What Must the Automotive Industry Do to Make Success of In-Car Advertising?

The automotive cabin has been transformed into a digital cockpit, with many of the technologies that have defined smartphones, tablets, and the smart home being deployed in vehicles. This applies both to interfaces, such as displays and voice assistants, as well as entire experiences transplanted from the Consumer Electronics (CE) world into the automotive industry, with some limitations to accommodate for driver distraction. However, while the automotive industry has imitated the typical experiences of the CE industry, it has yet to adopt its business models for monetizing these experiences.

Large, high-resolution displays, natural language interfaces, and software-defined audio have all been leveraged by automakers as competitive differentiators to drive shipments of models featuring those technologies. These systems are increasingly offered as standard fitment, with little effort put into driving subscriptions for telematics services. However, automakers are actively investigating ways to extract recurring revenue from their vehicles, and are now looking to imitate the advertising business models employed by the same CE industry that their vehicle cabins have imitated.

An earlier assessment of the in-car advertising opportunity (see ABI Research’s Automotive In-Vehicle Advertising and Commerce report (AN-5400)) identified a number of key weaknesses in the approaches that had been employed to date, concluding that the prospect for in-car advertising strategies following the Telenav model were unlikely to be successful. However, in the past 36 months, two key factors are bringing the automotive and advertising worlds into better alignment—automaker desperation and advertiser sophistication.

• Automaker Desperation: A key factor holding back widespread adoption of the advertising business model in the automotive industry was a fear of consumer backlash. While consumers are willing to tolerate advertisements in handsets costing less than US$1,000, they may be less accepting of a strategy to extract yet more revenue from a car costing US$30,000 or more, which for most consumers is the second most expensive purchase after their home. Only a small number of consumers would need to switch brands for automakers to incur a net loss from their advertising strategy. However, ongoing sales disruption, increasing labor and materials costs, and the huge costs associated with across-the-board electrification are all driving automakers to look again at every opportunity for revenue extraction, including advertising.
• Advertiser Sophistication: As automakers have softened their attitude toward in-car advertising, advertising middleware suppliers have tried to meet automakers half way, developing far more subtle and low-impact templates that also give automakers far more control over the in-cabin experiences. A good example of this is the approach pioneered by 4screen. In the place of screen-dominating ads that can only be consumed when the vehicle is stationary, 4screen applies subtle branding to Point of Interest (POI) pins displayed on the navigation map. From the consumer’s perspective, this can often feel more like enrichment of the map than an overt advertisement, allaying Original Equipment Manufacturer (OEM) fears of a consumer backlash. 4screen has deployed its advertising solution in Mercedes-Benz, Audi, and Škoda models, with the first two brands demonstrating that this trend is not confined to the mass market.

In-car advertising has failed to gain traction to date, but as described above, automakers are becoming more amenable to any installed-base monetization strategy that will not jeopardize their brand integrity, and by extension their existing, product sales-based revenue stream. Advertising solution providers should adopt the following best practices to take advantage of the more open OEM attitude:

• Low Impact User Experience (UX): Subtle, low-impact graphics that enrich, rather than detract from the OEM’s design language are clearly preferred.
• OEM Control: Every avenue for easy customization should me made available to the OEM customer. This should even extend as far as allowing the OEM to blacklist certain vendors/merchants that do not align with the OEM’s brand identity. For example, a premium brand OEM might prefer that discount retailers be excluded from having their logo rendered on the navigation map. Of course, the OEM must strike the right balance between maintaining its brand identity and UX and maximizing their revenue generation potential.
• Distraction-Oriented Advertising: A key weakness of larger more immersive advertising is the limited opportunities for advertiser impressions. These advertisements can only safely be displayed when the vehicle is stationary, which in most cases, means four opportunities to engage with consumers in their cars on any given day. Smaller ads that take the form of enriched map visualization are more limited in their scope; however, they offer more opportunities for ongoing impressions on the driver, with drivers spending between 40 and 50 minutes per day in their vehicles on average.
• Focus on Vehicle-Centric Merchants: Vendors of vehicle servicing, charging, fuel, parking, and other vehicle-centric services are most interested in reaching consumers during their driving hours. Focusing on services that are essential to the vehicle/journey and calibrating offers around these services is key to maintaining consumer satisfaction.
• Support OEM Customer Relationship Management (CRM): OEMs are very keen to see their own services advertised to consumers in the cabin, particularly as they relate to aftersales services such as servicing and maintenance. Currently, these service relationships with the consumer are owned by the dealership, but OEMs are keen to wrestle back the ongoing relationship with the consumer as part of their broader strategy to monetize their installed base of vehicles. Supporting OEMs in advertising their own services, or driving more touchpoints through the embedded Human-Machine Interface (HMI), as well as providing a solution for an advertising-based revenue stream, is the best approach to securing a long-term relationship, embedding the advertising solution provider as a key component in the OEM’s CRM.