Autotrader Price Increase and Generated Leads

According to a study by Autotrader, Autotrader generates $99 billion in annual sales, or nearly 30% of total car sales in the US. More than 40,000 dealers have signed up with Autotrader and a number of private sellers list cars for sale on Autotrader as well. Autotrader is a huge company for car sales, but clearly tensions exist between dealers and autotrader. The recent price hikes have irked dealers, but the amount of leads from Autotrader also lags other providers on a cost per lead basis.

Jake at HigherTurnover.com has done an experiment to see which classified drives the most leads and Craigslist is out performing Autotrader 3 to 1 while Cars.com has driven twice as many leads. Not a statistically valid sample size, but still interesting.

Autotrader started back in ’97 before the pay per action model became established and went with a traditional subscription model. This has had a few significant consequences for autotrader, consumers, and dealers. Primarily because businesses manage to what they measure, in this case, subscription revenues.

Autotrader monetizes dealer subscriptions not leads. This means Autotrader would place more emphasis on direct sales and dealer recruitment than lead generation. Not bad, per se, as consumers go to Autotrader for cars, and dealers have cars, but Autotrader has less incentive to experiment with driving leads. For example, a company called LiquidMotors actually handles the initial contact with customers. If Autotrader charged per lead, they could pre-screen leads for dealers and charge more.

I think Autotrader’s search results are also affected by the subscription model. Premium listings are posted first, despite not being the most relevant to a consumers search. Making money off leads would give Autotrader the incentive to improve search functionality, helping consumers find the right car quickly would drive leads, but reduce page views, visit times and perceived value.

Harvard Business Review published an article this month on mapping competitive position in a market. It recommended identifying what features customers pay for and then running a regression on features and price to identify what market opportunities are open. This is also a great way to see what people value. The auto classified space is interesting because the dominant players all offer the same basic value but at wildly different prices.

Craigslist – more leads than Autotrader and free

Oodle, Vast & Edgeio – millions of visitors and free

Cars.com – from what other dealers have said they generate the same amount of leads at autotrader for a portion of the price

Autotrader.com – biggest name, most dealers

Without doing the actual regression, dealers are not paying Autotrader for leads but instead for brand, great for Autotrader, less good for dealers.

11 responses to “Autotrader Price Increase and Generated Leads

  1. You bring up a good point about sample size and statistical significance. While my experiment is only a chronicle of personal experience, I think it would be interesting to do a full blown meta-analysis with a large sample size. Only problem with that idea is that I would have to rely heavily on dealers tracking leads which many do not bother to do.

    The internet is notorious for rapid change…I think we could be seeing something happen with Autotrader.com.

  2. The other thing to look at is DMA or location. Some markets are more advance with Autotrader or Cars.com. Craigslist does very well in specific regions like Seattle, SFO, NYC, ect but does not fair as well anywhere in the Midwest or Central time zone (minus the metro Texas cities & this is changing rapidly). One would have to believe that has to do with traditional advertising. For example the resurgence of Vehix.com in heavily cable penetrated markets. Also the amount of money that both Autotrader and Cars.com are spending in the major markets. Cars.com is almost betting the farm on their Super bowl spot… We’ll all see how that pans out.

    I do agree the internet is changing everything, not just car shopping. Craigslist is great, because it is mostly free. I do see them changing the model a bit to charge a small fee for Auto listings as they have for Jobs and Housing, but the site is still a bit weak for a undecided shopper. What I mean by that is not everyone one knows what they want for their next car, so they have to shop, research, and they will change their mind. This is where craigslist fails. You really need to know exactly what you are looking for and hope someone has one for sale. Plus you are dealing with the general public. Who really knows what you are getting?

    Craigslist is free and we know they are taking away the traditional liners from the newspapers but where is that money going? SEO, SEM, Autotrader? my guess – bottom line, we all know the dealers margins are smaller and sales are slower.

    The idea of pre-screening leads is not new, just never really figured out. If someone could figure it out, this could be a key niche.

  3. 03-28-08 :

    SAVE $$$ – Cancel Autotrader Now!!

    Autotrader is strong arming dealers into massive price increases with no additional perks, just promises – it’s a secret – “They can’t tell you now” – but they say “It will be good”.

    $4500 per month is the current price for the Early Model Premium Dealership Program. The elite, best program.

    Autotrader wants to raise it to $7,060 per month – even if you have a signed yearly contract with them.

    They say they can and will find a clause in their contract that lets them do whatever the hell they want to do.

    I think they are going to implode just like the original Internet Hitler: Autobytel – once powerful, now practically nonexistent.

    Cars.com, on the other hand, only charges about $2,400. A much better value and we get the same amount of leads, calls, clicks, maps,etc.

    Why the big difference?

    To me = No Difference.

    Maybe Cars.com is even better.

    I believe the economy is in tough shape. ComScore just released data yesterday stating that Google’s pay per click ads are down sharply – that means less clicks on the biggest search engine – which means less shoppers online.

    Autotrader may be in trouble – they may have over committed on their ad budget – and now need more money from their dealer network to sustain themselves.

    My suggestion:
    Cancel your expensive Autotrader monthly bill.

    Save half the money in the bank and possibly use the other half on different advertising.

  4. I prefer autotrader.com over craigslist because there are more verified sellers on auto trader. But craigslist is cheaper.

    http://www.mycarauctionreview.com

  5. I know this article is over a year old, but take a look at consumerautoauction.com. We offer listings, quality leads, and a focus on over aged used cars with a weekly auction, dealer to consumer. All for a lot less than AT! We sell your cars! Check it out and drop us an email! dtrageser@consumerautoauction.com

  6. How your project develops?

  7. how is this today in on the .com site?

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  9. First of all I would like to say great blog! I had a
    quick question in which I’d like to ask if you do not mind. I was curious to find out how you center yourself and clear your mind prior to writing. I’ve had a hard time clearing my mind in getting my thoughts out there. I do enjoy writing but it just seems like the first 10 to 15 minutes tend to be wasted just trying to figure out how to begin. Any suggestions or hints? Kudos!

  10. Cars.com, Craig’s list and AutoTrader.com are all extremely powerful online advertising tools. If your advertising budget allows, true success can be accomplished with cars and AutoTrader.com, it makes sense to utilize them both. Cars.com & AutoTrader.com both have their strong points. Currently Google’s trackability of online shoppers has declined due to the fact that millions of consumers are utilizing smart phones and tablets to access the Internet. Google along with everyone else is still working on catching up with regards to reporting accurate online usage.

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