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FARMOST
The Internet Mass Media  WORDS
I C O N O C A S T b y
M i c h a e l T c h o n g
Business 2.0's Newsletter for Internet Marketing Executives
++++++++++++++++++++++++ 09-Sep-98 ++++++++++++++++++++++++
___________________________________________M a c r o v i e w
Automotive Market --> 21% will buy cars over the Net in 2000
___________________________________________P a g e v i e w s
Media Erosion, Part 3 --> TV and 'zines biggest info victims
___________________________________________M a c r o v i e w
Automotive Market
*****************
Summary: Our love affair with cars is accelerating the Net's
stature as the ultimate sales channel. This is being driven
by both fed-up consumers and a wide array of sites that are
designed to make car buying a pleasure again.
Cyber Dialogue predicts that car dealerships will eventually
close or dramatically change in years to come. Many shoppers
feel it's high time. According to a study by J.D. Power and
Associates, broken promises, complicated price negotiation
and intimidating environments are the top three reasons why
consumers are dissatisfied with buying from a car dealer.
The Net provides what car buyers want. The online automotive
industry is already pulling in $6 billion a year, estimates
Payam Zamani, co-founder and executive vice president of
Autoweb.com, but that's only a tiny fraction of the $650
billion spent annually on cars in the U.S.
Still, a June survey of 527 Internet users by Millward Brown
Interactive reveals that while only 0.6% actually made a car
transaction online, fully 42% used the Internet to look up
automotive information, suggesting sizable demand.
The reason is simple. Next to homes, cars are unquestionably
the most complicated items most consumers will buy in their
lifetime. Attracted to the hassle-free systems used by such
automotive lead-generators as autobytel.com and Autoweb.com,
consumers are presenting dealers with an average of 43 sales
leads a month via the Internet, reports the National
Automobile Dealers Association.
Here are a few more highlights of the online car industry:
* Market Forecast - Palo Alto, CA-based Killen & Associates
predicts that 40% of auto loan originations will move to
the Internet by 2005. J.D. Power and Associates estimates
that 21% of all new-vehicle buyers will use the Net to get
information or otherwise facilitate a purchase by 2000:
-----------------------------------------
--- New Car and Truck Online Shoppers ---
Year
Percent of All Buyers
-----------------------------------------
1996
10%
1997
16
2000
21
-----------------------------------------
Source: 1998 J. D. Power and Associates
* International Activity - In Japan, 9% of PC users are
currently using their PCs for online purchases reports
J.D. Power and Associates. This information comes as good
news for Quick KK and Tax Co. of Tokyo, two new online
auto sites that recently opened for business. Quick KK
estimates that it can sell as many as 1,000 cars per year
via the Web. But the company better be quick, because word
has it that autobytel.com plans to spend as much as $100
million to establish a beachhead in Japan. In the U.K.,
KPMG Peat Marwick estimates that 20% of new and used
vehicles in the Britain will be bought on the Internet
in the next two years.
* U.S. Activity - Autoweb.com already generates $660 million
in car sales each month, Microsoft's CarPoint pulls in a
cool $200 million monthly, while Manheim Online boasts it
sold $150 million in automobiles over the Internet since
last fall. To meet these established players head-on, new
arrival cars.com plans to spend $26 million advertising
and promoting its site in the next 18 months, claims Greg
Stuart, vice president of marketing. Another new entrant
is Priceline.com, a site that will let users bid on cars.
* Marketing Costs - The average dealership's marketing cost
per vehicle sold through online buying services is only
61% of the average cost of traditional media, according to
J.D. Power and Associates' "The 1998 Dealer Satisfaction
With Online Buying Services Study," which is based on
phone interviews with 540 dealerships. Bigger dealers,
those that sell more than 12 vehicles online per month,
gain even more efficiency through online marketing, with
costs averaging only 23% of traditional advertising.
* Ad Spending - As a result of these marketing efficiencies,
online ad spending by car dealers will jump significantly
says a Forrester Research report entitled "Classifieds and
Directories":
--------------------------------------------
---- Online Advertising by Auto Dealers ----
Millions Percent of Ad Budget
--------------------------------------------
1998 $
47 6%
1999
107 5
2000
262 8
2001
405 10
2002
605 12
--------------------------------------------
Source: Sep. 1997 Forrester Research Inc.
* Top Online Services - autobytel.com is tops in dealer
satisfaction with online buying services (J.D. Power
and Associates). AutoVantage also ranked above average,
while Autoweb.com and Microsoft CarPoint were below-
average performers in dealers' opinions.
* Purchase Patterns - There is a notable difference between
the types of cars Internet users buy and the ones the U.S.
market prefers, with Net users opting for more imports
and fewer trucks:
------------------------------------------------------
-- Most Popular Cars/Trucks Sold Online and in U.S. --
Online Car
Sales
1997 U.S. Car Sales
------------------------------------------------------
1. Honda
Accord
1. Ford F-Series
2. Honda
Civic
2. Chevy C/K Pickup
3. Ford
Explorer
3. Toyota Camry
4. Toyota
Camry
4. Honda Accord
5. Dodge
Durango
5. Ford Explorer
6. Ford
Expedition
6. Ford Taurus
7. Ford
Mustang
7. Dodge Ram
8. Volkswagen
Passat 8. Honda
Civic
9. Toyota
Sienna
9. Chevy Cavalier
10. Volkswagen
Jetta 10. Ford
Ranger
------------------------------------------------------
Source: Aug. 1998 Auto.web; Jul. 1998 Popular Mechanics
* Marketing Campaigns - Automotive marketers are pushing
the marketing envelope. Rubin Postaer Interactive has
rolled out a new Honda ad campaign using WebTV's "TV
Crossover Links," which allow users to click on an icon
to access Honda's site. Sigma6 Interactive Media has
created a "Web-ring" to promote the Cadillac Seville.
While a spokesperson for Toyota tells ICONOCAST that 1,000
of their 1,200 dealerships have a site, a major obstacle is
getting dealers to follow through on their Internet leads.
Most car dealers are a stubborn lot who have been doing
business their way for years, quite often successfully.
With one out of five users buying cars online in just two
years, there is a definite shift taking place. Dealers that
don't heed the new rules will face innovative new players
ready to take their place.
=> Key business opportunity: Internet lead fulfillment firms
[Julie Blacklidge contributed to this story.]
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___________________________________________P a g e v i e w s
Media Erosion, Part 3
*********************
Summary: Our media plate is so full now that some users are
resorting to drinking latte to speed up their reading, but
the two most frequently mentioned solutions are increased
scanning and less TV viewing.
Stories about shifts in media usage patterns abound. To shed
more light on this subject, we surveyed ICONOCAST readers
about their reading habits. A survey was e-mailed to a list
of 2,328 randomly selected readers. A total of 510 responses
were received, for a net response rate of 23% (less 94
bounces and undeliverables).
While most subscriber studies present a capsule view of a
larger market, we feel that due to an acute need to monitor
about 35 Internet marketing-related sites, newletters, lists
and publications, Net marketers represent "the bleeding edge
of the leading edge." Put another way, this survey is a
preview of things to come.
"Monitoring" is the right word because our subscribers, on
average, regularly visit or read three marketing-related
sites and two lists/newsletters. Frequently mentioned sites
(visited at least once a week) are Internet World (15%),
Advertising Age (14%) and Interactive Week (10%).
Newsletters and lists read on a regular basis (at least two
out of four issues) include Robert Seidman's Online Insider
(26%), followed by ClickZ (16.3%), Internet Advertising
Report (15.9%) and Online Advertising List (13%).
But when readers were asked how they cope with information
overload, many indicated that their media consumption habits
were in flux. One adaptation is an increase in article
scanning. Many readers have also become more selective
by filtering or disregarding content.
Besides article scanning (mentioned by 16.7%), ICONOCAST
subscribers watch less TV (16.8%), and read fewer consumer
magazines (13.3%); fewer computer magazines (12.6%); fewer
newspapers (11%) and fewer books (10%). Some even sleep less
(9%), while 8% report that their social life suffers. One
distressed user even reported taking St. John's Wort, but
several macho readers wondered "what information overload?"
It's ironic that the largest group of respondents, 16%, are
members of the media (publishing, broadcast or cable), the
very creators of the information flood. Other represented
market segments include online marketing services/Internet
ad vendors (9.4%), Web developers/designers (9.4%) ad-
supported/e-commerce sites (9%) and ad agencies (7%).
The upshot is that *all* media are under pressure to deliver
content more geared towards the needs of readers. Limited
by a finite daily media window of 8 hours and 36 minutes,
consumers are damming the info flood with more scanning and
skipping. It goes without saying that the future success
of media hinges on vastly improved content presentation.
=> Key business opportunities: 1. Content architects
2. Personalized media
3. "Reader's digest" services
[Christine Fox contributed to this story.]
____________________________________________________________
<<< A B O U
T I C O N O C A S T >>>
Imagine Media, 150 No. Hill Drive, Brisbane, CA 94005
Chief Information Architect
Michael Tchong
michael@iconocast.com
415.468.4684 x445
Associate Editor
Julie Blacklidge
julie@iconocast.com
415.468.4684 x796
Web Producer
Judy D. Chin
judy@iconocast.com
415.468.4684 x419
Research Editor
Christine Fox
christine@iconocast.com
415.468.4684 x789
Sales Representative
Todd Paquette
todd@iconocast.com 415.468.4684 x734
LEGAL NOTICES
* ICONOCAST is published each Wednesday by Imagine Media,
one of America's fastest growing media companies.
ICONOCAST is a trademark of Imagine Media Inc.
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collecting and preparing the information published herein,
ICONOCAST does not assume, and hereby disclaims, any
liability for any loss or damage caused by errors or
omissions, whether such errors or omissions resulted
from negligence, accident or other causes.
* ICONOCAST and its affiliated individuals may, from time
to time, own, have positions in, or options on companies
discussed herein and may also perform advisory services,
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Copyright 1998 ICONOCAST http://www.iconocast.com.
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