AutoTrader.com Agrees to Buy HomeNet Automotive

[Joe Pistell]

I am in Rob Fontano's camp. AT/Cars is not an all or nothing decision. I also agree with Dennis Galbraith's point where we need to judge our marketing/merchandising/sales process skills to decide if we've given commitment needed to "out-effort" our competitors. I also like the ability to simplify the scoring between the 2 platforms using $ p/VDP.

C'mon Larry, there you go again. Dennis offers very interesting and challenging thoughts where as every statement you make points back to validating your biz model. One "Community friendly" suggestion you could make was to follow that logic and drill down to Lead per VDP and Cost per lead (rather than throw it all out in favor of microsites)

 

[LarryBruce]

@Joe, good god man! Where do you get this stuff, I haven’t even brought up microsites, I even stayed away from it when you were baiting to bring it up. Just quit it man, it’s not about that.

The fact of the matter is that Cars and ATC both offer the dealer little in the way of working to differentiate themselves within the listing. Do yourself a favor Joe go look on eBay and see all of the ways the dealers there can design listings to differentiate themselves. Among other things this makes eBay a better choice when it comes to listing services. That’s what we are talking about right? why do you keep wanting to bring it back to microsites?

Joe I don't think you get it; the internet is a direct response medium VDP isn’t relevant when you are paying for a listing. Would you pay for a banner ad on a CPM basis that never got a click? A listing is a banner ad and a really bad on at that. The really bad part is that the visitor never gets to your website so there is zero benefit to the dealer from even a branding perspective. The only thing that matters here is CPA, what you can quantify, what you think you might be able to quantify on the floor and how much weight you want to give that.

 

[LarryBruce]

@Rob, I wouldn’t think any dealer out there is going to base his or her decision to use ATC on the evil empire card. I would, as I have said here be prepared as a dealer to move products to other vendors if and when a price hike comes, that’s all.

Just don't get caught flat footed, and if you truly believe a price hike is coming it might not be a bad idea to make a long term deal with a new vendor now while you can negotiate good terms and pricing. If one goes up the rest usually will follow.

 

[ed.brooks]

This is a conversation that, for many reasons, I wanted to stay out of. But a huge misconception (only one of many) is being perpetuated here.

@Larry - You said, "This is right back to the newspaper model. You have to be the lowest guy in the paper or you’re wasting your money. Anyone can see that is the case here, in fact VAuto made a business out of that."

Some cars need to be priced low: the cars in low-demand and high-supply. These are the cars that other dealers have had for 60-90 days and have priced to move. If a dealer prices one of these cars high, they are condemning themselves to an aged unit in 45-90 days.

Yes vAuto provides it's dealers with this information. But not so it's dealers can price these cars low, but rather so it's dealers can avoid these cars altogether.

When a dealer is armed with full supply and demand information about their market, at this moment in time, they can make better decisions about which cars to stock, how much to pay for them AND how to price them.

When a dealer is stocking short-supply, high-demand cars they need to know the "Sweet Spot" on price, but that will almost never be the lowest price.

I hope I was able to shed some light on what vAuto does, and more importantly, dispel the myth that a dealer needs to have the lowest price to drive traffic on classified sites.

 

[autotrader]

Mark from AutoTrader.com. I wanted to clarify some points made in the above discussion over the past few days that may or may not relate to our recent acquisition activity. Our goal is always to maximize the value of our site to both the dealers and OEMs who advertise vehicles for sale on our site and to the car shoppers who visit our site. How these acquisitions will impact / add to that goal is something that will be worked out, and when we have news to report, the dealer and OEM community will be the first to hear it.

To clarify some points above, though – dealer contact information is all over both the SRP listings and the VDPs on AutoTrader.com. It has to be – we don’t have the cars, the dealers do. If car shoppers couldn’t figure out how to contact dealers from our site or find where the cars they want are located, they wouldn’t come back to us. Our goal is always to direct the customer to the dealerships that have the cars they are interested in, which is why you’ll find contact information, links, phone numbers, maps, branding and a variety of other ways for car shoppers and dealers to connect throughout our listings. The idea that we are trying to keep car shoppers and dealers apart by somehow hiding contact information doesn’t hold water because our whole business model is based on connecting buyers and sellers. And every time a person views an SRP or a VDP is an opportunity to influence that car shopper to buy that car from you, so it’s important to use that space as effectively as possible and we can help you do that (see below).

Walk in traffic – and walk in traffic with no previous contact via phone or email – is real: and it’s the majority of customers in many cases. We’ve proven it in a national study and proven it to dozens of dealerships in individual sourcing studies. The truth is, most car shoppers DO know where the various “dealer rows” are in their areas, and they DO shop and review cars online, and then they DO just get in their car and drive to “dealer row” when they are ready to test drive cars. In the beginning of the internet age, the idea that you could measure every single customer by a phone call or email lead captured the industry’s attention. However, consumers have been trained – in the auto world and other industries – that they just won’t get the information they want via phone and email. In the auto space, we’ve found some of the information consumers want most is “what’s the best price you’ll give me on that car” and “is that car still available” – and they want it usually within a couple hours (some want it immediately). This is information, however, dealers are reluctant to share through these channels and many customers have experiences where dealers didn’t get back to them in a timely way (or at all). So, as a result, consumers are more and more avoiding those channels, even as they increasingly research cars and dealerships online. The internet absolutely plays a role in helping dealerships brand and identify themselves for the consumer, but if consumers can’t get answers to the questions they want via phone or email, they won’t use those channels and they WILL just walk in after researching and finding the cars they want online.

Finally, AutoTrader.com has not raised rates in almost two years. We have rolled out and continue to roll out new products, which we do charge more/additional for, but that’s standard business practice. I think it’s important, and it’s been mentioned further up here, for dealers who are using AutoTrader.com products to work with their AutoTrader.com sales reps and/or the AutoTrader.com dealer training team to maximize the value of the products they are already buying from AutoTrader.com (and do the same with all your vendors). With better photos, better merchandising, etc., we’ve shown dealers how to increase lot traffic and sales without spending any additional money with us. Ask about walk in traffic and sourcing studies. Ask to see the information on consumers’ views on email leads and phone calls to dealerships. Our sales and training folks are smart people and their success is dependent on your success, so use them as resources to make the best use of the AutoTrader tools you’re currently using and get a sense of what new tools we offer that may benefit you.

I’m hopeful this helps offer some perspective and clears up some inaccuracies above, and you’re hearing it directly from AutoTrader.com.

 

[[email protected]]

Hey all,

I would like to weigh-in with some personal and inside perspective on the Homenet acquisition and more generally what I think is going on with AutoTrader.

First, as I’ve stated in the past, I thought long and hard about selling my company. In the end, I did not sell to the company with the highest offer and I even refused the direction of my board to run an auction. I chose to sell to AutoTrader because of all the potential acquirers, they had the data assets that would allow me to take inventory management to yet a higher level. Having said this, I never could have chosen AutoTrader if I didn’t personally believe in their mission.

Now, I’m fully aware that it wasn’t more than about 3 or 4 years ago that you couldn’t mention the name AutoTrader without arousing the ire of just about every dealer. It is true, in my opinion, that they push the envelope of pricing with dealers too hard.

Two years ago, I was invited to attend AutoTrader’s annual meeting. I personally witnessed Chip Perry announce to an audience of over 1,000 field reps that their company had made significant errors and that if their mission did not change, the company’s future prospects would be dim. Often, companies make mistakes, but seldom do they so publicly admit to them. At that same meeting, Chip Perry declared that from that point forward AutoTrader’s sales objectives were not primary, but rather secondary to those of their dealer customers. Chip told the audience of 1,000 reps that they were no longer considered to be sales reps, but rather advertising consultants.

Chip’s proclamations over the succeeding two years were backed up with action. First, all of the senior executive team members have been replaced with individuals that have a very different perspective on how to pursue success than their predecessors. There have been no dealer price increases whatsoever during the second half of 2008, all of 2009, all of 2010 and I have reason to believe for all of 2011 as well. Further, AutoTrader has invested millions of dollars of training for their field staff. They’ve hired NADA Dealer Academy to re-tool their people to be consultants rather than sales representatives. I too have had the privilege over the past two years, of conducting such training.

I firmly believe that those who choose to characterize AutoTrader in a negative way are either laboring under impressions from the past, or perhaps just cynical because of their clear dominant market position. Fortunately, I’ve done well enough financially that I don’t need to carry any company’s official line, nor would I ever risk my reputation by saying things that I don’t believe. I will honestly tell all of you that the intentions and actions of this company today are very different from the past, and in fact very much aligned with my own. In spite of its proper intentions, everyone must remember that AutoTrader is still very large and capable in any given situation of not doing the right thing. I do believe, however that in such circumstances they would like to consider what ever grievance you might have with the intention of rectification or a mutually agreeable solution.

Now, let me share some insights with you about the recent acquisitions, I think there are several things involved. First, if you look into the future of the automobile business, I think that there are several things that can be fairly predicted. The first is the likelihood of continued margin compression. This isn’t the doing of company’s like AutoTrader, vAuto or others, but rather an inevitable consequence of the internet and information age. It’s happening in every industry around the world. As the margin compression continues, I believe that there will be an increased consolidation of dealers. I fear that individually owned dealerships are likely going to go the way of the family farm. In an environment of shrinking margins, scale becomes of much greater importance. I don’t know what the actual numbers might be, but I can well imagine that in 10 years, 80% of the dealerships could be owned by perhaps 300-500 companies.

OK, if you’re a dealer solution provider looking at that future, what does it mean and what would you do? Well, I think the first thing that it means is that as dealer margins shrink, so will yours. It’s unrealistic to think as a solution provider that you’re going to extract a big fat margin from a dealer that has razor thin ones of their own. In such likely circumstances, how will you grow your business? The most reasonable answer is not to think that you’re going to raise your prices, but rather to expand the products and services offered. This in fact has much to do with my motivation for selling vAuto and I suspect much of AutoTrader’s with respect to their recent acquisitions.

I can personally assure you that of all the meetings I participated in during the past two months since the acquisition, I have not heard a single mention about raising dealer prices. Rather, all of the discussion has surrounded how AutoTrader can take the various products and services of its recently acquired companies and put them together to create best-of-breed dealer solutions. It is now clearly the responsibility of all of us in the expanded AutoTrader family to deliver on this promise. Our future performance in this endeavor is how I think we should ultimately be judged.

Finally, I can’t help but take exception to an assertion that Vehicle Detail Pages (VDPs) are not important. For the past year or so, I’ve gone around the country exhorting dealers to consider VDPs as “the money metric” in evaluating the performance of on-line classified advertising sites. Having had the privilege of working with over 3,000 used car departments, I’ve found a clear mathematical correlation between the number of VDPs and the number of used vehicle retail sales. Specificially, during the 13 months that I researched and wrote the book Velocity 2.0, I tracked the retail sales and key internet metrics for 100 randomly selected vAuto clients. Consistently every month, the dealerships that got the highest number of VDPs sold the most retail used vehicles. Conversely, the dealers that got the fewest VDPs sold the least number of used vehicles. In fact, over the 13 months, I did not see a single dealer sell more than 100 retail units in a given month without generating 10,000 VDPs. So with this information clearly documented in the past and present, it’s simply wrong to say that VDPs aren’t what it’s all about for any dealer advertising on a third-party classified site.

Simply stated, the more times that your vehicle appears on a vehicle detail page view, the more times a customer is going to call your switch board or show up at your front door with a highly qualified intent to purchase a specific vehicle in your inventory. The notion that most customers email rather than just show up has also been proven wrong by several dozen independent research studies. These studies are available to any dealer that questions this notion. Also, the assertion that search result pages and vehicle detail pages attempt to hide the dealer brand is absurd. Just simply go on an AutoTrader SRP or VDP and count the number of times you see the dealer’s name and ways to contact them, including direct links.

In conclusion, I’d be happy to discuss any issues that anyone has concerning AutoTrader, its recent acquisitions or the performance of its site. In reality, such discussions are healthy. I think it’s also important to remember that solution providers need dealers, and dealers need solution providers. Ultimately, no one wins at the expense of the other.

Thanks for your consideration.

Dale

 

[Michael Page]

As the current Cars.com Ad Product VP and a friend/colleague of Dennis', I wanted to clarify some of the thoughts being discussed here.

1. At cars.com we calculate an SRP only when a vehicle actually appears on the page. We don't include vehicles that may be in the search but are not on the specific page being viewed (a default of 50 vehicles per page)

2. Likewise, we only measure a VDP once. After the consumer clicks on other items within the details page, we don't count that as an additional VDP.

3. We are considering breaking out (or segregating) new and used vehicles within our exposure reporting. As we continue to refine our new car products, we are looking for ways for a dealer to see more value, merchandise their new vehicles, etc. We also have questions about the differences between how new cars are marketed/listed versus used cars and quite frankly a VDP in the new car segment may not have the same meaning as it does in the used car segment in terms of the dealer's ability to change.

4. One of the factors we always take into consideration are the numerous spider/scraper sites out there and how they can impact both the SRP and VDP numbers. Certain automated scrape activities can skew both numbers a great deal. At Cars.com, we've devoted a lot of technical resources to fight the spiders because we know that their activity can create overinflated numbers for both VDP's and SRP's.

5. Because of the consumer-centric orientation of our site, we think there is room for really engaging a consumer on the details page. That's where many of our new product resources are devoted including our relatively recent video enhancement.

Hopefully this addresses some of the questions in methodology raised in this thread.

Please let me know if you have any additional thoughts.

mp

 

[LarryBruce]

Wow between Ed, Mark and Dale I feel like I just read a novel…whew!

@Ed I agree that you certainly have to be more aggressive with pricing on high supply low demand cars, the fact is these cars also bought cheaper as well. That said whether VAuto is use to unilaterally dial back pricing on units by a number of its dealer base now, Well I hope not. I have recently run into more than a few occasions where the dealers price has been automatically adjusted by VAuto to the dealers determent. When I was first pitched VAuto’s software that was the main feature, in fact my reaction was “Why in the hell would I want to do that?” I forget what the salesperson said in response to that objection because it made no sense and to be frank when it didn’t I tuned him out.

That feature may not be your focus now but it was then and we’ll leave that at that.

Is VAuto good for looking at market conditions across multiple vehicles yes very much so and like all software tools used properly it can be a great asset, used improperly can cost a dealer plenty.

@Mark I can’t put pictures on comments area of this site so for anyone that wants to see a comparison I have done between ATC, Cars and eBay Motors listings and VDP’s click this link to my blog and you can see what I am talking about in a powerpoint presentation and side by side conversion comparisons between the three sites listings and VDP’s.

http://pcmguy.com/2010/12/conversion-analysis-aut...

After you look at it you will probably wonder how ATC and Cars convert anything, I know I did. Mark you will also see what you are talking about when you say “The dealers branding being all over the page” after you look at it in this way I wonder if you will still feel the same way.

Mark says “In the beginning of the internet age, the idea that you could measure every single customer by a phone call or email lead captured the industry’s attention. However, consumers have been trained – in the auto world and other industries – that they just won’t get the information they want via phone and email.”

Really Mark, are you kidding me? Do you really think customers won’t call because they somehow think they will get more information by spending their entire Saturday running around talking to dealerships in person to get more information on a car? Seriously Mark you're way out of touch, I don't think I have a word that will adequately describe how out of touch you are on that point.

Mark somehow Dealix and Autobytel sell millions of dollars worth of leads each month to dealers where the information is captured online without a phone call or vehicle the customer can check out. Is it possible that ATC just doesn’t know how to get the information out of the visitor? I think it is. Don't try to put this back on the dealer, ATC is touting itself as the internet marketer if you can’t get the opportunity for the dealer that your fault not the dealers.

I don't see where you have cleared up any inaccuracies Mark you have simply confirmed what has been said here. The platform remains as it has with little changes, ATC has made space for banner advertising that they can charge dealers more money for. That’s what I take away from your comment but the dealers reading this can come to their own conclusions.

@Dale I hope you are able to pull off with the data what you think you can, only time will tell. I hope you're right about the direction with ATC again only time will tell. I would love to be eating my words a few years from now, but I don't think I will be.

Dale I have to disagree with you on the effect of margin compression. In some of the best dealers I work with and in my own personal experience I have seen margins increase. Why? Because these dealerships realize that price is a concern but NOT the driving factor for a customer online. The fact of the matter is that if you merchandise your cars online better than the guy down the street you can get more for your car. If you have a better trained sales force you can get more for your car, that same well trained sales force can trade for the cars at a lower price point and allow you to get more for the trade when you retail it. If you have a good finance department you can sell that car at a lower price point and still make money.

At the end of the day Dale there are a lot more moving parts to internet marketing of a car than the price as its compared to others in my market who may not be as good as my dealership.

I refuse to believe that the store and its personnel play no factor in what you can do in the marketing of a vehicle online.

Dale I appreciate you are data guy, I am big on data myself let me ask you this question about the data regarding VDP’s as they relate to sales. Did theses dealerships that had the most VDP’s also have the most inventory on Auto Trader? What was the correlation VDP to Sale ratio for the best dealers, in the example you have here it is 100 to 1, the dealerships that had more vehicle sales what was their ratio VDP to sale? What was their salesperson to sale ratio? What data supports that the VDP view had anything to do with the number of sales? I love the data your proposing but the little bit you have shared here just poses more questions than answers as to whether or not VDP views are even a good measurement of the performance of ATC advertising. Based on the analysis I have posted in my blog I can’t see how more VDP views help any dealer in any way, but I can sure see how more VDP views helps AutoTrader with ad impressions.

I will reiterate the internet is a direct response medium if you're not getting the response you want at an appreciable number there is something you are doing or not doing to connect with the customer. It’s not just something you dismiss and say that’s how dealers have trained customers or how they want it, I can’t and won’t buy it.

 

[Todd Mathews]

Great rebuttal Larry. As you have stated several times "only time will tell" is very true.

PS: as I have stated in a pervious post "my money is on Larry's observations"

 

[Jeff]

Larry,

Nice power point. However, next time you feel like doing an educated presentation, make sure you are educated on the topic. You said on the Autotrader VDP "BTW these are not your stores cars". Look again! These are the dealers vehicles. Not that you had much left but your credibility keeps spiraling downwards. What Zip code, Make, and Model did you perform this search? I would like to verify your other claims.