May 25th, 2008

Get Set to Have Ads on Board

By Sarah A. Webster
Detroit Free Press

High tech in cars will be brought to you by sponsors

Buckle up, tech-hungry consumers.

The digital revolution long promised for your car—known in the automotive business as telematics—has arrived.

Over the next few model years, drivers will be able to do things such as find a nearby gas station with the lowest price, pay bills, order movies and schedule hair appointments.

But here’s what the automotive industry didn’t tell you: Advertisers will be providing the gas on this Information Superhighway.

Getting your door unlocked when you’ve left your keys inside, for example, “might be courtesy of Red Bull,” explained Velle Kolde, senior product manager for Microsoft Auto, which recently released its 3.0 automotive operating system to industry developers.

Phil Magney, an analyst with Telematics Research Group in Minnetonka, Minn., told the Free Press: “There’s no question in my mind that this will be subsidized by advertising.”

The reason for that was crystal clear to participants at the Telematics Detroit 2008 conference last week in Novi, which was billed as the world’s largest gathering of the wireless automotive and mobile industry. The event was sold out, with about 1,500 participants from a panoply of tech companies such as Microsoft Corp., Intel Corp., Continental AG and WirelessCar.

“Nobody wants another bill,” Hakan Kostepen, group manager for product planning and strategy at Panasonic, explained during a panel discussion titled “The Mouth-Watering Future of Infotainment.”

Getting people to pay for a monthly subscription—General Motors Corp.’s OnStar starts at $18.95 a month—or even a flat fee—Ford Motor Co.’s Sync costs $395—is a hurdle that can be lowered by allowing advertisers to sponsor services or parts of the technology.

That could mean drivers can download online movies for the kids in the minivan courtesy of Netflix, book oil-change appointments courtesy of Pennzoil, or handle that outstanding recall on their air bags courtesy of the Detroit Medical Center.

“It’s something that can speed up” the digital revolution in the car, explained Antonino Damiano, product line manager for Magneti Marelli, an Italian company with local offices in Farmington Hills and Troy. That firm has taken on a leadership role in this global revolution.

“Ad-supported is the way this can go mass-market,” explained Steve Koenig, director of industry analysis for the Consumer Electronics Association in Arlington, Va.

In the next few years, for example, Kolde says most new vehicles could have navigation systems that are almost entirely supported through advertising listings tied to the map.

Advertisers would pay for premier placement in the map listings that come up when a driver is searching for a nearby coffee shop or a pharmacy.

Younger buyers want more

Although this advertising could eventually mean big profits for automotive companies and their suppliers, experts told the Free Press that the advertising revenue is needed more in the short term to pay for the technology and to get it to the consumers who desire it most.

When Ford decided to roll out its Sync wireless communications and entertainment technology in a low-priced vehicle—the entry-level Ford Focus—instead of a luxury model, the experts said the automaker made a wise strategic decision because the people who most want this technology are least able to afford it.

That’s because they tend to be young.

A survey of more than 1,100 drivers by the Consumer Electronics Association revealed that only 37% of 16- to 24-year-olds were willing to spend money on installed consumer electronics in their vehicles. The average they were willing to spend: a mere $270.

Older survey participants were willing to spend more. However, fewer of them actually wanted to pay for the technology in the first place.

So, to get this technology to the people who most want it, the technology industry has concluded that it needs the support of advertisers. That way, the technology will start getting installed in more affordable vehicles faster.

“It will waterfall up instead of down,” said Ton Steenman, vice president of the digital enterprise group at Intel Corp. in Chandler, Ariz.

Tell car about yourself

Before you can understand just how sophisticated this in-car advertising will be, you first need to understand how sophisticated these telematics systems are already becoming.

Many vehicles today already have their own personal computer; their own telecommunication system, often their own cell phone; a wireless connection system such as Bluetooth and a display monitor.

Some even come with a keyboard. Ford Works, a productivity telematics suite aimed at people who drive their trucks for work, already offers one, with a touchpad that fits in the console and works with the in-dash computer.

With all of this in-car technology being developed faster and faster, the list of possibilities seems endless.

You will be able to tell your car all about yourself. That includes your blood type, how many kids you have, where you work, what stocks you own, what restaurants you prefer, the type of cell phone you carry, even the temperature you like your seat to be in the morning.

Then, you can tell your car what you want it to do and when. Maybe you want your car to notify your wife automatically if the air bags are deployed. Or send an alert to your cell phone if the alarm goes off. Or alert you whenever you get within a stone’s throw of a Starbucks. Or play a certain track of music when you start the car.

Your car will be so smart that it will be able to tell you how it’s doing, too. It can announce the miles per gallon it’s getting or whether its tires need some air.

Hughes Telematics, based in Atlanta, which will launch a telematics system in Chrysler LLC products next year, says it will be able to pull 77,000 different types of data out of a vehicle to share with consumers, the automaker and dealerships. The car also can use the data to diagnose itself. It might, for example, optimize its drivetrain and other automotive systems to suit the environment, be it the deserts of Arizona to the snowy roads of Alaska.

Your car also will know where it is at all times and will automatically get the data it needs to serve you better.

And really, all of this is just the beginning of something that will begin moving much faster now. Product cycles in the technology sector range from six months to a year, much faster than the auto industry, where it takes three years or so for a new car to hit the market. That means a car can get cool new features about as often as a new mobile phone comes out.

“It is evolving rapidly,” Steenman said. “The car is becoming the next frontier.”

Following you around

Advertisers are chomping at the bit to elbow their way into the car with all this new technology, experts report.

“It’s the advertisers,” Kolde said, “who will want to take advantage of the PC-type platform in the car.”

The telematics-equipped car offers them sophisticated location-based advertising options like they’ve never seen before.

“McDonald’s wants to capture people when they’re making that decision” about what to eat, Kolde said.

The aspect of this revolution most exciting to advertisers, though, is that they will be able to track whether your car actually went to their store after your saw their advertisement. It might even ask for feedback about what customers did at the store and thought of their experience there.

This will give advertisers a sophisticated tool to measure their return-on-investment—provided drivers give their permission to share this data.

“We could see if they closed the loop and went to Home Depot,” Erik Goldman, president of Hughes Telematics, explained during a recent interview.

Hughes Telematics reports that consumers are surprisingly willing to share this information, especially if there is something in it for them, like a discount.

In his Home Depot example, Goldman made sure to note that consumers would get something in return for sharing this data.

Privacy versus discounts

Paul Stephens, a spokesman for the Privacy Rights Clearinghouse in San Diego, said the most important thing about this new technology is that companies make it clear what data they are collecting and how it is being used.

“We’re being tracked in more ways than you can imagine,” he said. “There are some people that are going to be extremely sensitive to this sort of tracking. There are others that will find it desirable, especially if there’s some sort of inducement.”

Goldman said those in the telematics industry recognize the rewards that will come with being honest stewards of this new technology.

“If it’s managed right, it’s a big opportunity,” he said.

And one that could bring a new source of revenue and profits to the auto industry.

By 2013—just five years from now—Telematics Research Group expects more than 50 million vehicles to be on the road with sophisticated telematics systems like these.

So, tech-hungry consumers: Welcome to the future. Courtesy of the Free Press.

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