Tuesday, July 14, 2009

Smiling at uncertainty: Auto ads + value deflation

With much the US auto industry now firmly in the surreal world of Washington, DC, it should come as no surprise that advertising is feeling the impact of the industry's troubles.

According to the Television Bureau of Advertising, local TV advertising from the automotive category--usually the strong number one local advertiser--was down a remarkable 52% from the same period last year (here). Only Food + Consumer Electronics categories were up among the top 25 advertiser categories (reflecting a back-to-basics move of twittering while eating, perhaps).

Back in January, I posted that one of five marketing trends we'd see was ad deflation among the pay-per-impression models online (here)...those pressures would seem to be accelerating in the traditional ad channels now, even as last summer foretold the decline in automobile advertising as imminent, if not quite present (here).

So What?

As ad reps now pursue landscapers, pawn brokers and plastic surgeons who have traditionally seen TV advertising prices as out of their league (here), it begs the question: what is the value of TV advertising?

The answer it seems, is that it is much less than the current market price. With local ad rate cards running at $6.66 to $27.29 cost per thousand impressions (depending on day part), effective rates are much lower for local dentists and plumbers now being courted by tv ad sales reps.

As marketers, we all undertand the importance of rationalizing advertising decisions using established goals and the means of measurement against them. But not every ad channel can deliver a directly measurable (i.e, causative) return on investment...in spite of years of rhetoric saying it could...the choice of channel may depend primarily on one's willingness to accept the very real uncertainty of not knowing the outcome of an investment before it comes out.

For local TV broadcasters, though, the auto industry's decline is contributing to a larger, more certain outcome in the pricing model: value deflation.

For a look at some 'legendary' auto advertising, harkening to a past that will of course remain there, check it:

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