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On the surface, decisions by General Motors this month to pull paid ads from Facebook and sit out the annual television advertising mania of the Super Bowl appear contradictory.
On the one hand it was unwilling to spend on the 900m-member social network, where there is little consensus about returns on advertising investment. On the other, it was pulling back from what many media executives see as the most tried and tested advertising event of the year, with 111m viewers.
The carmaker’s $4.47bn advertising budget remains unchanged from 2011 but its moves underscore the difficulty companies face navigating the shift from traditional advertising towards the less understood platforms of social media and mobile devices.
Advertisers are still coming to grips with how to use these more interactive platforms, analysts say, and are reluctant to commit to Facebook and Twitter while there is no established metric for measuring success.
“It’s analogous to when television came on the scene and companies asked: ‘Does it work? How do we plan for it?’” says Daina Middleton, chief executive of Performics, a digital marketing agency. “We’re in a similar time of upheaval.”
For companies from Fox to Facebook, these changes carry high stakes. And no other sector spends more on marketing than automotive, which contributed 17 per cent of all US advertising spending last year, Kantar Media estimates.
So while TV networks push to retain automakers’ ad budgets – carmakers are allocating 39.6 per cent to TV this year compared with 41.4 per cent in 2011 and 42.3 per cent in 2010 – social and mobile platforms are trying to prove they have better outlets.
The trends are in their favour. Global ad revenue at Facebook, by far the largest recipient of social media budgets, should reach $5.06bn this year, up from $3.15bn in 2011, eMarketer estimates. Mobile ad spending in the US will jump from $1.45bn in 2011 to more than $10bn by 2016, eMarketer forecasts.
Carmakers will spend $11.6bn of their total $30.9bn advertising budgets online in 2012, up 39 per cent from 2011, according to Borrell Associates, the research firm. That compares with a 16 per cent rise in overall online ad spend forecast by ZenithOptimedia, suggesting that carmakers are catching up with other advertisers.
“By the end of 2012, almost 40 cents of every auto ad dollar will be spent on digital media, and that trend will continue – largely unabated – through the foreseeable future,” it said.
Automakers’ broadcasting spending will rise 8.9 per cent to $6.6bn this year, Borrell estimates, lifted by the Olympics, which GM sponsors, and the Super Bowl, for which NBC charged a record $3.5m for some 30-second spots.
But TV’s share of ad budgets has shrunk. Carmakers such as GM and Ford are allocating a 39.6 per cent this year, down from 41.4 per cent in 2011 and 42.3 per cent in 2010.
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“It used to be carved in stone that if you wanted to do branding you had to do it on TV,” says Kip Cassino, Borrell executive vice-president, but with increased use of online media has made that idea “kind of old hat”.
The manufacturers’ growing digital and mobile spending is converging with a shift in the way consumers buy cars, arriving at dealerships with more information gathered online and the ability to comparison shop on their smartphones.
That makes location-based mobile advertising a “real opportunity” for dealerships to capture customers, Ms Middleton says. She says a potential buyer may be “three blocks away [and wondering] ‘do you have the model I want to look at?’ ”
Reaching the right audience is critical because fewer people are shopping for cars, with annualised sales of 12.8m in 2011 compared with pre-recession highs of more than 16m. Owners are also keeping cars longer and using longer financing terms. High unemployment, high petrol prices and younger Americans’ dwindling interest in car ownership also have an effect, analysts say.
While sales have picked up this year to an annualised pace of more than 14m from 12.8m in 2011, analysts say they are unlikely to return to pre-recession highs above 16m.
Dealers and carmakers are increasingly targeting the most likely buyers, says Mr Cassino. “If you’re trying to get one person instead of a great bunch of people, the focus of your ads is a bit different.”
The proportion of prospects who follow through with a purchase climbed from about 55 per cent before the recession to 70 per cent in 2011 and is expected to reach 83 per cent this year.
To succeed in social media, particularly with younger consumers, Ms Middleton says carmakers and dealers must identify new measures of engagement. “After someone likes our page, what are we going to do with them?” she asks.
After GM turned against Facebook ads, Ford took aim at its rival with a tweet saying: “It’s all about the execution. Our Facebook ads are effective when strategically combined with engaging content and innovation.”
Ford studies the communication and consumption habits of 18 to 33-year-old “millennials”, said Sheryl Connelly, its manager of global trends. “Millennials are really sophisticated. They cut through marketing and rely on word of mouth. It has changed the tone of our conversation. You can’t have a monologue – it has to be collective, co-operative thing.”
With reporting by Andrew Edgecliffe-Johnson