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Auto Industry and Online Brokers - PowerPoint PPT Presentation


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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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Presentation Transcript
Slide1 l.jpg

CarPoint

internet

business models

text and cases

Kristin Belanger



Overview l.jpg
Overview

  • Introduction

  • History

  • Strategies

  • Stakeholders

  • Get Big Fast!

  • 20-20 Hindsight


Introduction l.jpg
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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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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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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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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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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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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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


Strategy cont l.jpg
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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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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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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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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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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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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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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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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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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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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Winner takes All?

  • Value Customer Proposition

    • 1,441 / 200 = 7.205


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Update!

  • Carpoint.com

    • No longer exists

    • Now part of MSN.com and has been renamed

    • Same look as old CarPoint.com



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