AutoTrader.com may not be profitable. And it may have postponed plans for an initial public offering this year. But the online used-vehicle marketplace has lofty goals.
1. Go public next year
2. Use the capital and stock from the IPO to acquire other auto-related companies
3. Become the category killer in online classified space.
AutoTrader.com CEO Chip Perry said the company's owners are satisfied that its business plan is solid and that the company is poised to turn a profit in the next 12 to 18 months. Until then, the owners are prepared to continue to pump cash into the online used-car classified service, Perry said. Documents filed with the Securities and Exchange Commission show AutoTrader.com lost $22.7 million in 1998 and $46.7 million in 1999.
'We plan to be a consolidator in the online world,' Perry said. 'It's a disappointment that the market is not receptive to a good idea, but we're not discouraged. We plan to become the category killer for online auto classified.'
Perry said AutoTrader.com will target companies that provide services - such as inspections and warranties - to aid used-car transactions. It also is interested in dot-coms with strong auto content.
Manheim Auctions Inc. and parent company Cox Enterprises of Atlanta own AutoTrader.com. Other investors are: Dealer Services Group of Automatic Data Processing Inc. of Hoffman Estates, Ill.; Landmark Communications Inc. of Norfolk, Va.; Trader Publishing Inc. of Norfolk, Va.; Kleiner, Perkins, Caufield & Byers of Menlo Park, Calif.; and eBay Inc. of San Jose, Calif.
1.5 MILLION LISTINGS
AutoTrader.com boasts 1.5 million used-car listings from almost 40,000 dealers and 250,000 private owners.
The company canceled plans to go public in early November because of depressed stock prices in general and a stock market backlash against dot-coms in particular.
Since dropping its IPO bid, AutoTrader.com has taken off the muzzle imposed by the SEC and is sharing information about its business plans.
Perry said business has grown tremendously this year.
Since the beginning of the year:
The number of dealers paying for ads such as links, logos, color stripes and titles on the Web site have increased from about 1,700 to 5,000.
Vehicle searches on the site have increased from 6 million a month to 16 million a month.
Revenues increased from about $5 million to almost $30 million.
REDUCES AD COSTS
Perry says that AutoTrader.com reduces advertising costs for dealers. He said dealers who pay for advertising on the site get about 200 leads a month compared with about 20 leads a month for dealers who do not advertise. Dealers who pay for advertising pay an average of $550 a month, or $2.75 per lead.
Perry said about 10 percent of the leads become sales costing dealers about $25 per vehicle sold. He said newspaper advertising costs dealers an average of $250 per car sold.
'We've become a strong force in the used-car market,' said Perry. 'We're helping dealers sell cars for about one-tenth the cost of traditional advertising.'