Auto Advertisers Rev Up TV Spending

Automotive advertising on TV stations is on the rebound, despite the still rocky U.S. economy and the earthquake that shook Japan in March, severely disrupting its auto manufacturing and marketing, according to media buyers and trackers of auto spending.

Although auto sales and commensurate ad spending may fall a little short of expectations this year, the outlook for spot TV from all three marketing tiers — factory, dealer associations and local dealers — is positive for 2012 and beyond, they say.

Automotive advertising is by far the largest revenue producer for stations, totaling $3 billion in 2010, up markedly from $2 billion in 2009 in the depth of the recession, but still far short of the record $4.2 billion in 2007, according to Kantar Media data.

The $3 billion in 2010 reflected sales of 11.5 million cars and light trucks. Forecasters had expected sales jump to 13 million units this year, but the economy and the natural disasters in Japan have caused some to pull back.

Most notably, J.D. Power & Associates last month recalculated, paring down its forecast for 2011 from 12.9 million to 12.6 million units. At the same time, it lowered its 2012 forecast to 14.1 million units from 14.7 million.

"We're not getting back to what was considered normal or healthy as quickly as possible, but it's still a pretty strong progression," J.D. Power's Jeff Shuster told the Associated Press.

Reacting to the J.D. Power report, Paul Taylor of the National Automobile Dealers Association said not to give up on the original projections just yet. "Many manufacturers still predict light-vehicle sales could be as high as 13 million this year."

In any event, while the forecasters may quibble about the speed of the auto (and auto advertising) recovery, they all agree there is one and that the growth should continue at some level for the next several years.

A BIA/Kelsey Media Ad View report on the auto category projects that ad spending by the automotive industry on local television by 2015 will total $4.2 billion, equal to 2007 levels, the culmination of a steady turnaround from the low point of 2009.

BIA/Kelsey also projects that spot TV will maintain its 26% share of the local ad spend through 2015, while newspapers share drops from 27% to 18% and online doubles to 12%.

According to Kantar Media, automotive spot TV spending in first quarter was up 2.4% to $700 million from $684 million in first quarter 2010 — the last quarter for which it has definitive numbers.

As any station account executive will tell you, auto spending did slow in the second and third quarters, primarily as a result of the problems of the Japanese automakers, but now that production is back up to speed, broadcasters hope that the ad spending will be quick to follow.

TVB President Steve Lanzano believes there could be an advertising battle in the fourth quarter between the U.S. and Japanese automakers.

“The Japanese automakers will want to regain the share they lost following the tsunami and plant shutdowns there, while the American automakers will want to protect the share that they picked up,” he said. “I expect there to be lots of incentive advertising out there in September and October in particular. They will all want to move a lot of cars and the pressure will be on to move them.”

TVB Director of Marketing Research B.J. Park adds that consumers have held on to their cars longer than usual because of the weak economy. "But these cars are getting older and they will eventually have to replace them,” she said. “This is going to mean a rise in demand at some point.”

Park also said the introduction of new hybrid models is going to require automakers to explain them to consumers.

Buyers agree with BIA/Kelsey that TV stations will be able to maintain their share of the auto dollars for the foreseeable future. “The dealers depend on local TV to move their cars.“ said Ellen Drury, managing partner and president of local broadcast at media agency conglomerate Group M.

“If they have the money to spend, that’s where they’re going to go. With local TV they can see it and tag it and the results are immediate," Drury added. "And dealers do like to see their spots. Unless there are some unusual circumstances, that’s the first place they go. And overall, the U.S. automakers are still the biggest spenders locally.”

Sue Johenning, EVP and group director, local broadcast at Initiative Media, said when the automakers begin shifting local ad dollars, the “lion’s share” will most likely move out of newspapers rather than local television.

Since most dealers are targeting consumers within a 10-mile radius of their dealerships, local television is an important vehicle for them, she said. “Everything we see continues to indicate that local automotive advertising will be a major ad category for TV stations."