Get Big Fast

1

CarPoint
2
Auto Industry and Online Brokers
3
Overview

• Introduction
• History
• Strategies
• Stakeholders
• Get Big Fast!
• 20-20 Hindsight

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Introduction

• In 1999 more than 22,400 car dealers
• Dealers were intermediaries
• Earned 12.6 on ever sale
• Online Referral Service
• Built to order was expected
• 2.7 of new car sales in 1999
• Saved customer average of 379

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Introduction cont.

• Most visited online marketplace (www.itsa.org)
• More than 6 million consumer visits per month
• More than 10,000 models and more than 100,000
  used vehicles
• CarPoint generates more than 8 billion for each
  of its 5,000 affiliated dealers nation wide (per
  year)

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Problems

• Online was less profitable
• Online didnt rely on mass media advertising
• About 400 per new vehicle sold (average
  spending)
• Compensation payments to dealers were lower than
  offline transactions
• 150- 200 commission paid to dealers
• About half that with online sales.

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Strategys

• Began w/ Autobytel (with just info)
• 1997 changed strategic plan
• Went for the referral business
• Contract with Reynolds and Reynolds
• Info on 90 of all auto dealers
• Reynolds Reynolds inventory management

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Strategys Cont.

• Features
• Independent referral services
• Kelly Blue Book, car reviews, crash test ratings
• Personal Auto Page
• Offered financing and insurance services
• Referred services
• Up to date listings on used cars
• 360 degree views on some used cars

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Strategys cont.

• Business Model
• Revenue from subscription fees
• Paid from affiliated dealers (average of 1,000
  per month)
• Earned more revenue from referring users to other
  insurances and financing services
• Advertising was about 250 per new vehicle sold

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Strategys cont.

• Marketing
• Microsoft was a partner
• MSN portal
• Majority of the advertising was done on portals
• And other automotive sites
• With more than 30 million unique visitors per
  month in Oct. 1999

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Strategy cont.

• Dealer Relationships
• Dealerpoint
• Market more specifically with fine tune ads
• Had over 300 reps for Carpoint Business
• Consumers respond when their responses are lt 24h.
  

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Direct Competitors

• Autobytel
• 200,000 referrals a month for more than 3,000
  registered dealers
• Spend 15 million on advertising in 1999
• Did not expect to get a profit in 2000
• Autoweb/ Autovantage
• Same strategy as CarPoint
• Became more of a content provider

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Competitors cont.

• StoneAge.com
• Focused on customer satisfaction
• Could list person vehicles for 20
• Relied on word of mouth
• OpenAuto.com
• Customer seeking popular vehicles
• Willing to compromise total control over buying
  process

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Competing Car Buying Models

• Newspaper
• Traditional dealers
• Manufactures
• Cars.com, Yahoo!s automobile section
• Free auto classifieds
• Troubleshooting and repair advice
• Autotrader.com
• Had automated inventory with its 5,000
  dealerships
• Moved towards a yellow pages model

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Priceline

• Model Name your own price
• Buyers paid 25
• Dealers paid 75
• If customer failed to respond to dealers offers
• Priceline deducted 200 from credit cards
• Priceline kept consumers names anonymous
• Launched IPO in April 99
• Market valuation of 12.9 billion
• Teamed up with Ford

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Dealers

• Dealers could legally compete with referral
  services and did
• 1999 74 of Dealers had own website
• Tried to cut out the middleman

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Manufacturers

• GM made effords to reduce third-party services
• Such as Carpoint and Autobytel
• Created e-GM which consolidated all of the
  e-commerce sites
• Ford
• Attempted to consolidate into networks

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Direct Sales

• CarsDirect.com
• Founded by Scott Painter and Bill Gross (backed
  by Michael Dell)
• Had referal system however dealers were not stick
  to original quote
• Buyed cars and then resell them
• Expensive
• Lost money on car sales

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Partnership w/ Ford

• Ford would persue relationships with other
  Internet partners
• Microsoft and Ford understanding
• No perferential placement or other special
  treatment on the CarPoint site
• Made changes in CarPoints business strategy

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Problems?

• Making this alliance can disrupt relationship
  with other manufacturers
• Manufacturers could end up as an Internet company
• The relationship with a Microsoft can become very
  complex
• Could turn CarPoint to an IPO

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Partnership with Ford

• CarPoint as an IPO
• Could raise money to be a top of the line IPO
• Could prevent the team from focusing when the
  competition is fierce

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Winner takes All?

• Network Effects
• Moderate to Strong
• Created community online
• Scale of Economies
• Moderate to Strong
• Generate leads for dealers not so much worried
  about the transactions
• Customer Retention
• Moderate let customer know about availability of
  cars even when the customer isnt shopping
• Saves the customer money

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Winner takes All?

• Value Customer Proposition
• 1,441 / 200 7.205

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Update!

• Carpoint.com
• No longer exists
• Now part of MSN.com and has been renamed
• Same look as old CarPoint.com

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Questions??