Where Are Dealers Spending Their Money?

Several years ago, any dealership that had an online strategy was looked upon as forward-thinking and cutting-edge. Today, however, the Internet has become an advertising staple for almost all dealers. Indeed, most in the industry now believe online advertising is an absolute necessity for success.

Of course, times have been a little tough and everyone knows that when times get tough, the advertising budget is sometimes the first casualty. So what about online advertising? Has there been a change in online ad spending practices? Where are dealers focusing their online ad dollars? The answers to these questions are varied, and it all depends on who you ask.

“It’s amazing what a year can do,” commented Todd Swickard, CEO and founder of Auto Dealer Traffic, stating that he has actually observed an uptick in overall online spending. “But,” he added, “[dealers are] not as experimental as they used to be. They’re very cautious, very much looking at every single number that’s out there.” A year-and-a-half ago, he noted, everyone was trying out different things to see if they’d work. Now things have come full-circle and many dealers are pulling back, opting to stick with what works. “There is no budget to try anything that isn’t results-oriented or proven,” he said. “They’re kind of digging back in.”

Richard Valenta, CEO of TK Carsites, said he’s been seeing dealers trend toward increasing their spending and dedicating a much larger percentage of their budget to online efforts, whether it’s pay-per-click advertising or paying someone to help them with search engine optimization. “In fact,” he said, “some of the dealers we work with actually dedicate 100 percent of their advertising budget to online spend.”

So where is that money going?

Pay-Per-Click (Paid Search/Sponsored Links)
No doubt about it, dealers are still making use of pay-per-click (PPC) advertising, also referred to by many as paid search or sponsored links.

According to Dean Evans, chief marketing officer for Dealer.com, more dealers are doing paid search. In fact, he said, they’ve seen the use of paid search double over the past five months. Evans attributed this increase to a change in dealers’ perception of PPC advertising. He stated that in the past, some dealers viewed this method of online advertising as something that was only occasionally dabbled in or something that merely produced traffic for their Web site once in a while. He did not believe dealers have the luxury of just dabbling in paid search anymore. “Years ago, if they didn’t do it—not a big deal,” he said. “Today, if they don’t learn how to do it and acquire customers for less money … it could be a situation of them not running a business any longer.”

Evans described PPC as the cheapest and most metered spend dealers can invest in. He noted that dealers need to determine how much they can spend on PPC to ensure that their Web site is in front of “all of the finite, organic interest that’s coming across the search engines.” In other words, there will only be a certain number of people every day going to a search engine and typing in a term like “LA Honda dealer,” and dealers need to put their ad in front of all of the people interested in the key terms applicable to what they’re selling. “There’s a finite amount; it’s not a black hole,” he pointed out.

“[Pay-per-click] needs to be the first set of spends,” he said, “Dealers are looking at paid search and how to maximize that first before they go to other spends.” He explained that search engines are to present-day dealers what the yellow page listings were to dealers 20 or more years ago—the baseline spend before they buy ads anyplace else.

Swickard agreed that dealers were definitely still keen on PPC ads, but said more dealers are trying to be smart about it, being more selective in what they do rather than simply throwing money at it. “It’s much more conversion-driven,” he stated, adding that the dealers he’s observed seem to be taking a more holistic approach to their online strategy; they look at it as just one part of the mix and try to balance it against other elements like organic search. “There’s not the overly aggressive dealer out there as much as there used to be: ‘Hey, let’s dump $10,000 into the engines each month just to make sure that we are everywhere,’” Swickard explained. “It’s much more selective.”

Sponsored links are a favorite for Checkered Flag in Virginia Beach, Va. According to Alex Snyder, director of e-commerce for the dealership, paid search has given them “far and away” the best return on investment. “That’s probably our most effective paid advertising we do. Actually,” he added, “it is our most effective by far.”

At Gentilini Motors in Woodbine, N.J., where 80 to 85 percent of the total advertising budget is spent online, the majority of online ad dollars go toward PPC. However, according to David Pritchard, director of marketing and public relations, it won’t always be that way. “As more and more competition has moved into pay-per-click advertising, we have increasingly focused on organic search. Once the bidding wars for keywords really get heated up … no one will be able to buy enough clicks to make it worth their while,” Pritchard speculated, “and that time is not far off.”

Display (Banner) Ads
One of the areas dealers are expressing the most interest in learning about, according to Evans, is display, or banner, advertising. At Dealer.com, they are seeing more dealers interested in understanding and asking questions about the how, what and why of engaging customers online with display advertising. While Evans thinks display ads, if done correctly, can be very successful, he cautioned that not all display ads are created equally. “Display advertisement, if it’s not done right, if it’s not in the right markets and the right in-market sites … it can be more expensive than traditional advertising in some cases,” he advised.

Dealers should do some due diligence before agreeing to purchase a million impressions (number of times the ad is displayed) from a company that promises to run the ad on “auto-related” sites, said Evans. After all, a site selling hubcaps could be considered auto-related, but would not be “in-market” for a dealer. He encouraged dealers to get specific about which sites their ads run on and if they’re in the appropriate market. “This is not going to be rocket science,” he said. “The more in-market your advertising, the better your ROI.” He also urged dealers to make sure they can measure not only the number of impressions but all the way down to cost per lead and cost per sale. “Make sure you look at display [advertising] just like you do all other Internet lead-generating activities.”

Pritchard mentioned that Gentilini Motors is experimenting with display advertising, testing variations of contextual behavioral-targeted banner ads. With basic contextual marketing, he explained, Internet users are shown advertising based on the terms they search for. “Google’s AdSense program, for example, is a straightforward version of contextual marketing,” he offered.
Behavioral targeting is a more sophisticated type of contextual marketing that targets Internet users with relevant ads based on a profile of their recent online activity. “Each time the user performs a search, reads an article or clicks on an ad, a cookie stored on the computer tracks the activity, which is used to create a behavioral profile of the consumer for marketing purposes,” Pritchard explained. “Here’s an example: The user searches for mid-size car reviews, reads one or two reviews and then read an article about fuel-efficient models. Next, the user might visit a general news site and be shown ads for hybrid vehicles.”

Behavioral-targeted advertising has not really caught on in the dealer community, according to Swickard. “I think it’s still evolving,” he said. “A lot of dealers still don’t grasp the concept … There’s definitely a complexity to the world of behavioral targeting, so it’s catching on but it’s still not lighting the fire.”

Third-Party Sites
When talking about online advertising, things like pay-per-click and banners immediately come to mind. However, the practice of paying for inventory listings on third-party sites should not be overlooked, especially since it seems to be one of the easiest and most popular methods. Pushing inventory out to scores of third-party sites often involves no more effort than entering a vehicle into the dealership’s DMS. For many dealerships, third-party sites are their biggest online ad spend; in some cases, it may be the only form of paid online advertising they engage in.

Such is the situation with the Jim Koons Automotive Companies, a group of 18 franchise stores in the Washington, D.C. and Baltimore, Md. area. According to Marketing Director Kevin Corsini, “If you look at your pot of advertising dollars and say where have you gotten and where can you get the biggest bang for the buck, [third-party sites have] been it. It’s tried and true and hasn’t let us down, so we just keep going back to what’s been working,” said Corsini. They list vehicles with AutoTrader.com and cars.com, among others. “Our attitude is, the third-party providers are kind of the experts in the field.”

Snyder said that Checkered Flag lists its inventory with third-party sites, but he also noted that he’s seen a slight dip on the results from those sources in the last few months, something he attributed to some changes with Google. “Google’s mission in life is to give a searcher the most relevant search results that they can possibly get and … when it comes to the car business, I’m seeing trends with Google results where they’re pushing people more toward dealership Web sites and manufacturer Web sites than to, say, CarsDirect.com or even cars.com.”

Ricky Lopez, Internet Sales Director for Greenway Dodge Chrysler Jeep in Orlando, Fla., said third-party sites are some of their best lead sources. The dealership spends roughly 40 percent of its ad budget online, but receives 62 percent of their sales from the Internet. Lopez lists inventory with cars.com and AutoTrader.com, as well as with UsedCars.com and the other sites in the Dealix network for new and used vehicle listings. “I’ve used other lead sources, but they haven’t done well for us,” stated Lopez. “We’ve used banners and they’ve done OK, but we haven’t gotten the money’s worth that we’re getting with these providers.” He said they average between 53 and 63 sales per month from third-party sites.

Microsites are still an important part of dealers’ online advertising mix. “A lot of dealers have tried to figure out a strategy for microsites,” said Swickard. “[They] used to be done just for the sake of doing a microsite,” he said. “The microsites have gotten a whole lot better … Now their microsites are much more focused, hoping to drive traffic back to the main domain that they have.”

Swickard said one of the biggest concerns he’s noticed is dealers wondering what more they can do online with their used inventory and how to make sure it’s appearing in the search engines. Microsites are one way they’re addressing that issue. “We’ve seen a lot more microsites on the used side, so folks trying to promote their used vehicles can actually get them into the [search] engine,” he stated. “Those types of microsites are becoming much more popular.”

While many dealers use microsites as lead capture points, some dealers look at them mainly as means to increase their online real estate as part of their overall search engine optimization strategy. “We don’t use microsites really for lead capturing,” said Snyder of Checkered Flag. “We use it more for organic search purposes.”

Search Engine Optimization (SEO)
Snyder’s comment is consistent with what has been observed by Valenta at TK Carsites. “The simple fact is they want to increase their exposure and their presence on the search engines because that’s where most of their traffic is coming from,” he stated. “More dealers, from our point of view, are really trying to focus on gaining ground on the natural or organic listings,” he continued. “There seems to be a high demand for the ability to dominate those organic listings, whether it be optimizing their main site, putting up additional Web sites or landing pages or microsites—the goal seems to be common in that [dealers] want to dominate those listings.”

SEO is cited by most as still being the most effective strategy for online advertising and marketing. Obviously, SEO does not require a monetary investment if dealers handle SEO efforts in-house. “But the questions is,” offered Valenta, “would they do it right?”

Some dealers would rather leave it to the professionals. Evans with Dealer.com said he’s seen clients increase the amount of funds they’re devoting to SEO services. He pointed out that continually getting a Web site to the top of the organic search listings will require updating the site more frequently, which means dealers will either have to invest time and manpower or hire an SEO company to keep the site optimized. He said investing in putting up a good Web site and keeping it on the first page of Google “is purely the best ROI you can get for any activity you can be doing at the store, period.”

What works best?
“Online marketing is really a moving target,” observed Pritchard of Gentilini Motors. “Just when you think you have it figured out, everything changes.” Constant tracking and monitoring are absolute necessities. “That’s one of the things we love about online marketing,” he stated. “I can’t ever remember a time when tracking results has been so accurate and manageable for advertising. Technology has really helped us zero in on what works and what does not.”

So how do dealers evaluate those results and determine the most effective use of their online advertising dollars?

“Ultimately it is extremely easy to measure effectiveness because it’s all about the bottom line,” said Pritchard. He said he looks at a multitude of factors including the quality of the leads and the closing rate. “However, we also measure effectiveness of different online efforts in relationship to their intended utilization,” he added. “For instance, [we evaluate] a Web site by its conversions to leads, time on specific pages, and its ability to communicate our brand; a pay-per-click campaign [is evaluated] by click-through relative to bounce rate; display [is measured] by impressions and more importantly by click-through and conversions.”

Snyder agreed. “Every advertising source is a little bit unique,” he said, adding that he measures effectiveness by looking at closing ratios and cost per sale, but keeps each source in the proper perspective. “We do take a little bit of a step back and realize that cars.com is not simply an Internet lead generation tool, so you can’t compare cars.com directly against our paid search campaign, but we do … watch the trending in all those areas.”

Swickard encouraged dealers to give themselves an overall checkup when it comes to any online advertising and marketing they’re engaged in. “Right now,” he said, “as long as they have a mix of search engine optimization and paid search, that’s definitely where they’re going to get the biggest bang for their buck.”

Vol. 6, Issue 10