At age 11, Autobytel Inc. is a granddaddy, if there is such a thing, in the online automotive retail space.

By Internet standards, the company is a survivor, but there are tough challenges ahead judging from its disappointing third-quarter results. It lost $7.9 million and saw revenue fall nearly 8% to $28.1 million.

But CEO Jim Riesenbach has a comeback plan for the Irvine, CA-based firm. Now he has to execute his ideas. The former senior vice president for AOL, an Internet portal, brought in several executives from his former company to help whip Autobytel into shape.

He declines to provide specifics about his plan, but a careful listener might pick up hints.

Riesenbach spent his first six months on the job visiting dealers and evaluating Autobytel’s business model. He admits dealers have told him they are concerned about the quality of leads Autobytel sells to them. In fairness, virtually all new-car lead providers hear that.

Dealers paid Autobytel an average $18.77 per lead in the third quarter, down from $19.20 in like-2005. Lead revenue accounted for 58% of the firm’s overall revenue in the third quarter.

Competition is fierce in the lead-generation business, and Autobytel has lost dealers, even when taking into account the more transparent method it now uses to count dealerships.

Meanwhile, Cars.com, the Cobalt Group’s Dealix Div. and AutoUSA report they are gaining dealers. But these are private companies and do not have to provide specifics.

Riesenbach believes the industry needs to get more sophisticated at analyzing where customers are in the shopping process.

Industry experts say automotive sites try to push visitors into sending a lead request before they are ready. Instead, they say, the sites should provide customers with what they need at any time during the buying process.

Riesenbach sees a direct relationship between the consumer experience and lead quality. Improving the customer experience will create more traffic and increase ad revenues and ultimately provide dealers with stronger leads.

Rumors continue to leak out of Irvine that Autobytel is overhauling its website and possibly creating an automotive-related search engine designed to improve the customer shopping experience. There is no word on whether the new site will be ready in time for the National Automobile Dealers Assn. convention in February.

One problem is Autobytel lacks the cache that sites such as Cars.com and Autotrader.com have, both of which have seen their advertising revenues from OEMs and dealers explode.

Autobytel’s third quarter advertising revenue was $4.3 million – good for only 15% of its overall total.

In theory, Autobytel should be well-positioned to flourish in the near future. Online automotive advertising will continue to grow and is predicted to reach $2.7 billion in 2007. If Autobytel can leverage its website and brand itself as Cars.com and Autotrader.com have done, advertising revenues could be a big revenue source, observers say.

One step already announced is the pruning of divisions that have brought little, if any, profitability to the company.

During a recent call with analysts announcing the disappointing third-quarter losses, Autobytel confirmed it is seeking “strategic alternatives” – in other words, buyers – for its Retention Performance Marketing (RPM) and Automotive Information Center (AIC) divisions.

Unlike AVV, Autobytel’s lead-management system, RPM, its customer-relationship management product, has never been a hit. Fewer than 1,000 dealers use the tool.

The moves should help Autobytel streamline some of its operations and reduce its employee headcount down from approximately 400.

Meanwhile, look for Autobytel to invest more in AVV. With more than 2,600 dealers using it, AVV is one of the top online lead-management tools. Dealers generally report being happy with AVV, and sources close to Riesenbach say he thinks the product provides value to its dealers.

Other changes include an agreement with AOL to provide the portal with technological services while managing its entire purchase request business. Autobytel officials hint it may be the first of several such announcements.

Autobytel recently also announced a deal with the Van Tuyl Automotive Investment Group, the country’s fourth-largest dealer group, to create a national online referral program.

Other announcements include an agreement in principle with Cobalt to settle a lawsuit from 2004, in which Autobytel sued Dealix for patent infringement.

It remains to be seen whether Riesenbach and his team can deliver. This time next year that question likely will be answered.

cbanks@wardsauto.com