Paid Search and its Tipping Point: How OEMs and Large Dealer Groups Are Leading the Charge

While industry pundits continue to accurately forecast the growth of U.S. automotive dealership digital advertising spend, the discussion around the unprecedented increase in total paid search has been absent in the trade.

In May 2016, eMarketer published its latest report on trends in digital ad spend within the auto industry. The report highlighted two significant industry trends:

  • In 2015, U.S. auto dealerships’ digital media represented 66.5% of all media spending. This was up from 57.2% in 2014.
  • In 2016, U.S. auto dealerships will spend $3.93 billion on paid search; that’s 45.1% of dealerships’ total digital spend.

Is the trade aware that local retailers now spend close to $4 billion on just one medium (and, largely, just one company)? Additionally, absent from the trades is the fluency that U.S. auto dealerships have in terms and KPIs that paid search (Google) re-sellers push – terms like “impressions,” “impression share,” “website traffic” and “cost per click.” Increasingly, the discussion with local dealerships regarding their marketing strategy centers too much around terms that are self-servicing for paid search re-sellers, rather than retailers.

Dealership website traffic is one important platform to help influence the dealership. However, to overemphasize and put unnecessary budget toward dealership website traffic largely ignores the consumer journey and what truly influences car buying and servicing decisions.

With local automotive dealerships spending billions on paid search, when will it reach its tipping point, like the Yellow Pages in the 1990s and traditional media in the 2000s?

Borrell’s “2016 Auto Outlook – The Thinning of the Media Pack” analysis indicates that paid search has already reached its tipping point in our industry.  The report highlights that U.S. franchise auto dealers will decrease their paid search spend by 62% by 2018. Additionally, U.S. auto manufacturers and ad associations have already started to invest less in paid search in 2015, and they forecast that paid search will be a smaller aspect of their digital investments moving forward.

  • Paid search spend is forecasted to go down to $666 million by 2018.
  • Paid search for U.S. auto manufacturers will go from $534 million in 2014 to $288 million in 2018 – a 53% decrease.

What has caused OEMs and dealer associations to begin scaling back on paid search? What were the KPIs they used to guide their decision making? Which KPIs are they using to guide them to pare back paid search budget and keep the thousands of paid search Google re-sellers at bay?

At the heart of this shift is new technology that focuses on digital influence and, most importantly, results. OEMs have the sophistication and tools to leverage KPIs that lead to results (sales and service). While site impressions are important, a consumer will use a few key sites to influence their decision. The key is to appreciate which sites influenced that decision – not just the last or referring click.

A successful media campaign will never be driven by one company (like Google) today, or the Yellow Pages or traditional media in their heydays. Most important in media are results, and the sites and experiences that influenced those results. A new cottage industry is emerging to support OEMs and local dealers on what is truly influencing the consumer on deciding what, where and from whom to purchase, and this new quest for results and digital influence is upending the current CRM industry and the army of Google re-sellers.

Yes, paid search’s tipping point has started, and the KPIs around influence and results are rapidly changing this industry.

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