It's a War out there... A SEM war!

[Mid-Grade Ford]

Dealers buying SEM from CarGurus?

That's like giving your checkbook to Darth Vadar

I was just thinking about buying SEM from CarGurus. Why is that a bad idea?

I was wary at first but they say they are getting like $2 CPC with 1.5 avg position on the new/used vehicle campaigns they run for their dealers. I'm sitting at like $3 CPC and 3.2 avg position, so even with a 15-20% management fee it seems like it might be worth it.

 

[George Nenni]

I was just thinking about buying SEM from CarGurus. Why is that a bad idea?

I was wary at first but they say they are getting like $2 CPC with 1.5 avg position on the new/used vehicle campaigns they run for their dealers. I'm sitting at like $3 CPC and 3.2 avg position, so even with a 15-20% management fee it seems like it might be worth it.

A more important question is, how will the clicks perform downstream in the website? CPC, position, etc. matter only if they generate solid shopping behavior on the site, or generate sales (not service) phone calls.

 

[George Nenni]

I don’t know how I missed this original post over the summer @joe.pistell but what a great one. TY!

Note: This is a work in progress, in no way is it a final research work. Grab a cup of coffee and feel free to add or challenge what you see.

Summary:

1. The Big Classified Sites are in a face-ripping SEM war.
2. CarGurus aggressive SEM work is noteworthy
3. Dealer SEM spending needs a deep review.
4. The car dealer SEM vendor biz could be at risk.

Overview:
I've been hearing complaints from Dealers about SEM costs going higher and SEM traffic getting lower, so I looked into it. I was prepared to blame it on bad SEM Vendors, but, I've found a far bigger cause. The Big Classified Sites are in a SEM war. CarGurus has outspent ALL of the other classified sites... COMBINED (e.g. AutoTrader, Cars.com, TrueCar, Edmunds, CarFax, etc...) From a biz strategy POV, 'Gurus competition must react. So... SEM costs that dealers pay are already high AND the trend to continue higher looks real.

It's easy to conclude that this war is real and it the trend of SEM costs are going higher. Dealer's need to place a wary eye on SEM spending. As time passes, it's logical to expect Classified sites to pass thru these costs to dealers. Should this happen, Dealers used car SEM and the Dealer SEM vendor biz could be at risk.

Details:
Using SEMrush*, it shows SEM spending by Auto classified sites like CarGurus, TrueCars, Cars, AutoTrader, Edmunds, Carfax, etc is about $10MILLION A MONTH and the historical growth rate looks to be accelerating.

"So what?" you may ask. Let's look at some of the evidence and connect some dots.

• $10mill a month divided by 20,000 dealers is ~$500 a roof per month. This is a 'pass thru' cost that dealers will pay for.
• Why would Classified Sites spend more SEM money than today?
  • As New Car SAAR rolls over, dealers' sales and marketing dollars move into Used Car Arena
  • CarGurus, the new 800lb gorilla, is smashing the SEM gas pedal to the floor. CarGurus is outspending EVERYONE COMBINED (~$6mill a month) See below.
  • Wall Street Likes CarGurus model (the winner gets more cash to work with)
  • 'Guru's competitors may want to close the gap & shift dollars into SEM (consider AT's TV spend)

"and... So what?" you mutter. SEM is an auction-based system, so, as Classified Sites move more dollars into SEM, SEM costs for ALL go higher.

"How does CarGurus play a role in this?" As of June 2018, this SEM arms race among classified sites looks to be dominated by CarGurus. The gap in spending is so significant that It's easily possible that this SEM war between the Classified Sites has just begun. CarGurus has a Wall Street war chest AND they have lower costs (gurus scrape your website for inventory data & they don't pay your DMS to get your data).

I'm looking forward to your thoughts...

*Some SEMrush screenshots FYI

View attachment 3646
CarGurus $ is 4:1 mobile to desk

View attachment 3642
AutoTrader $ is 1:1.5 mobile to desk


View attachment 3645
TrueCar $ is 2:1 desk to mobile

View attachment 3644
Cars $ is 2.5:1 mobile to desk

View attachment 3643
CarFax $ is 2:1 mobile to desk

‘now