy of search marketing among dealers. We see it as our role to aid their understanding of online media and de-mystify Google.