Advertisers Want Auto Industry To Stay Afloat

GM Dealership
GM Dealership

When it comes to the auto industry, there are more than just millions of auto-related jobs on the line. Billions of dollars in advertising—arguably the cornerstone of the industry—is at stake.

That means everyone from the advertising agencies to TV networks, to local newspapers, would be affected. And this comes at a time when the ad industry is already suffering from the economic downturn and the transition from traditional commercials to web ads. The U.S. automakers are at the backbone of many parts of the U.S. ad industry. The TV networks' schedule and season that starts in the fall was even built to cater to the auto industry's release schedule for new vehicles.

General Motors , Ford , and Chrysler together accounted for 3.3 percent of measured ad spending in 2007, a total of 4.6 billion dollars. If you include unmeasured ad spending it's well over 7 billion dollars. Now just over three percent may not sound like a lot, as my colleague Dennis Kneale noted, but I'd like to point out that the percentage is of the entire advertising industry, and that General Motors and the like are among the biggest single advertisers in the country, and are incredibly important to certain sectors.

The four major TV networks saw nearly six percent of their revenue last year come from the American carmakers. If one or all three were to fail, it would be particularly hard on News Corp's Fox, which drew 9.2 percent of its revenue from these advertisers last year. So far this year it's only gotten worse: through July 2008 Ford and Chrysler each spend 22 percent less on advertising than last year, while General Motors dropped its spending by six percent.

Based on what General Motors CEO Rick Wagoner said today in congressional testimony, GM's spending is about to drop off a cliff. Wagoner said "we're not going to do Super Bowl ads this year frankly because we are cutting back on everything and we are actually shifting a huge amount of our ad budget that remains to digital marketing which is less expensive and more efficient."

GM has been one of the Super Bowl's biggest advertisers, so its absence this coming year speaks to how bad the automakers woes are for sports programming in general. I'm hearing from ad buyers that even the major Thanksgiving day football games haven't filled their ad slots. And fewer auto ads means lower ad prices sports programming on ESPN as well as the networks.

The ad is really facing a perfect storm. While GM might be wise to focus on lower-cost online ad campaigns, the ad industry is worried that online revenues aren't growing fast enough to compensate for losses elsewhere.

Questions? Comments?