Cars.com is being told to profit or sell

[joe.pistell]

Woa, re-read what I wrote and I had an ohshit moment

On this metric alone, CARS is undervalued. But, on a PEG basis, BOTH are overvalued. CARS is barely growing > inflation, where CARG is growing ~20%. With CARG's growth comes a far higher PE, and higher PEs = higher risk (e.g. the execution of the vision falls short).

CARGURUS MUST KEEP GROWING ITS EARNINGS 20% or more YoY. It has all the dealers signed up so the biggest/easiest way to get there is to raise rates.

 

[Ryan Everson]

I feel like CDK is too proud of their current next-gen websites to quickly replace them with Dealer Inspire’s WordPress based websites. They’ll argue using an open source platform doesn’t make sense at the enterprise level. Not to mention CDK has a few manufacturer approvals that Dealer Inspire doesn’t.

So if this acquisition were to happen, I would expect they would run the two website companies separately for a few years before sunsetting CDK sites and strong arming DI to build their own CMS.

I pray this doesn’t happen though because it will definitely put a hamper on the awesome innovation happening at DI and Cars, which is hard to find nowadays.

 

[mikesayre]

Hi @jon.berna.
In my travels, I sense that dealers are shutting down all the little $500 p/mo vendors and wanting to cut one of the Big 2 (AT or CARS) and leave CARG.

We've come to that place in the auto-sales-cycle, there's a shift in the air. Nothing at NADA had wow-factor. I think the new theme for dealers is "hunker down for the coming storm".

Agree! The dealer sales vendor space is bloated for sure. The progression of sales attribution technology revealing which marketing & advertising networks & channels really work in your particular market is another big reason for this.

I also think the shift in overall dealership viability from Sales in the past to now Fixed-ops & F&I leading the charge in profits is making a difference in overall strategy & decision making.

 

[mikesayre]

Woa, re-read what I wrote and I had an ohshit moment


CARGURUS MUST KEEP GROWING ITS EARNINGS 20% or more YoY. It has all the dealers signed up so the biggest/easiest way to get there is to raise rates.

Yes! I just went through this with our group, it's the old Yellow Pages sales model, let's see what how much more $$ we can get every year! It's not an ideal partnership but hey, we didn't cancel either.. I don't think their sales model is sustainable long term, but I also don't think CG is in it for the long haul.

 

[Alexander Lau]

I feel like CDK is too proud of their current next-gen websites to quickly replace them with Dealer Inspire’s WordPress based websites. They’ll argue using an open source platform doesn’t make sense at the enterprise level. Not to mention CDK has a few manufacturer approvals that Dealer Inspire doesn’t.

So if this acquisition were to happen, I would expect they would run the two website companies separately for a few years before sunsetting CDK sites and strong arming DI to build their own CMS.

I pray this doesn’t happen though because it will definitely put a hamper on the awesome innovation happening at DI and Cars, which is hard to find nowadays.

Somewhere in 2005 I said to a former boss, "one day, a group will build custom automotive templates and plugins for WP. That would be innovative, along with better lead capture processes and functionality." Hell, I see "automotive attribution" companies creating standalone products (announcing it at NADA) that mimic Roxanne @ https://www.dealerinspire.com/website-platform. Meanwhile, it's already integrated (seamlessly) within DI sites.

I was wondering the same thing in reference to the two web solutions. I suppose CDK's worries would be around scaling.

Let's be honest, DI and @joe.chura are the ones innovating and that's why Cars bought them. They needed them; they still need them. Cars innovation previous to buying DI out...? Dismal.

 

[john.quinn]

You would think that "innovation" and "better technology" would be factors in these types of decisions. In fact, they might, if a "tie-breaker" is needed.

In the end, all that really matters is "risk."

"OK... here, I have old tech, but $100M in revenue. Here, I have great new stuff, but only $20M in revenue. Simple... I'll live with the old stuff"

 

[Alexander Lau]

https://www.linkedin.com/feed/update/urn:li:activity:6496572007109533696
Cliff Banks
President & Founder at The Banks Report
The part of the story that's true is that GM is opening up its vendors beyond CDK (website and digital advertising). I predicted it last year that GM would make this decision. I even went as far to say it's likely CDK will sell its digital marketing group because of the negative impact it's having on earnings and the stock price. The fictional part of the story is that Cars is entertaining final bids next week. That's a joke -- it just announced the 14 days ago that it's exploring strategic alternatives. It hasn't even opened up the first round of the bidding process yet. As far as CDK buying it? It's only possible with a large influx of debt financing along with the help of a large private equity firm. It's going to take between $2.5 billion and $3 billion to land Cars. CDK today does about $2.4 billion in annual revenue (it sold $500 million in bonds last June to finance the eLead1One purchase).

 

[Alexander Lau]

Stuff like this doesn't help their cause...

https://forum.dealerrefresh.com/threads/cars-com-requesting-facebook-page-admin-access.6366/

 

[Alexander Lau]

@Alex Snyder I'm guessing you'll ask Alex and Joe about this?

 

[Alex Snyder]

@Alex Snyder I'm guessing you'll ask Alex and Joe about this?

Duh