Advertising through the Internet is growing rapidly - especially in Europe. But even though consumers are using the web to research car purchases more than any other retail product, the automotive industry remains unconvinced that Internet advertising is preferable to more traditional media.
Until now, the overall Internet market has been dominated by the USA, which accounted for 85 percent of overall web advertising expenditure in 1999. That compares with only 9 percent in Europe.
Spending by online advertisers in America will grow eight-fold between 1999 and 2004, according to Forrester Research. But electronic advertising budgets will grow almost twenty-fold in Europe over the same period. The North American share of the market is expected to fall to 68 percent during this time, while Europe's share will grow to 17 percent.
Much of the expenditure will be diverted from traditional advertising budgets - and growth will be particularly rapid within the European auto industry.
The Internet Advertising Skyrockets report from Forrester Research suggests some expenditure on radio, television and magazines will be diverted into electronic advertising, but budgets will continue to grow. Net expenditure on newspaper advertising and direct mail is forecast to fall from 2002 onward, with the two media forecast to lose 18.2 percent and 17.5 percent of expenditure to the Internet.
Some of the extra spending on electronic advertising will come from newly allocated funds, however. Much of it will come from non-advertising budgets such as sales staff, events or promotions.
Expenditure of electronic advertising will move rapidly toward payment by results. At present, 85 percent of advertising is paid for simply according to the size of the audience reached. By 2003, Forrester suggests, more than half of expenditure will be performance based. Payment will be calculated on the basis of pay-per-click, pay-per-lead or pay-per-customer.
Internet users are increasingly using the web to research car prices. According to the Internet Access Report published in April by Continental Research, checking car prices with a view to making a possible purchase is the second most popular online activity for British Internet users.
Thirty percent of male Internet users aged 35-44 have researched car purchases online in the past six months, compared with an average of 16 percent for the total universe of UK Internet users.
Neil Bradford, director of Fletcher Research, agrees with the findings. 'Online consumers want to use the Internet to help them buy cars,' he says. 'Successful online strategies will combine the research and communications potential of the Internet to instill sufficient faith in consumers to commit to a vehicle purchase online.'
According to the report Automotive Retailing in the New Millennium from the Economist Intelligence Unit, 'the Internet provides significant opportunities to change how, when and where cars are sold. As the online distinctions blur between OEMs, dealers and third parties, the auto Internet looks more like the 'Wild West' than ever.'
Online advertising activities from European motor manufacturers have got off to a slow start.
Emanuela Wilm of Volkswagen's New Media department says there has been 'very little electronic advertising activity by the company.'
While there is a separate budget for electronic advertising it is still low, though 'it will increase over the next few years.'
VW has concentrated on banner advertising with search site Yahoo! and automotive sites such as auto.de, autocity.de, faz-online, falk-online and mobil.de. Payment is generally per click which allows easy monitoring of effectiveness.
Kevin Everhart, European advertising manager of Jaguar, says the company has been 'dabbling' in the use of banner advertisements since late last year.
Jaguar has 'hardly been overwhelmed by the response levels,' but appreciates the ease of tracking the progress of sales prospects.
'Electronic advertising could quickly fall on its face,' says Everhart. 'Consumers could soon turn back to conventional media.'
After a year of experimentation, Mercedes-Benz is more positive. Gerald Keller, team leader for the Audio Visuelle Medien department, says the marque is identifying a strategy for electronic advertising.
It tested the market with a six-week banner advertising campaign for Transporters on Yahoo! and advertisements on other specialist sites with payment by click through. The results were good, with an overall response rate of 5 percent. The more specialist sites generated a higher quality of response.
Keller sees the trend growing. He believes that electronic media will soon take budgets from conventional media. Keller believes that the process 'should be accelerated rather than waiting too long until everything is perfect.'
Mercedes-Benz GB expects to move online rapidly. New media manager Morelia Low expects the company to launch an online campaign in the next two months with a separate budget.
'It will be the biggest change this year in our advertising,' she says.
The enthusiasm is shared by Renault, which has been advertising online since 1998. In addition to banner advertisements on search engines Yahoo! and Lycos, Renault has invested heavily in ensuring that searching for keywords such as 'safety' prompts listing of the Renault website address.
Renault is seeking to work closely with tightly defined target groups for precisely targeted advertising of specific models. Websites attracting families are used to advertise the Espace minivan, for example, and sites attracting homosexuals are used to promote more unusual or flamboyant models.
Competitions with cars as prizes have proven to be a strong trigger, attracting 1-3 percent of users to click through to the Renault site.
Autobytel is also moving toward payment by performance wherever possible. It spends 40 percent of its 4 million (A6.6 million) budget online, with long-term bookings on the AOL, MSN and Lycos search engines plus various motoring sites.
'We always buy into the motoring section,' says head of marketing Suzanne Butler, 'very rarely outside. Click-through rates are slowly declining throughout the business, from 0.6 percent to 0.4 percent of people that have an opportunity to see the advertisement in the USA.
'Not only can we monitor in real time the source of any person visiting our site, but we can also see where they go within it. We can build a detailed profile of users.'
German Internet specialist Ferdinand Dudenhoeffer emphasizes the importance of using the contacts delivered through the web. While all the major carmakers have their own websites in Germany, more than half have no facility for users to make contact via e-mail. Of 333 test e-mails sent in a recent exercise, only 181 were answered, with 70 percent taking more than 24 hours to respond. In the worst case, it took the Rover importer 13.5 days to respond to an e-mail enquiry.
'Money spent on electronic advertising is a complete waste unless the business is engineered to handle the interest in the right way,' says Dave Hawkins of automotive e-commerce training company CyberCar.
'There are some fantastic websites generating huge numbers of sales leads, but dealers have generally failed to convert those leads into sales.'