The used-car business doesn't always get a lot of respect, "but that's where the money is," according to Chip Perry, president and CEO of AutoTrader.com.
He says of the $370 billion used-car industry, "It's bigger than new cars, it's more profitable, and thanks to the Internet, we've made it much easier to match buyers with sellers."
Two years ago AutoTrader's parent company, Cox Enterprises Inc., launched the on-line buying and selling service, then known as AutoConnect.
"We decided to focus like a laser beam on used vehicles," says Mr. Perry. "Those on-line firms which focused on new vehicles left the used-car market wide open for us."
AutoTrader has become the world's largest used-car marketplace of its kind through various acquisitions and mergers (the big one being the 1999 purchase of TraderOnline, which led to the name change to AutoTrader from Auto Connect).
Its selection exceeds 1.5 million vehicles. That will rise to two million by the end of the year, Mr. Perry predicts.
AutoTrader monthly attracts about 1 million qualified leads. It drives those potential used-car buyers to its participating dealers, private sellers, advertisers and e-commerce partners.
About one-fourth of the leads result in sales, says Mr. Perry.
"We've won the war to become the largest provider of auto classified listings in America," he says.
But it hasn't been an instant bonanza.
While not getting specific, Mr. Perry says AutoTrader didn't make any money last year and doesn't expect to this year.
"It's a long-term commitment," he says. "We have a patient group of investors standing behind us."
That includes Kleiner Perkins Caufield & Byers venture capital firm as well as Manheim Auctions Inc. (a Cox firm), Automatic Data Processing () and Landmark Communications Inc.
They're getting there, he says, noting a 505% revenue growth revenue from the third quarter of 1998 to the fourth of '99.
Mr. Perry is not predicting exactly when AutoTrader might make a profit. Probably in a few years, he says.
He adds that it could go public with an IPO.
AutoTrader charges no listing or referral fees to either buyers or sellers. Instead, it makes its money selling banner ads, website links and "enhanced" or highlighted listings.
Dealers are AutoTrader's most important revenue stream, says Mr. Perry.
It's been a daunting job building the largest used-car marketplace. As Mr. Perry notes, "Marketplaces are hard to build."
AutoTrader's sales force has grown from five to 125 in five months. Those sales people visit auto rows, trying to get dealers interested in the business.
AutoTrader also sponsors an Internet training network and on-line chat rooms for dealership personnel.