Over the past decade that Google (now Alphabet) has been a publicly traded company, its revenues have ballooned from $6.1 billion in 2005 to $74.5 billion in 2015 – a staggering twelve-fold increase. While Google has diversified its business considerably over the past ten years (software, hardware, consumer electronics), it still generates over 90% of its revenue from advertising.
Google is the largest advertising company in the world. And the U.S. auto industry has been a significant contributor to its massive revenue growth; eMarketer predicts that in 2016 automotive advertisers will spend $3.93 billion.
What continues to be absent from Google’s advertising dominance is the value the U.S. auto industry receives from spending $4 billion on paid search. Five years ago, Google famously published its Zero Moment of Truth (ZMOT) report, highlighting the consumer journey and how digital experiences contribute to a consumer’s decisions about what, where and from whom to buy. Yet, Google and search resellers and agencies continue to ignore central themes of the consumer journey, including that the path to purchase can be influenced, but not controlled or limited. And this is not just happening in auto – let’s draw a comparison to the hospitality industry.
A friend of mine owns a few higher-end restaurants, and like auto dealers and manufacturers, she focuses on creating a great product, positive guest interactions and an impressive culture that translates into superb consumer experiences. Her goal is similar to the auto industry’s: to engender customer loyalty through these positive experiences. And, like the auto industry, she focuses on investing in and developing her team, harnessing the wisdom of the crowd through reviews and using third-party platform sites to “fish where the fish biting” (e.g. OpenTable and Grubhub).
I asked her if she uses Google paid search. She told me she used to, but soon realized it’s tantamount to advertising to consumers either well before or well after they’ve decided where to eat. She doesn’t advertise with paid search for the same reason she doesn’t advertise in taxi cabs: Even though the majority of her customers show up in a taxi (or Uber), these consumers made up their minds prior to hailing a cab.
There is a disconnect between the U.S auto industry’s understanding of the consumer journey and how Google and search companies fit into the consumer research process. Alarmingly, eMarketer reported in summer of 2016 that 49% of local U.S. dealers’ digital spend is with paid search. Our industry needs to learn from our colleagues in hospitality and understand the importance of advertising to consumers when they can be influenced, as well as appreciate the massive waste that comes from advertising to consumers before or after they have decided on what, where and from whom to buy. Many in the hospitality industry have already figured out paid search’s role in influencing decisions. Automotive advertisers, your $4 billion Google cab fare is still running…