Analysis-Elon Musk’s embrace of advertising at Tesla grabs marketers’ attention

By Akash Sriram and Hyunjoo Jin

(Reuters) – With Elon Musk outlining plans for Tesla (NASDAQ:) Inc 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 (NASDAQ:).

“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 (NASDAQ:)’s 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.

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 (LON:), Omnicom Group (NYSE:), Publicis Groupe and Dentsu Group – 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 (NYSE:) Corp spent $370 million and $1.1 billion, respectively, while the brands of General Motors Co (NYSE:) 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 (NYSE:) Co 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.

(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)