Analysis: Elon Musk's embrace of advertising at Tesla grabs marketers' attention

Perion Network

17/05/2023 22:35

By Akash Sriram and Hyunjoo Jin
       May 17 (Reuters) - With Elon Musk outlining plans for
Tesla Inc  TSLA.O  to use traditional advertising for the first
time, viewers might see the electric-vehicle maker's Model Y
crossover or upcoming Cybertruck pickup - maybe even the
billionaire CEO himself - on TV or online.
    Musk revealed those plans on Tuesday at the company's annual
meeting, an about-face for the celebrity executive who recently
acquired social media platform Twitter. He has for years
eschewed advertising in favor of seeking to capitalize on his
star power and customer enthusiasm for Tesla's vehicles.
    "We'll try out a little advertising and see how it goes," he
told investors in Austin, Texas. 
    Tesla shares closed 4.4% higher on Wednesday.
    Musk said Tesla is not immune to macroeconomic pressures he
foresees over the next year. The EV maker's tweaking of prices
in its major markets is a symptom of a company that no longer
can take ever-higher levels of demand for granted in the face of
growing competition.
    Whatever advertising path Musk chooses, ad agency executives
and investors expect a unique and irreverent take that will
clearly communicate Tesla's advantages, including its
technology.
    "Tesla has not been like every other car company, and he's
not going to start now, so expect breakthrough creative that
speaks to Tesla's disruptive technology and personality," said
Tal Jacobson, incoming CEO at advertising technology company
Perion Network  PERI.TA .
    "His ability to use the media to amplify his brand and his
company's brands is an art form," Jacobson said of Musk. 
    Musk, who could not be reached for comment, told CNBC on
Tuesday that he envisioned advertising that emphasized the
features, safety and affordability of Tesla vehicles. A Tesla
spokesperson declined to add anything beyond Musk's comments. 
    Musk told CNBC he did not yet have a "fully formed strategy"
for Tesla advertising. He said it should be "informative about a
product" and "aesthetically pleasing." He added: "It should have
some artistic element to it. And it should be something that you
don't regret watching after it's done." 
    While Tesla disseminates information about its vehicles via
its Twitter account, Musk told CNBC that approach is "preaching
to the converted and not reaching people that are not already
convinced." 
    Last year, Musk touted the company's "$1 (trillion)
valuation with $0 advertising spend" on Twitter. 
    
    FUTURISTIC ADS?  
    Some industry officials mused on whether Musk might attempt
a memorable TV ad, perhaps akin to the famous "1984" commercial
for Apple Inc's  AAPL.O  Macintosh computer which was directed
by Ridley Scott and aired only during the Super Bowl. Many say
that commercial, inspired by George Orwell's dystopian novel of
the same name, paved the way for big-budget TV commercials.
    "I don't think Musk would spend elaborately on a brand
mosaic like Apple did, but ... minimalistic while futuristic is
the approach I'd see him taking," said Bob Gruters, chief
revenue officer at streaming platform Loop Media  LPTV.A .
    Some wonder whether Musk may feature himself in the ads,
although that may carry risk as the executive can be polarizing.
    "Is he an effective ambassador? My guess is that there is a
less polarizing, more motivating and compelling way to
communicate the brand's benefits than using Musk as a
spokesperson," said Kimberly Whitler, a professor at the
University of Virginia's business school.
    While Musk did not outline a marketing budget, Tesla would
likely be perceived as a high-profile account for top
advertising companies, said Vivek Astvansh, assistant professor
of advertising at Indiana University's business school.
    Officials with four of the world's top ad-buying firms - WPP
 WPP.L , Omnicom Group  OMC.N , Publicis Groupe  PUBP.PA  and
Dentsu Group  4324.T  - could not immediately be reached for
comment. 
    Tesla spent $151,947 on advertising in the U.S. in 2022,
according to advertising intelligence firm Vivvix, which
measured ads across places including TV, social media, Web
banners and billboards. By comparison, Ford and Toyota Motor
Corp  7203.T  spent $370 million and $1.1 billion, respectively,
while the brands of General Motors Co  GM.N  collectively spent
a total of $1.35 billion on U.S. ads last year, Vivvix data
showed.
    GM last year spent $4 billion globally on advertising and
promotions, while Ford Motor Co  F.N  spent $2.2 billion on
advertising, according to U.S. regulatory filings.  
        
    TWITTER CONNECTION
    Musk's "newfound passion for advertising," in the words of
author and venture capitalist Claire Diaz-Ortiz, was not
surprising given his takeover of Twitter last fall, she said.
Diaz-Ortiz is a former Twitter manager who has written books
about the social media company. 
    Last week, Musk named former NBCUniversal ad chief Linda
Yaccarino as Twitter's new CEO.
    "It is hard for Musk to own a social media company that
requires advertising dollars to survive and then to dismiss, as
head of a manufacturing company, the value of advertising,"
University of Virginia's Whitler said.
    Thomas Martin, senior portfolio manager at Tesla shareholder
Globalt Investments, sees Musk's embrace of advertising as a
positive. He expects the company to show how its products differ
from its competitors'. 
    "Obviously they're going to have to focus on what's good for
the environment and also that it is a car of the future as
opposed to your father's Oldsmobile," he said.

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BREAKINGVIEWS-Tesla’s governance autopilot heads for disaster   
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Elon Musk says Tesla not immune to tough economy that he
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 (Reporting Hyunjoo Jin in San Francisco and Akash Sriram in
Bengaluru, Additional reporting by Yuvraj Malik and Aditya Soni
in Bengaluru, Sheila Dang in Dallas and Victoria Waldersee in
Berlin
Writing by by Ben Klayman
Editing by Matthew Lewis)
 ((benjamin.klayman@thomsonreuters.com; 313-600-2277; Reuters
Messaging: benjamin.klayman.thomsonreuters.com@reuters.net))