Carpoint.ppt

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© 2005 UMFK.

CarPoint

internet business models

text and cases

Kristin Belanger

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© 2005 UMFK.

Auto Industry and Online Brokers

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© 2005 UMFK.

Overview

• Introduction

• History

• Strategies

• Stakeholders

• Get Big Fast!

• 20-20 Hindsight

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© 2005 UMFK.

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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© 2005 UMFK.

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 it’s 5,000 affiliated dealers nation wide (per year)

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© 2005 UMFK.

Problems

• Online was less profitable– Online didn’t 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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© 2005 UMFK.

Strategy’s

• 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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© 2005 UMFK.

Strategy’s 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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© 2005 UMFK.

Strategy’s 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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© 2005 UMFK.

Strategy’s 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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© 2005 UMFK.

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 <

24h.

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© 2005 UMFK.

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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© 2005 UMFK.

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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© 2005 UMFK.

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 it’s 5,000 dealerships– Moved towards a yellow pages model

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© 2005 UMFK.

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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© 2005 UMFK.

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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© 2005 UMFK.

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 CarPoint’s business strategy

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© 2005 UMFK.

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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© 2005 UMFK.

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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© 2005 UMFK.

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 isn’t shopping– Saves the customer money

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© 2005 UMFK.

Update!

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

Carpoint.ppt

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