Autobytel Inc. Thinking Young

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

By Internet standards, the Irvine, CA-based firm 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. Now he has to execute it. The former senior vice president for AOL 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. He spent his first six months on the job visiting with dealers and evaluating Autobytel's business model.

He admits dealers have told him they are concerned about the quality of leads Autobytel sells to dealers. 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 compared with 2005 results.

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

Meanwhile, Cars.com, the Cobalt Group's Dealix Div. and AutoUSA report they are gaining market share.

On a side note, Autobytel and Cobalt have agreed to settle a lawsuit from 2004 in which Autobytel sued Dealix for patent infringement.

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, automotive 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.

It is likely he has employees building a brand new web site, possibly an automotive-related search engine that may be ready in time for the National Automobile Dealers Assn. convention in February.

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

During a call with analysts announcing the 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 it.

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

Meanwhile look for Autobytel to invest more in AVV. Sources close to Riesenbach say he thinks the product provides value to its dealers.

Other changes include an agreement with AOL to provide it with technological services while managing its entire purchase request business. Company 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.

In theory, Autobytel should be well-positioned to grow in the near future. Online advertising will continue to explode and if Autobytel can leverage its web site as Cars.com and Autotrader.com have, advertising revenues could be a big revenue source.