© 2005 UMFK. 1-1 CarPoint internet business models text and cases Kristin Belanger.
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Transcript of © 2005 UMFK. 1-1 CarPoint internet business models text and cases Kristin Belanger.
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© 2005 UMFK.
Overview
• Introduction
• History
• Strategies
• Stakeholders
• Get Big Fast!
• 20-20 Hindsight
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© 2005 UMFK.
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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© 2005 UMFK.
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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© 2005 UMFK.
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
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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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© 2005 UMFK.
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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Update!
• Carpoint.com – No longer exists– Now part of MSN.com and has been renamed– Same look as old CarPoint.com