TV networks beware: Auto ad spending growth will slow to a crawl this year

Global automotive ad spending growth will slow considerably this year—a potentially ominous sign for TV networks that rely heavily on the sector—according to a new forecast.

Publicis Groupe-owned Zenith projects auto spending to grow by just 0.8 percent, down from 1.5 percent growth in 2018. The report, issued today, covers 14 markets—including the U.S., U.K., China, Brazil and India—that account for 76 percent of global spending for all categories. Automotive spending in those countries totaled $35.5 billion in 2018.

"Auto brands are expecting a tough year in 2019 as they face continued tension in trading relations, particularly between the U.S. and China, and the possible imposition of car import tariffs in the U.S. making it more expensive for manufacturers to source raw materials and parts, as well as to sell across borders," Zenith stated.

But there is better news on the horizon: Zenith expects growth to pick up to 2 percent in 2020, spurred by several large marketing events including the Summer Olympics in Tokyo and the UEFA Euro soccer championships. Still, that rate would remain behind the 4 percent growth the entire ad market has been posting.

Automotive trends are closely watched by TV network executives because of the large volume of spending. Zenith estimates that nearly 55 percent of all auto ad spending went to TV in 2018, well above the 33 percent average for all categories.

In the U.S., Ford ranked as the No. 2 ad spender on broadcast network TV in 2017 at $692 million and General Motors came in No. 5 at $610 million, according to the latest figures from the Ad Age Datacenter.

"Television remains the best channel for conveying emotional brand images and sustaining them over time," Zenith states. "However, the ongoing decline in linear television ratings in most developed markets has been pushing up the prices of the remaining audiences. That's now pushing brands to divert more of their spend to online video and other internet formats."

Zenith projects TV's cut of auto spending to drop slightly to 54.4 percent in 2019 and to 53.1 percent in 2020. In 2018, digital consumed nearly 21 percent of total auto ad spending, far below the nearly 41 percent global average across all categories. Zenith notes that the TV-digital gap can be partially explained by the fact that auto sales "are almost exclusively finalized offline" (i.e., in person at dealerships). That "makes it more difficult for auto brands to optimize their online activity," Zenith notes.

But the tide is slowly changing as more buyers perform auto research online. By 2020, Zenith expects automakers to spend about 24 percent of their ad budgets online.

The U.S. is by far the largest market for automotive ad spending among the 14 countries studied by Zenith, accounting for $18 billion—which is nearly three times what was spent in China. However, spending in the U.S remains stuck in a long-term decline, dropping 12 percent from 2012 to 2018, according to Zenith.