Automakers increase ad spending
'It's starting to come back in a nice way,' marketer says
Automakers are spending a lot more on advertising than they were a year ago, giving a boost to the media companies that rely on ad revenue to keep them profitable.
While the major automakers wouldn't release details on their advertising budgets, advertising firms as well as radio and television broadcasters have confirmed they're seeing a jump in car and truck ads after a slump caused by the recession.
"To the end of February, among the big 10 automotive companies we're looking at about a 25 per cent increase from a year earlier," said Gary Belgrave, president of the Toronto-based Radio Marketing Bureau.
"It's starting to come back in a nice way."
Last week, Montreal-based Astral Media said profits at its television and outdoor advertising divisions improved in its most recent quarter due in large part to increased spending by car companies like General Motors, Ford, Honda and Kia.
"We're getting to the point where I think the entire industry in TV is seeing the rebound and basically because of the car business," said Ian Greenberg, CEO of Astral, which owns radio stations, outdoor advertising and pay television stations.
Automotive advertising accounts for 10 to 20 per cent of Astral Media's overall revenues.
Canada's public broadcaster is seeing a similar rebound, said Scott Moore, executive director of CBC Sports and general manager of media sales and marketing.
"We're seeing a revival of spending in most sectors. The auto sector has returned, not to its previous levels, but is certainly healthier," Moore said.
He added that CBC's advertising revenue is up 10 to 15 per cent so far in its fiscal first quarter and he is "optimistic for the year." CBC's sports programming relies on the car companies for between 15 and 25 per cent of its ad revenue.
Ad budgets cut during recession
Sunni Boot, president and CEO of the Canadian division of ZenithOptimedia, a global advertising firm, said the experiences at Astral and CBC can be more widely applied to the industry as a whole.
She said the car companies started to increase their advertising spending at the end of last year as the economy began to rebound — a trend that can best be seen in the ad campaigns by companies like GM, which bought back-to-back full-page ads in some newspapers to showcase its vehicles. She said radio, online and to a lesser extent TV are all benefiting from these new campaigns.
Many automakers cut their advertising budgets to save money during the recession, when car sales were suffering and consumers weren't spending money on big-ticket items. Dealerships — an important source of ad revenue for local radio stations and newspapers — also advertised less.
According to the Canadian Radio-television and Telecommunications Commission, national advertising revenues fell by 10.3 per cent to $1.32 billion in the year ended Aug. 31, 2009, while local ad revenues were also down more than 10 per cent at Canada's private-sector conventional TV stations, which include the likes of Global and CTV.
Boot said the auto industry is the second biggest overall spender on ads after the retail sector.
Not all car makers cut back
However, not all car companies cut back spending during the recession, said Jack Bensimon, president of advertising agency Bensimon-Byrne.
Hyundai, a client of Bensimon-Byrne, was "a consistent, heavy advertiser throughout the year," Bensimon said.
The South Korean automaker fared particularly well during the recession — its sales were up 28 per cent in 2009 compared to a year earlier — by emphasizing its low prices and high quality.
"We wrote the line for Hyundai, 'Smart is in,' because we started to see an aspirational attribute in making the right [purchasing] decision rather than a decision that says, 'Look who I am, look how successful I am,"' Bensimon said.
"People are recalibrating what they're saying about their brands, because consumers are recalibrating what they're prepared to spend for certain deliverables."
And other automakers continued to spend on ads that promoted consumer incentives. For example, Hyundai, Ford and GM all offered to cover payments on newly purchased cars if a customer got laid off during the recession, Boot said.
"I think the automotive industry was prudent and had to be, but did all the right things to advertise in a down market," she said.
GM confirms increase in spending
GM Canada spokesman Tony LaRocca confirmed that the company has spent more on advertising so far this year than it had a year ago.
"With last year being highly recessionary — and a particularly challenging one for GM — we were not spending on advertising as we would in a more typical year. With the new business plan in place and the positive start we've had to 2010, we have returned to stronger and more focused advertising campaigns," LaRocca said in an email.
Chrysler, Honda, Ford and Toyota wouldn't comment on their advertising spending.