Compared to annual ad spending increases of 3.7 percent by auto advertisers from 2001 to 2006, local media research outfit Borrell Associates expects compound annual auto spending growth to be 1.7 percent over the coming five years. "Overall, spending is kind of stagnant," said Borrell Associates VP Pete Conti.

Meanwhile, the Web will see a spike in auto ad spending. According to Conti, online ad spending in 2001 by car sellers was pegged at $471 million. That's steadily increased and is set to go up nearly 84 percent from $2.3 billion in 2006 to over $4.2 billion in 2011. "That is a huge leap," he said. In 2001, total new and used car ad spending was around $25 billion, and is forecast to reach more than $33 billion in 2011, Conti told ClickZ News.

Ad dollars allocated to cable and telemarketing each are expected to increase over 40 percent in the next five years, while spending on newspapers, direct mail and directories each will drop over 20 percent, according to the report.

The research firm projects video and paid search ads will comprise the bulk of ad formats used by local online auto advertisers by 2012. In 2007, 29 percent of local auto Web ad spending will go towards video and paid search, and by 2012, Borrell expects 76 percent to be spent on those formats.

"One-third of dealers are buying search engine advertising, and 80 percent of them say it is successful in driving new traffic to their sites," notes Borrell's "2007 Online Auto Advertising Shifts Into High Gear" report, released yesterday. Larger dealers are buying paid search advertising, said Conti, but most smaller dealers are not sophisticated enough to do so yet. Many local auto advertisers are taking advantage of free listing venues such as Craigslist and Google Base.

Thirty-second video spots in auto dealer directories, mainly on newspaper sites, cost between $150 and $350 per week, according to the report; such efforts have generated from $160,000 to $600,000 in ad revenues annually in mid-size markets.

Along with video and search, e-mail spending on local online advertising is also set to rise; however, banner units will see a spending decline.

Used auto sellers are putting larger portions of their ad spending online compared to all auto advertisers combined, which dole out 7.6 percent of the total $30.5 billion spent to the Web. Used auto sellers put 20 percent of their ad budgets online in '06, and private car sellers allocated 27 percent of their budgets to the Web.

Of the $421 million spent on used auto advertising by private-parties in 2006, $114 million was spent online. "Given current trends," notes the report, "it is likely that online will become the No. 1 media choice for individuals advertising their used vehicles this year."

Used auto sellers in general have a big opportunity online, said Conti. Over $831 million, or almost 20 percent of ad spending by used auto sellers, including franchises, independent dealers and individuals, went online in 2006. Borrell Associates predicts spending on used car advertising online this year will comprise 39 percent of all new and used vehicle advertising.

“There is also a big opportunity for those who can master used-vehicle marketing, and in particular private-party sales," Conti noted. "The number of used vehicles on the road continues to swell, and dealers and individuals alike will need new ways to connect with buyers.”

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