Jeff - would you mind clarifying the differences between a Cars.com and ATC VDP?

Dennis,

A dealer can't accurately compare the cost of VDP's between ATC and Cars.com. Cars.com counts their VDP's much differently and over states their VDP's in relation to how ATC counts theirs. What is your suggestion to be able to compare these two side by side objectively. Dealer are confused on this matter and Cars.com does a great job of pushing their numbers side by side. However, it really is smoke and mirrors. If the 2 counted their VDP's the exact same way, it would be a much different story wouldn't it.

I have not talked to executives at AutoTrader.com in the past six months, but here is what is not speculation:

1. AutoTrader.com and Cars.com are not just websites, they are listing services. They spend many millions of dollars putting the inventory of their customers on other sites for added exposure. Getting AT listings back on kbb.com will mean more phone calls, emails, and walk-in traffic for their dealers. Did they pay too much? What are the other parts worth? I don't know those answers. What I do know is they bought more audience. As to the timing, Kbb was going to sell to someone.

2. At Cars.com, I paid DMI to do what AutoTrader.com pays HomeNet for. I doubt AT has very many suppliers they are more dependent on. The technology integration is so complex it is not easy to switch vendors. It would be scary for AT to watch someone else buy HomeNet.

3. Neither AT nor Cars.com have ever been satisfied with their ability to help dealers help themselves. Both models are participatory, and most of their dealer customers don't get but a fraction of the value from the service that they could or should. Poor merchandising lowers the rate of leads per VDP. I oversaw the dealer training effort of Cars.com, and it's pretty obvious Dale and vAuto helped dealers get more value from their listings than my team or the AT team ever did.

I don't know what new products or new financial structures may come of this, but these are the kinds of businesses a company like AT would like to own. It's not the same as vertical integration, but some of the justification is similar.

For those looking for a way to hold AT accountable on rate, cost per VDP is the answer. You absolutely must know your current cost per VDP before deciding to add features, scale back, or buy alternative listings solutions. In most regions, two of the best buys are AT Featured and Cars.com. I have yet to find a dealer who received a marginal cost per VDP from going to Premium that was as good as Cars.com or Featured. Premium is a good buy in many cases and not in others, but AT is not going to crunch the numbers for you.

@Joe, What are you talking about!? How am I locked into anything? Joe how the exit for the investors in ATC is all just mental masturbation, the exit means nothing to either of us. What is going to be happening over the next few months or years to get to that exit does mean a great deal to dealers however.

Joe I give the people in this room a lot more credit to be able to read what I write look at their own situation and view of the facts and make their own decisions. I don't think anyone is taking my writing as gospel. We’ll know in the next few months where my reading or the “Tea Leaves” was right or wrong and you know what in either case it won’t change a thing.

I have been very transparent on my current business model; it has nothing to do with Homenet, VAuto or KBB. Although I have said dealers should look at alternatives to both Homenet and VAuto (Diversify). I have said and still maintain that dealers should look at eBay as an alternative to ATC, the customers there are higher quality and more engaged among other things and my business model has nothing to do with eBay or listings in general.

I have however been a long time critic, longer than you have been in this business Joe, of companies that work diligently to get between the dealer and the customer 3rd party lead companies in particular, but for the last 4 years ATC has fallen in that bucket.

I have shown with UserTesting.com that ATC doesn’t have near the footprint they would have a dealer believe they do and that a dealership can and should compete with them online particularly in their local market. My new business absolutely could be an alternative to ATC along with eBay as I have described above. I will be happy to say it so you maybe will feel better:

“Yes I believe a dealership spend with my company would produce more than a spend with ATC and I would show them data that would support them moving that spend or a portion there of to my company”

Feel better now?

I have been following movements of ATC for some time now but I wouldn’t say I have all of what you are describing above I would say as a hobby I have been pretty accurate over the years at connecting the dots to what might happen and I have been more right than wrong. IPO or not it is ATC’s motivation that’s in question not their exit.

ATC do you intend to grow by making good innovative products that we are happy to pay for?

OR

ATC do you intend to leverage these companies into a higher price point and margin to get to a goal of exit whatever that may be?

Their actions over the next 12 months will tell the tale, I bettin on the latter.

Larry writes: "...It just is what it is and dealers need to prepare now for it and diversify."

Larry, could it be that you sell something that fits a dealers need to diversify?

We all know it's Yes.

Is it possible your opinion gets colored by your business mission? I am sure you'll reply that your beliefs were not shaped by your business model. I'll roll with you on that. Here is a little intellectual test.

To arrive at a "best guess" decision you must fully explore the opposite side of the coin.

Based on what little evidence that we all see, construct an outcome where the acquisition of these properties fits the Cox Enterprises business history and it's profile. Also, list all joint ventures that Cox has made in the last dozen years AND list out all joint ventures that have produced an IPO.

Larry, I know you won't produce this. All I am saying is you nor I have no idea if this will end in an IPO. Even if it is designed to become an IPO, it won't become one unless the stock market is healthy. And what if it did become an IPO in 3-5 years, Google maybe "so last year" by then!!

Larry writes:

"...While I am sure Cox as no plans of going public private equity doesn’t get involved at this level without a clear exit strategy, in this case IPO. "

Larry, Look at how you lock yourself into a position with no facts what so ever. C'mon Larry, this is tea-leaf reading. This is conjecture. Where in the hell does conviction come into play here? All anyone has is shallow "arm chair QB" evidence to connect the dots, but somehow you have locked on to your "best guess" and are treating it like gospel.

@Joe

Innocent Bystander, whoever that may be, is providing that key piece of the puzzle.

While I am sure Cox as no plans of going public private equity doesn't get involved at this level without a clear exit strategy, in this case IPO.

You’re right this isn't your typical Rollup but it is one just the same. Time will tell if they can execute to get the right multiples for exit.

To get them they will need to keep expenses low and raise top line revenue IE there is a price hike coming and no innovation or value to go with only new sales spin.

It just is what it is and dealers need to prepare now for it and diversify.

@Joe, a private equity firm acquired a 25% interest in ATC earlier this year, and provided the capital that has funded these acquisitions.

While COX may not be looking to go public, a spin-off of ATC isn't out of the question in 3-5 years.

Larry,

I spent 7 years as a wall street stock trader. The financial process you are describing is called a Rollup. Your idea has merit, but, like my idea, we're just taking our best guess.

ATC is not buying the properties, Cox Enterprises is. Cox Ent. is privately owned MEDIA EMPIRE that includes newspapers, television, radio, cable television, CEllular Service and other businesses. ATC is one small part of the Cox Empire. Cox has no active history of rollups, but, the primary owner of Cox Enterprises is Anne Cox Chambers and she's almost 90. A IPO from the Cox Empire would be historic indeed.

If your roll-up scheme is true and Cox is looking to go public, then this isnt the only buy Cox has made. You'll get confirmation in seeing Cox buy up many other smaller properties to improve it's diverse portfolio. If you then see other buys, you have to factor in the Tax bonus sellers are getting that would fuel this wave of acquisitions.

That being said, if this is a Rollup, it sure is a strange one. Rollups often bring many small players together to share common resources to inflate profits. I don't see a lot of overlap as all three are really unique models.

Lastly, the Cox's are no different than Mr Biter. The tax impact that helped force Dale P and Jesse B to sell is what the Cox family will be dealing with.

If I were called out to make a bet, given the Cox history and it's gigantic empire, I see this as further diversification in the massive Cox Empire.

Joe in my opinion the motivation of the "Fat Finger" is pretty clear. Cox has tried selling ATC before with no luck. This buying frenzy is a rollup of top line revenue to get to an IPO.

ATC has no strategy or idea what they will do with these companies except raise rates enough to get a revenue rate over $3 billion, IPO and exit.

No doubt Google has a habit of taking the inefficiency out of consumers searching for relevant items and content and that the car finding process may be on their radar, this maybe the driver behind the push to go public but make no mistake these acquisitions are a part of an IPO strategy.

A New Spin on the AutoTrader Buy-a-Thon

Why in the world is 'Trader (Cox Enterprises) buying up gigantic Automotive Internet properties like KBB.com, vAuto and HomeNet? Obviously, sellers are driven by possible Tax law changes, but, what's motivating the "fat finger" at 'Trader HQ?

It's very possible that Goolge's going to eat their lunch and render them a 2nd class citizen. It's happening in other verticals, take a look...

http://forum.dealerrefresh.com/f21/new-spin-autot...

Gimme a break…Really?

First of all coming into a room hiding your identity makes you suspect right off the bat.

Secondly make no mistake every venture I have done has been for profit, there is nothing evil about profit when you provide value that is equal to that profit, and therein lies my issue. ATC has continued to raise prices adding no more value. ATC has continued to try and establish themselves between the dealer and the customer even going as far has siphoning off the dealers own traffic from their websites and making the dealer pay for it.

Provide value consummate to your price and you will never have an issue with me, you can make as much profit as you like as long as I am getting to make a fair profit too.

As for ATC threatening my business well, I don't think we are in any danger of that so no I have no worry about ATC, Homenet, VAuto or Kelly from that perspective.

Give them credit, I would certainly give them credit for trying if that’s what they were doing, their actions in the past and as of late say to me they are not trying at all. However as I have said, I could be wrong and for the dealer’s sake I hope I am, so go ahead ATC prove me wrong no one will be happier to admit it than I will if you do.

Larry,

I'm willing to bet that all of your business ventures were profit driven. Or were they philanthropic? It sounds to me like you hsve an axe to grind and are afraid of what the partnerships might do to your business. ATC might be doing this strictly for profit. Does that make them evil? Don't be mad because somebody is trying to build a bigger and better mousetrap. Better...maybe not but only time will tell. You at least have to give them credit for trying.

Thanks Dave and unfoutunately you're right on the money with your numbers and the layoffs.

I have to agree with Larry here. It does seem very disingenuous for a representative of one of the companies involved to jump into this discussion with the "thanks for the support" and "we are looking forward to great things" corporate talking points. To assume that the driving force behind this, and the other acquisitions, was anything other than profit driven is extremely naive. With regard to the comments on the job security of the newly acquired personnel; following the Honeymoon period (9 months to a year) there will a significant number of layoffs. Typically the new ownership looks to keep 10-15% of the original staff - and that's usually the younger, talented, and lower paid employees.

@Tammy – I see now, thanks for clearing that up. I am with you Tammy I hope the employees that worked hard to get Homenet where it is today don't get the shaft, however that is inevitable. Some will get let go some will move on that is the nature of things, good luck to all of them.

I appreciate you optimism although I don't share it.

@Todd – Thanks for the support, it is much appreciated although I don't like being right about things that hurt dealers so much I rather be wrong here, unfortunately ATC’s actions support me being right in this case.

Dealers need to limit their exposure with ATC and now the companies they own as much as they can. Better to do that now and have options than to be deep with this company and have your bill go through the roof and service through the floor then have to scramble put new strategies in place, the name of the game here “DERVISIFY”.

Move some of your budget to eBay and start leaning what it takes to be successful there while you can make mistakes if you are already there put a bigger focus on it.

Look and talk to new inventory export providers while you have time to make the right deal.

Look and talk to new inventory management companies while you have time as well.

Don't wait until the hammer drops be proactive and put yourself in the right position to make a good decision.

I apologize for the redundancy on my part here, but it's has to be echoed that again and again. This is move to drive an IPO or in the case of many other large Corp companies is to drive stock prices. I really feel for the folks in the companies being acquired because as in the case of Homenet, they are a first class company with a first class leader in Jesse Bitter (I have know Jesse personally for many years) and we want to believe the honeymoon speeches of how this is good for everyone etc. But my experiences tells me a whole different story and again please just approach it all with your eyes wide open, in the end you may thank me.

Larry Bruce; let's look back at your comments in 2 years within the post and it will prove how on the money you regarding this topic. If anyone wants to bet on that, my money is on Larry.

Larry,

I should have been more specific instead of replying in general. I was referring to comments "their employees who have gone above and beyond to exceed my expectations time after time dont get shafted","I hope only the best for my many friends at Homenet thru any changes". It was not my intent to infer that everyone supported the acquisition or even HomeNet in general. I completely understand the frustration and speculation of changes, but as I've said, I'm optimistic some great innovative changes could be introduced into the automotive space with the combined resources.

Tammy did you even read the post or the comments? I had to go back thru and read to see there were any positive comments or support.

Did I miss one?

Is this what dealers can expect the corp. glad hand? Do you really think that if you keep thanking us for our support that somehow you will get it?

I don't understand either of the comments from Homenet.

@all
I just want to say "thanks" for the positive comments about HomeNet Automotive in general and for the goodwill generated towards our employees during this transition; we appreciate your support. While it is still early, the plan is to remain operating independently,and I am confident (and extremely optimistic and excited) we can find a way to incorporate some of the combined resources to offer/support more robust solutions in the automotive space. The opportunities seem endless when you really think about it; I, personally, will do all I can to ensure all the opportunities are thought out.
Thanks again for your support.

Tammy DeFazio
Director, Client Services
HomeNet Automotive, LLC

@Jeff I understand, I have heard the same things out of a lot of dealers and the same lack of results for a lot of work.

@All - Keep in mind ATC isn't a technology company and it isn't a web marketing company it is at its root a magazine that had a base and too that base online lower its distribution cost and charging more money. So ask yourself what do you think they are really going to be able to do with more technology and more data?

We have all seen many large technology companies in this industry swallow ONE good product or company only to later bastardize it and eventually kill it, what do you think a non-technology company is going to do with 3 of them?

The fact is that this is not about giving dealers a better product or more help, this is strictly about getting to a top line number that makes for a good IPO and the Top cat cashing out leaving whoever is left to figure that out, if they can.

For the money I see dealers spending with ATC you are better off taking that money with a good strategy to eBay motors, the visitors there are far more engaging than ATC for a lot of reasons I won't go into in this comment.

Get out of ATC before you lose more money. It's just like when you got out of the paper you'll tense up in anticipation of the business drop only to find it doesn’t and you'll find a lot for efficient uses for the money you were spending with ATC.

As I posted in a previous post, if you work for any of these companies you would do yourself a favor by going into these acquisitions with your eyes wide open and know that AT already has a sell channel in place and it's much cheaper to consolidate ALL products into the existing sells channel rather than have several channels selling the products individually. I have been there and done that and many of my friends bought into the honeymoon speech placed lost their jobs. Not trying to rain on the parade, but that's reality.

It scares me to see these wonderful independent, home grown organizations be acquired by ATC. Their track record is very weak( Auto Mart/Auto Trader) and senior leadership is comprised by the most unintelligent humans you could ever expect. Hopefully these folks who led that merger (Ian, Joe) have been put out to pasture. I wish these folks the very best of luck and hope that fate will treat them much better than it did the 3,500 employees who lost their jobs for no good reason

Larry- As always you are correct. It's principle and personal now.

Rob- If you include what is co-op'd there is no ROI. It's a money pit. AT collects just over $10k for our services $6400 of which is paid by our IMR acct. 10 times earnings with IMR participation 3 times earnings without. Keep in mind that you need to factor in the amount of time and brain damage associated with updating your spotlight ads, special offers and dynamic display ads. The back of my neck is tensing up just thinking about it.

There site absolutely crawls at a snails pace making said updates such a pain in the ass!

I'm curiuos, how many people in this discussion can show an accurate ROI year to date that makes AT a worthy investment for your dealership.