Look who's shifting its advertising strategy: monster marketer General Motors
Ad dollars -- and euros, and yuan, and rubles, etc.
Most big-ticket TV events throughout American history have been laced with car ads, and many of those spots were GM's. This was particularly true of the ad spending frenzy that is the Super Bowl: In the decade-long span from 2002 to 2011, the company shelled out almost $83 million on spots for the big game. This made it the event's No. 3 ad spender behind two other longtime Super Bowl marketers: Anheuser-Busch InBev
And that was only for an annual event. Until recently, GM had a strong and constant advertising presence on the domestic market. In 2010, for example, the company spent a total of around $5.1 billion on ads and sales promotions. Out of that money, $3.4 billion was placed in the U.S., which didn't leave much for the rest of the world.
That's out of sync with current and anticipated sales patterns. In 2011, North America was the source of only 26% of global unit volume. Asia, meanwhile, took a much bigger share at 38%, while even economically hobbled Europe eclipsed our continent with 29%. Numbers for 2012 are expected to be roughly similar. So if the bulk of its cars are bought overseas, why should it spend two-thirds of its ad money here?
Although the firm is fairly circumspect about what this shift will entail, already it seems to be moving in a more global direction. At the end of May, it announced it had finalized a five-year sponsorship deal for its Chevrolet brand with the most popular pro soccer team in the world, Manchester United. According to the team, it currently has a fan base of 659 million people throughout the world. That's an awful lot of potential car buyers.
If GM giveth, it inevitably taketh away elsewhere. A few weeks ago the company famously pulled its ads from Facebook
Prior to exiting the Facebook freeway, the auto company was spending around $10 million for advertising on the site. That certainly won't kill the social-media portal in terms of revenue -- the company took in $3.7 billion in 2011 -- but it'll give current and potential advertisers a big pause to think before they consider paying for Facebook eyeballs. And for a company that could really use the advertising bucks, that's not a positive development.
Another potential victim of the ad retrenchment is that aforementioned car commercial standby, the Super Bowl. GM has announced it will not air any ads during the upcoming episode of the football classic. Cost is the stated reason, since the game's broadcaster, CBS
On the back of such a defection and the press it's generated, the broadcaster might have to reduce those rates. The question is, by how much? The danger is that GM's departure will provide negotiating leverage for the big Super Bowl spenders to lower the rates for their spots. Using the 2012 game as a base, the upcoming contest could rake in around $306 million in ads. Now that's just a 2.5% drop in CBS' deep revenue bucket (using its top-line figure from 2011), but discounts could have a ripple effect, with the firm's top advertisers negotiating price cuts for all of their spots throughout the year.
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Advertisers such as Anheuser-Busch InBev and PepsiCo know how to take advantage of this, and they would be pleased to save a little coin on their marketing. Anheuser-Busch, for example, spent $5.1 billion on such costs in 2011 -- up 9% year over year. Its revenue, meanwhile, grew only 7.6% during that span. Pepsi's advertising remained more or less level over that time at around $1.9 billion. Lower ad rates will make that money go further and allow the company -- which operates in the mass consumer space, where marketing is critical -- to boost its presence among the multitudes.
Of course, without specifics from GM as to how its new ad strategy will shape up, it's hard to be exact about the kind of impact it will have. But whatever the effect, it will certainly be felt strongly by former partners and fellow advertisers. Investors in those companies should watch to see what new directions that strategy takes. Let's keep our eyes on the road.
GM's a big presence abroad, but it's not the only U.S. company reaping the benefits of selling globally. We've identified a trio of solid companies poised to make huge returns in international markets. Find out which ones they are in our FREE report, "3 American Companies Set to Dominate the World," available for download here.