Google poised for major retail push

Editor's note: An earlier version of this story misstated how Google handles dealer bids for customer sales leads.

LOS ANGELES -- Google is poised to expand its online car-shopping service to dealers throughout California and enter more states, sources say.

Dealers in the San Francisco Bay area have tested the service since last summer. Consumers can browse dealers' inventory and check vehicle prices without leaving Google search pages.

By expanding the pilot, Google is signaling its intention to be a more significant force in online auto shopping, a crucial part of auto retailing. More than 90 percent of car buyers begin their shopping online, and two of every three visitors to a typical dealership's Web site arrive from a Google search page.

Now Google wants to keep car shoppers on its pages instead of directing them to dealership Web sites and other car-shopping sites such as edmunds.com, autotrader.com and cars.com.

But some dealership general managers who have participated in the pilot give it mixed reviews. For instance, they say, Google shoppers can call dealerships anonymously, which limits the usefulness of a Google sales lead. And the Google service limits how many times a dealer can follow up with a potential customer.

Google's service also lacks original content found on other shopping sites, such as auto reviews.

The expansion's timing is undisclosed, but the sources told Automotive News that Google is nearing a statewide rollout in California. Other states will follow soon, they said.

Pollak: Google’s expansion plans were made clear.

Dale Pollak, founder of vAuto, a dealer inventory-management system vendor, said Google executive Michael Rose described for dealers how the Google service works and took questions during the 2013 Digital Marketing Strategies Conference on Feb. 7 in Orlando. Pollak said Rose made it clear that Google was preparing to expand the service beyond the San Francisco test. vAuto is owned by AutoTrader.com, which competes with Google for Internet sales leads.

"Clearly, he was there to announce that it was coming soon," Pollak said. Rose's title at Google is industry expert, auto vertical.

Another attendee who asked not to be identified confirmed that Rose asserted that California was next for the Google rollout.

A third source close to the program said Google is ready for the expansion in California and that other states would follow.

A Google spokeswoman said: "This experience is designed to help connect users who are looking to purchase a car directly with the dealers who can get them the cars that they want. We have nothing further to announce at this time."

Dealers who sign on with Google can list their new-vehicle inventories with no upfront or monthly fees. They pay only for leads, or when shoppers ask for vehicle information from the store and give an e-mail address, phone number or other contact information.

Say a shopper searches for "Honda Accord San Francisco" on Google. A box appears high on the crucial first page of search results containing a picture of a Honda Accord and a link marked "Honda Accord -- Inventory on Google."

Clicking the link opens a page with a detailed list of vehicles available at local dealerships.

The Google service's per-lead cost is determined by bid, starting at around a $10 minimum. Dealers pay the bid amount when they receive a request from a customer to be contacted with a price quote. The amount of the bids only helps determine the pool of dealers from which shoppers can request price quotes.

Mike Shum, general manager of Toyota Sunnyvale in California and part of Google's pilot program, is enthusiastic about the service. His store averages about 200 monthly leads, and the volume and quality of those leads improve every month, he says. About 10 percent of his store's 350 average monthly new-car sales originate from the Google service.

Shum says his store pays about $22 per lead for Toyota cars and $26 for trucks and crossovers, making Google leads more expensive than the roughly $20 he pays for most other lead providers. Shum praises the bid system used to determine lead costs, which he says allows him to adjust sales plans immediately.

Another big appeal: the Google brand.

"Everybody is going there already," Shum says. "They're doing their searches there; they're using them to find our Web sites, and that drives a lot of traffic to us."

Scott Pettitt, general manager of The Ford Store Morgan Hill in California, has had a different experience. Pettitt, also part of Google's pilot program, says his dealership has converted just one Google lead into a sale in the past seven months.

Leads originating from the dealership's Web site and other third-party online lead providers account for most of Pettitt's monthly new-car sales, and he says his store typically converts about 14 percent of its online leads into sales.

Pettitt acknowledges that his staff has spent little effort on the program since beginning the pilot last summer. He bids near the minimum amount for leads, and his staffers spend most of their time working other leads. He notes, though, that unlike other third-party lead providers, Google does not field support staff to ensure dealerships use best practices with online leads.

"I think we'll stick with it only because we don't want to be passed by," Pettitt says. "Google's a pretty big name."

Pettitt is frustrated by Google's lead follow-up system, which prevents dealers from contacting customers directly. All communication occurs through a Google service that keeps identity and contact information of the shopper anonymous.

When a customer requests a price quote, the dealership receives the customer's first name and an anonymous phone number or e-mail address to use for follow-ups. The anonymous phone number forwards dealer calls to the customer's phone, and it expires after six incoming calls, regardless of whether the customer answers. The customer's anonymous e-mail address remains active as long as the customer responds, and it expires after six unanswered e-mails from the dealership.

Google says the communication system is designed to protect consumer privacy.

Pettitt also says it seems that many of the leads he has received were from customers only seeking price information with no intention of visiting his store.

"Our niche is getting in touch and explaining how we do business," Pettitt says. "It's difficult to do that because they've commoditized the process."

Ryan Hopkins, general manager of Larry Hopkins Honda in Sunnyvale, Calif., and a Google service pilot dealer, says it's still too early to tell if the system is an effective tool to help sell more cars.

Hopkins says Google's size makes abandoning the program a tough proposition.

"You kind of have to be there," he says. "Google has such a huge reach; you're almost shooting yourself in the foot by not being there."