Web Providers' Next Big Things

I guess you can't please everybody. Someone mentioned to me that little new information came out of a panel discussion I moderated for J.D. Power and Associates in Las Vegas.

After listening to the tape of the session, which focused on the next big things from third-party websites, I beg to differ.

According to the panel, higher Internet lead costs for dealers and a system allowing customers to rate dealers are just a couple of new developments dealers may see by 2008. Sounds newsworthy, especially if you're a dealer buying leads from third-party firms.

On the panel were the following experts in their field:

Stephen Henson, executive vice president of Kelley Blue Book; Chip Perry, president and CEO of AutoTrader.com; Mitch Golub, president Cars.com; John Holt president and CEO of the Cobalt Group and Jim Riesenbach president and CEO of Autobytel Inc.

One thing is clear. All of the panelists agree the process with which their sites move online car shoppers to the dealers needs to evolve to the next level. And that means improving the quality of leads dealers receive.

There has been much industry discussion about improving lead quality. Riesenbach says, though talking about lead quality can be a misnomer.

“The notion that a consumer, not ready to buy to on the day they visit a site, is a low-quality lead strikes me as odd,” he says.

Rather than poor quality, it is an issue of readiness, Riesenbach thinks. “We need to define readiness and recognize people are coming into the funnel long before they are ready to buy,” he says.

“It is incumbent upon us to build (business) models that help move the consumers logically through that funnel,” Riesenbach says.

“We need to take every lead that comes in and do everything possible to pass it on to a dealer, so it has as much opportunity to close as possible,” says Holt.

He suggests scientifically scoring leads as one way to measure readiness. Holt also believes third-party companies can do a better job of managing those leads. “We can do that with service,” he says. “We can extend our hands to the customer on behalf of the dealer.”

One way is to develop sites that allow shoppers to simultaneously search for both used and new vehicles, Perry argues. “There has been an artificial separation between new and used shoppers,” he says. “But studies show 40% of car buyers shop for both. There are fundamental gaps in the car buying process on many sites.”

Golub agrees saying third-party sites need to take a page from the used-car side of the business that allows shoppers to search for specific vehicles.

He envisions a process that allows buyers to match their online vehicle configurations with actual inventory on dealers' lots.

Another development in the works that Golub expects will be in the market in late 2008 is a ratings system of dealers. It likely will be a touchy issue for dealers, and is one that has to be done positively, he says.

Another area third-party sites will improve is in the use of content and consumer-generated tools, Henson says. “We'll see exponential growth in that area,” he says. KBB.com is piloting video applications and will begin rolling them out sometime next year.

Meanwhile, Cars.com is launching in February a series of vehicle databases shoppers can access using their cell phones and Blackberries.

But all this development will take money and likely will result in higher prices for those leads.

Cars.com is doubling its product development for its site in 2007. The shopping experience has to change, Golub argues.

“It's a 12-year old business model in which the price per lead has not changed in eight years,” he says. But that may be a tough sell for skeptical dealers.

The return for dealers, though, may be much higher closing ratios for the leads they purchase from third-party sites. If that happens, and that is a big “if,” that will be real news.

Highlights of What's Likely to Come: