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Keith Shetterly

Keith Shetterly Owner

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My Online Vehicle Advertising Gorilla Ate My Digital Homework

 

Silly title, yeah, but here's my point:  Is Autotrader's purchase of Vin Solutions the "death knell" for other Website/CRM/Digital/etc. vendors in automotive?  Do I need do no more study or market homework for tool selection, and so I just have to call Autotrader to get all my strongest needs satisfied?  To the first question, I don't personally think so IF the other vendors focus on improving their products to compete.  At least not for a while.  To the second question, well, I'd guess that was Autotrader's intent, which I am thankful for, but I am wary to make sure something of this size will stay focused on my and my dealer's needs.

In my career that includes several other non-automotive vertical markets, I've been through a number of tool-market consolidations that moved us away from the "best of breed" mentality--and I can say from personal experience that consolidation can be good, bad, or both for the end user. 

In this case, I think the complimentary products of the Autotrader suite, and the vision of cleaning up the data integration and marketing nightmares that happen with multiple vendors already, are definitely very good things for us in the industry and for dealers.  The bad thing is that while the inflatable gorilla is (rightly, and yay!) disappearing from the top of our buildings, it is being possibly replaced by a much-heavier Autotrader gorilla that is now strongly inserted in a position to influence the bulk of our used car supply chain, especially for marketing and pricing.  Autotrader, HomeNet, vAuto, KBB, CDMData--and now VinSolutions.  That's quite a gorilla.

And, as long as that gorilla stays off my roof, I don't see that as a direct threat to business, and I loudly applaud the independence that Autotrader has given and still gives to the purchased products it has added.  I hope they always do that.

And that's the possible threat in the future that I do worry about--because I worked many years for, and worked for many more years with, another gorilla called Microsoft.  My hope is that Autotrader continues to work to provide tools (by development and purchase) that we can use, and never to provide tools they control us to use.  That was the Microsoft mistake, which ultimately involved the Department of Justice (you can see a very minor reference to little ol' me in that mess here).

My hat's off to Autotrader and to Vin Solutions, as this particular marriage makes more sense than just about any other acquisition for several years now in the automotive space.  I look forward to some great things from both of them!

Let's all just have an eye out for this new gorilla and make sure he never sits on our dealership building.  We can't afford that weight on the roof.  And neither, frankly, in my experience can Autotrader.

So, keep watch that new gorilla doesn't ever show up there, and go enjoy the results of this new arrangement for your dealerships.  There's a whole lot of good here:  Let's use it!

 

By Keith Shetterly, keithshetterly@gmail.com
Copyright 2011 All Rights Reserved www.keithshetterly.com
Charles Gallaer
Keith, interesting observation. I'm wondering if now, with technology as it is, that this "gorilla" will be tamed by competition in the market. Let's take VINSolutions for example. They came onto the market and seized new business by innovating with things like month-to-month contracts and constant improvement to their product. They took a bite out of the share of some traditional players in the space (Autobase, Higher Gear, the DSPs, etc) even though they were relatively new and virtually unknown a few years back. What's to stop a new VINSolutions from taking share if Autotrader acts unwisely with the current VINSolutions? Same with vAuto. There are competent players already in both segments (CRM and used vehicle inventory control) and more competitors could come on line if opportunities arise. Microsoft was (and is still to a certain extent) in a very unique position compared to Autotrader and its subsidiaries. I don't think that Autotrader can count on the conditions that protected Microsoft for so long to protect them if they become uncompetitive.
Keith Shetterly
Hi Charles! I think Autotrader's core business sees some competition, but by far they have (for their market) a huge marketshare for online vehicle advertising. Competition there is not really Cars.com, as they are actually more complimentary in my view. For any component, month-to-month sounds good, too, except with CRMs as an example there is so much intertwining with processes that changing one is very difficult. Once you're committed, you're in. Enter Autotrader, where you can now hop on to everything from your website to your inventory pics and mgt. to your online advertising. Enough folks take that deal, and dozens of vertical markets have shown that it is very tempting for a provider to take the easy route of holding folks by the shear weight of the issues with returning to a "best of breed" solution. And what happens to markets without competition? Exactly. An example of that is Reynolds & Reynolds, which for years held sway over a marketplace simply because of the power of their DMS contract. CRM and websites were, imho, medium-powered items, imho--and yet thousands of dealers signed up! Enter other providers at a time when it was still "new ground", and Reynolds had competitors who could snag dealers who had no website or other independent providers' websites. Dealer.com and such made their market share, not by pushing out Reynolds contracted sites, but instead by gathering "uncommitted" dealers. Once Autotrader has this power, end-to-end, over the supply chain, a "month-to-month" situation really won't help much. They will have to have strong competitors. I'm very acquainted with a CRM/Website/Blah blah company that has about 700 dealers aboard. It would be nice if they had already competed well, but they remained slow and were able to (as the previous example) push a mediocre product to their dealers. Had Reynolds bought them, however, they would've--by the Power of Grayskul . . . er, um, by contracted marketshare, I mean--been able to extend the life of their mediocrity. With this Autotrader/VinSolutions move, they are square in the gunsights. A shame, because they had a chance for greatness on the order of VinSolutions. They just got complacent. In the future, a complacent Autotrader suite . . . and/or a swaggering Autotrader suite . . . will be bad for dealers. And so I hope they don't do either. Let the games begin! :)
Charles Gallaer
Maybe I'm a bit biased because I read sites like this, but I feel that Autotrader's core business (online advertising) is a non-growth business. AT seems like an internet business model that everyone thought was the future in the pre-Google internet. Back then, the best at SEO were porn sites and people thought you would "get your name out there" by putting your URL on everything from billboards to toilet paper. People weren't using search like they do today. AT's core business is still in this pre-Google world. They have to spend immense sums of money to build top-of-mind awareness (via traditional media) to get the consumer to type the URL in his or her web browser. They also have to play the PPC game. With Google's emphasis on local, in several instances AT wouldn't show up in an organic page 1 search in my market. I've heard plenty of chatter of dealers either dumping AT or considering dumping them because the lead submission just isn't there for the cost. So what are the possibilities behind AT's move? Maybe AT wants to create something like JD Power's PIN, where they will know what happened in a transaction from "soup to nuts" and then sell this data to the highest bidder. Or maybe they want a more constant revenue stream from products like vAuto and VINSolutions because the law of diminishing return is pummeling their advertising business. Or maybe they think they can be a "better" online advertiser because they will have data from CRMs and vAuto (like knowing what kinds of cars dealers are looking for at auctions). Maybe they're going to buy a DSP next, and maybe its all or nothing of the things I listed. Are they the next ReyRey? I don't think so. I think choosing a DSP or to leave one is a much more gut wrenching decision than the choices you have to make with the AT products. With a DSP you have to consider things like OEM compatibility while those concerns don't exist with CRMs or tools like vAuto. ReyRey (and to a much greater extent UCS) were great at tying dealers up with iron-clad contracts back when the dealer didn't have the choices he or she has today for a DSP. You'd be surprised how many dealers will allow the autorenewal clauses to kick in on these contracts thus trapping them with ReyRey/UCS. Thanks for the great discussion. I guess time will tell how all of this will pan out.
Keith Shetterly
I beg to differ about OEM compatibility and CRMs--all major CRMs are currently "compatible" with the large DMS players, yes, but that's not the point much . . . YET. A contract trap is very strong, but so are the processes and outage traps of both "best of breed" and "one-stop shop". Changing any CRM is very painful, extremely so at a large multi-point dealer and/or a group. Only when the pain of CRM issues breaks (not just flows over) the process dam does changing a CRM seem attractive. It's a processes and training thing, for sure. My feeling on CRMs is that they see poor usage at dealers that have them, anyway. As I've said and written, http://www.drivingsales.com/blogs/keithscorner/2011/04/05/the-next-best-thing-wont-fix-your-old-wrong-thing. :) And I love discussions like this. No one is improved without thought and learning. Thanks!

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