I've been working for the past couple months on a research report for The Kelsey Group, Car Classifieds Shift Gears as Online Auto Sites Transform Market, which was published Friday. It breaks a number of stories about what companies, such as AutoTrader.com, Autobytel, Yahoo and Vehix.com are planning and the ever-widening reach of Google in auto marketing. You might be surprised by where much of the money is flowing.
There's a summary below, but first the important takeaways:
- Online auto listings are poised to change from simple listing to a complete sales vehicle.
- As a result, newspaper sites need to start pricing auto listings as their premium inventory, not a loss-leader for print.
- Social media will change the selling process, extending it far past the current 60 to 90 days that has characterized the auto market for a century.
- The rise of online auto services has preserved the traditional dealership, but in coming years there will be a dramatic change in the physical retailing of vehicles, including a contraction in the number of dealerships.
It's a 48-page report, summarized thusly:
A decade after it led the migration of classified listings to the Internet, the automotive market is on the verge of a transformation that will eradicate the traditional online auto classified revenue model and result in a dramatic contraction among traditional auto dealerships. Search-based and pay-for-performance referral services, which have already undercut subscription-based listing services sold to dealerships, will drive the business going forward.
Internet advertising has taken its place alongside other media as an important part of the automaker’s media mix, yet television remains the dominant channel. This will likely continue until video has been fully integrated into TCP/IP networks and viewers’ habits have changed in response to the availability of on-demand media.
Classifieds began as text-only listings and have evolved to include photos, video and editorial content that blur the lines between advertising and marketing materials. Understanding that much more of the sales process takes place on the Internet, with more than 70 percent of buyers beginning their searches online, is key to anticipating where the market is headed. Content about cars and car ownership creates the context for a wide range of transactions — including the initial sale and aftermarket purchases and service relationships — that currently represent the highest margins at traditional dealerships.
Enthusiast communities, such as Edmunds.com’s Inside Line and CarSpace offerings and Yahoo! Autos’ forums, represent a new organizing force for information about cars. Spreading the effort of categorizing and valuing information among the people who care most about it is not only efficient, it also builds relationships that reinforce the importance of participation in a community.
Online communities, or “social media,” complement the other significant trend that will reshape automotive marketing in the next decade: vertical search. Making it easier to find a vehicle, the wheels or radio that fit it and the right service providers is essential to increasing the efficacy of referral marketing efforts. Vertical search may not yield any more leads than broad-based search services like Google and Yahoo!, but the ones it does produce will be more qualified and valuable and will drive more ongoing revenue per customer.
In an environment where preferences are increasingly defined before the customer enters the showroom, the dealership is under increasing pressure to win the customer and keep him throughout the life of the vehicle. As a result, referral fees paid to search engines and auto sites that deliver qualified customers have emerged as the primary online expense for dealers.
Online auto sites have catered to dealerships for the past decade and promise to do so for years to come. Yet increasing share of customer will ultimately bring online companies into greater competition with the local physical automotive channel as it is organized today.
The Kelsey Group expects a significant contraction in the number of traditional dealerships in coming years as dealer consolidation accelerates in response to greater marketing efficiencies in reaching potential customers. At the same time, an increase in specialized services, such as classic car sales and auto customization and personalization expertise, will redefine the market as more independent dealers — many of them displaced salespeople with showroom experience — attack niche markets through the Web.