Autobytel looks for new sources of revenue

Autobytel Inc., the pioneer of third-party lead referrals to auto dealers, is learning that adaptability may be the key to its survival.

No longer does Autobytel see lead generation as its sole means of creating revenue. But the company is by no means abandoning its lead generation model. A J.D. Power survey shows that Autobytel still drives the most online car sales, despite dealers' occasional complaints about the quality of leads.

But Autobytel is looking to create other means of revenue as the competition for lead generation has increased with the likes of Autotrader.com, CarsDirect, and the dealers' and manufacturers' increased web presence.

A big part of the strategy is the recent acquisition of Autoweb. Besides expanding Autobytel's reach to 6,700 dealers, Autoweb's Automotive Information Center (AIC) provides the data necessary to develop and maintain profitable relationships with the OEMs.

AIC may indeed be the wild card for Autobytel, who hopes to use AIC to become a data provider to the OEMs. Already, the company has used AIC's extensive automotive data to develop the AIC AutoSuite, an integrated package that allows the consumer to research, configure and compare vehicles on a dealer's and manufacturer's web site.

Nevertheless, Autobytel sees its core business as being a marketing services provider for the dealer. Jeffrey Schwartz, the new president and CEO, believes there is great potential in that area.

“The OEMs now spend only about $300 to $400 million in online advertising despite the fact that 62% of car buyers now shop online,” says Schwartz.

“I look at this as a marketing business,” he says. “Our goal is to help dealers sell cars and we can do that by developing marketing programs for the dealer.”

The company plans to unveil several new products at the NADA convention. One will be “radical,” says a company spokesperson.

There are questions, though. In the second quarter of 2001, Autobytel lost 700 dealers. Hoshi Printer, CFO for the company, tells Ward's that the company terminated the majority of those contracts because the dealers were not meeting Autobytel's standards.

Despite saying its dealer relationships are strong, Autobytel clearly recognizes the need to strengthen them. Mark Lorimer, before he resigned as president and CEO, told Ward's that the company was going to concentrate more on shoring up its current relationships with dealers rather than developing new ones.

Schwartz says, “I've spent the last five months visiting with our dealers and the relationship is positive. Of course, we can always do better. But, I do think the problems date back to the earlier days when we were having some technological issues. We've since straightened those out.”

Another issue for the company is the lack of profitability. Lorimer's frequent predictions of ultimate profitability seem to hurt Autobytel's credibility. The company has backed off those predictions.

The stock had reached a low price of 84 cents in the fall, but has since rebounded to $1.65 in mid-December.