Forbes does not think too highly of ABTL's prospects:
forbes.com
Autobytel Hits The Skids
Penelope Patsuris, Forbes.com, 08.08.01, 2:26 PM ET
NEW YORK - Car sales are strong and online auto shopping is up, so the road to
success should be a smooth ride for Autobytel.com.
But you'd never know it by looking at the car-shopping site's numbers.
Second-quarter sales were down 8% from last year and 6% sequentially, and it
had a loss of $5.3 million. Its shares have sunk to 85 cents.
Visitors to Autobytel (nasdaq: ABTL - news - people) can shop around for a car
and then find local dealers with whom they can do business, since the law
requires all vehicle sales to go through dealers. This is a service car shoppers
want. Five percent of all cars are now purchased through dealers found on the
Web, according to automotive researcher J.D. Power and Associates. Another
12.5% of auto sales are influenced by Internet research, according to Jupiter, and
that figure is expected to grow 300% over the next five years.
Autobytel depends on monthly payments from car dealers that want access to the
ready-to-buy car shoppers that the site sends to them. When its recent acquisition
of competitor Autoweb is completed at the end of this quarter, Autobytel says it
will have 60% to 70% of the online referral market. So why is its business stalling?
Because participating dealers are dropping out. According to CEO Mark Lorimer,
about 500 or so have defected, leaving the site with 4,200 of the country's 23,000
dealers. Dealers are defecting to cut costs and are instead going with cheaper, or
even free, referrals they get from the manufacturers whose cars they sell.
Once asleep at the wheel, General Motors (nyse: GM - news - people) and Ford
Motor (nyse: F - news - people) now have sites that sell only their own brands,
like GM's BuyPower.com and Ford's FordDirect.com. "Although dealers get more
leads from independent sites," says J.D Powers partner Chris Denove, "they close
a higher percentage of the leads they get from manufacturers, and the number of
manufacturer-generated leads are on the rise."
Like most businesses online, the game is now going to the established players who
are finally making their Web presence felt.
The dealers that do stick with Autobytel simply aren't paying enough to support its
business. "Dealers pay the site a flat rate," says Denove. "In most states, it's illegal
for them to pay sites based on the number of referrals they get, or to give them a
cut of car sales." Knowing this, Autobytel had hoped to make the model work by
getting more ancillary business, like managing car financing and warranties, which
haven't panned out.
Autobytel's Lorimar says he expects his core referral business to become
profitable, but admits that growth will come from providing products and services to
dealers and the manufacturers. With losses piling up, growth will make or break his
business.
This week, the embattled site got some good news along these lines. General
Motors extended a test partnership it's doing with the car site by another 30 days.
Since May 1, the companies have put inventory from 22 Washington, D.C.-area
Chevrolet dealers online on a special section of Autobytel. GM wants to gauge how
much inventory its dealers are willing to put online and to test the notion of listing
market prices for cars instead of sticker prices.
Deals like this with manufacturers will be critical to Autobytel's survival, but they're
by no means guaranteed. "Autobytel was selected for the test not because of any
long-term potential between them and GM," says GM's chief Web officer, Jerry
Weiland. "This is a learning exercise. We are talking to other third party sites."
Ouch.
In February, GM revealed it is considering teaming up with its dealers to create its
own all-makes, all-models shopping site à la Autobytel, instead of working with an
existing player. "One way or another, we want to reach people who don't shop on
GM's Buypower," says a spokesperson, "since that's the only way to expand our
market."
Autobytel's $17 million market cap makes it an easy purchase for GM, but why
bother? GM has the technology that ties into its dealerships and gives shoppers
real-time inventory updates, and it can certainly afford to tap into sources of far
better traffic. The carmaker already has deals with AOL Time Warner (nyse: AOL
- news - people) and the auto information sites from Kelley Blue Book and
Edmunds.
The piddling $1.6 million that GM is paying Autobytel for the D.C. test doesn't speak
highly for how GM values the technology or the traffic the car site brings to the
table, or for probable interest from any other manufacturer.
Nor does it auger well for Autobytel's future. |
