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.