Why GM gambled $1.5B on digital

When the third largest advertiser in the U.S. so much as sneezes, Madison Avenue is ready with a tissue. But the recent decision by General Motors to shift one half of its total advertising budget to digital over the next three years is hardly a sniffle. True, GM already leads the way among auto manufacturers, according to comScore, which reports that the carmaker delivers 27 percent more display ads than rival Toyota. But GM's decision to split the difference between digital and traditional has many of the web's big players thinking that we could be in the middle of a seismic shift.

"GM's decision to allocate 50 percent of its media budget to digital shows its commitment to more closely aligning media consumption with media spending," says Mitch Lowe, CEO and founder of Jumpstart Automotive Media. "Their head start will give them a distinct competitive advantage." 

But if GM does realize an advantage from its digital about-face, it won't be because its competitors are asleep at the wheel. The same comScore numbers that put GM ahead of Toyota with respect to display ads served also credited the Japanese carmaker with greater efficiency compared to the rest of the field. Toyota serves 32 percent more ads per person reached than all other auto manufacturers.

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Add to Toyota's impressive numbers its willingness to experiment -- the company recently spent $4 million on a dedicated YouTube comedy channel -- and it's clear that the GM marketing team has its work cut out for it.

But according to Shawn Riegsecker, CEO of Centro, GM will have one big advantage over the rest of the field.

"It will be the first time any client will have the budget and presence to look on the internet as a clean palette with which they can do anything," Riegsecker says. "Most brands are under-spending on the web, which limits their ability to truly be creative and use the medium for its potential. GM won't have these constraints and, pending similar moves by other advertisers, I expect GM to lead the revolution and gain first-mover advantage." 

Drive carefully
No matter how you slice it, GM's decision to dedicate half its ad budget to interactive is a good thing for anyone who works in digital. But GM might not be the ideal big brand to take the digital plunge the industry has been waiting for.

While Riegsecker and Lowe praise GM's marketing team, both acknowledge that marketing can only go as far as the product lets it. Both had praise for GM's products, but that message doesn't seem to have reached American consumers, who have made shunning the automaker something of a generational pastime.

"GM's sales and labor relations have faced a great deal of scrutiny in the past generation, and they have lost market share due to these and other factors," Riegsecker explains. "But their marketing has remained rock solid. I doubt so many analysts would fault GM's marketing for the company's loss of share."

According to Lowe, GM needs both great products and smart marketing to succeed. But, he points out, digital may be the place to reduce costs and improve efficiency in terms of delivering the right marketing message to the right customer.

"GM has put exhaustive research behind digital media investing and this shift proves its success," Lowe says. "With digital media, it is possible to find all consumers who are in-market shopping for a car and to narrowly target the right sales message to these consumers. This shift will result in GM selling more cars for a lower overall marketing spend." 

But to do that, GM will need to go beyond simple search and display, and that means one of America's biggest brands may have to start thinking small. To shift its outlook toward a more web-friendly perspective, GM says it will make changes in the way its marketing team works. Already, GM has begun to rethink operations at its dedicated media agency, GM Planworks.

Ken Taylor, who replaces outgoing GM Planworks boss Dennis Donlin, has been asked to both lead the agency and integrate it with Starcom MediaVest Group.

"As GM has streamlined and gotten more agile, it seemed only appropriate to move from a siloed business approach to a more flexible, nimble approach that would allow them to access all our centers of excellence," Laura Desmond, CEO of Starcom MediaVest Group, told AdAge.

Whether GM's gamble will pay off is anyone's guess. But Riegsecker says one thing is certain: Three years from now, we may very look back on GM's decision as a watershed moment.

Michael Estrin is associate editor at iMediaConnection.

 

Comments

Jennifer Fisher
Jennifer Fisher April 4, 2008 at 11:09 AM

It's definitely an exciting time in digital for GM and GM Planworks. We're hiring right now for digital roles in Chicago, New York, LA and Dallas, and always on the lookout for great digital talent in Detroit. Go to www.gmplanworks.com or www.smvgroup.com to check out opportunities to join our digital teams!

Jason Vu
Jason Vu April 2, 2008 at 2:13 PM

Hyundai Santa Fe is doing quite well in Vietnam with social media marketing.

T Brown
T Brown April 2, 2008 at 11:29 AM

The point is well made that due to mass collaboration, GM will still need to offer a great product in addition to effective marketing. With this type of spend they will be everywhere on the Net so it will be that much more important to connect with their audience instead of just annoying them.