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CarPoint

CarPoint. internet. business models . text and cases. Kristin Belanger. Auto Industry and Online Brokers. Overview. Introduction History Strategies Stakeholders Get Big Fast! 20-20 Hindsight. Introduction.

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CarPoint

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  1. CarPoint internet business models text and cases Kristin Belanger

  2. Auto Industry and Online Brokers

  3. Overview • Introduction • History • Strategies • Stakeholders • Get Big Fast! • 20-20 Hindsight

  4. 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

  5. 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)

  6. 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.

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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.

  12. 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

  13. 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

  14. 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

  15. 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

  16. Dealers • Dealers could legally compete with referral services and did… • 1999 74% of Dealers had own website • Tried to cut out the middleman

  17. 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

  18. 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

  19. 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

  20. 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

  21. 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

  22. 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

  23. Winner takes All? • Value Customer Proposition • 1,441 / 200 = 7.205

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

  25. Questions??

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