AutoNation Inc. wants to reduce its dependency on online lead generators and third-party shopping sites. The largest U.S.-based dealership group plans to build up its Web sites to capture online shoppers, part of a multiyear, $100 million campaign to rebrand itself.
Staff Reporter Amy Wilson interviewed COO Mike Maroone by phone on April 17, before AutoNation's earnings call with investors.
Q: How would you redeploy the money you save as you cut back on third parties?
A: A year ago when we launched the AutoNation brand, it was really about finding a brand that both consumers could embrace and our associates could embrace. One of the main reasons we launched that brand is the big opportunity in digital, and we have just seen a surge in digital traffic.
Our AutoNation sites today get more traffic than all the third-party sites put together, so we have made tremendous progress.
So the money you save in one place you expect to redeploy on building those new capabilities, investing in different technologies and even increasing your advertising to drive traffic to your own sites?
Yes, that's exactly it. The goal is to reduce the dependency on the third-party sites. It's the most expensive traffic we have when you look at it from a holistic point of view. And we believe we'd rather invest in the AutoNation brand rather than third-party brands. That doesn't mean we won't be customers. We have excellent relationships with the big players there.
In terms of the high costs of third-party traffic, have those costs been rising in the past couple of years?
Yes, there's no question. It not only rises, but they're looking to get into further segments of the business.
The thing that's most difficult is the leads they're sending to us they're also sending to four or five other dealers. And that is not a dealer-friendly model, and it's not a customer-friendly model.
Any ballpark on how much costs are rising for third parties annually?
It varies tremendously.
Percentagewise, can you give annual increases for any one of those types of models?
I don't have a number in my head, but the biggest player out there has pushed their prices up for the last 5 years. As these companies get closer to going public, they're going to have to grow their revenue. In many cases, not all cases, their traffic is flat, so you're going to see price pressure.
What is that biggest player you're referring to?
There are several big players, but I would say AutoTrader, Cars.com and TrueCar are the big three.