'It is a jungle'
The proliferation of auto sites is reminiscent of the Internet boom of the 1990s.
But after the dot-com bust of 2000, the number of third-party providers of automotive leads, such as Autobytel.com and CarsDirect.com, dwindled to a handful.
"It is a jungle out there," Bishton says. "This proliferation shows that there is a lot of money involved and that anything goes. Anybody with a server becomes a lead generator."
Bishton is lobbying Toyota to help dealers draft guidelines or a code of ethics on how dealerships use Internet tools such as search engine marketing and online sales leads.
Dealer Tom Vann of Team Hillsdale Chrysler-Dodge-Jeep in Hillsdale, Mich., says this influx of lead-generating Web sites is driving down the quality of dealership leads.
Vann, a devout user of third-party leads, says most of these new sites are just selling leads to the big lead aggregators.
"With a lot of these secondary places, it's all about names and addresses, and they are trying to push them off on other people so they can collect their $3 to $6 wholesale figure," he says. "This reduces the quality of the leads, and then it ultimately starts damaging the attitude of the dealers who are getting the lead."
Vann, an early adopter of third-party leads, has amassed a database of 52,000 names and e-mail addresses from the Internet. Now he is marketing more to his large customer base and relying less on buying third-party leads.
There's a major difference between the original dot-coms and the new generation. The originals would spread their names online and through traditional advertising. The new sites, such as Newcars.com, generally get in front of the consumer through search engines such as Google and Yahoo! Newcars.com also owns WhyPaySticker.com and manages CarPriceSecrets.com.
Newcars.com is based in Birmingham, Mich., and is owned by Cars.com.
It launched WhyPaySticker.com and CarPriceSecrets.com about a year ago.
Newcomers quickly copied the sites, says Todd Webber, vice president of Newcars.com.
"So there's a gaming that goes on with our industry," Webber says.
Newcars.com began by simply selling leads to the big lead aggregators but then developed its own customer base by knocking on dealership doors, Webber says. "All of our leads are 100 percent out of the search engine; therefore, there's a different level of quality. These are consumers that are what I call intenders. They went to a search engine, and they keyed in exactly what they want to buy."
Currently, dealerships receive an average of 37 leads per month from independent, third-party Web sites, up from 33 in 2003, according to J.D. Power and Associates. The overall close rate remains stable at 18 percent, according to the study.
Because it's expensive to set up a sales network to call on dealerships, most new sites are likely going to sell directly to Autobytel.com, AutoUSA.com and the other lead aggregators, says Dennis Galbraith, senior director of digital marketing for J.D. Power, in Westlake Village, Calif.
"So I don't think it will disrupt too much from the dealers," Galbraith says. "It's pretty hard to establish that kind of sales network in a hurry."
Online car shoppers may benefit from this sudden influx of new sites, he says. But they must be something more than just sites that parrot what's available, Galbraith says.
"What the industry really needs are better tools," Galbraith says. "If a site can help shoppers find the right vehicle for them, the right dealership, line them up with the right salesperson, then it's got a real chance."
Buying the same lead twice
The influx of new sites increases the chances that a dealership will buy the same lead twice, Webber says. But at a cost of about $20 a lead, "my argument is, if you have to pay both of them, pay them. The guy went to two sites. He really wants to buy a car."
Autobytel.com, a survivor of the dot-com bust, buys leads from well-established sites such as Yahoo! Autos and Edmunds.com. But it also buys leads from this second tier of lesser-known sites, says Mark Garms, Autobytel's senior vice president of dealer operations.
Autobytel closely monitors dealership feedback and the close rates on leads obtained from these newer sites, he says. It also makes sure these sites are not making deceptive claims to consumers, such as promising a quote below invoice, Garms says.
There is a saturation point at which simply too many sites offer consumers the ability to request a quote from a dealership, says Christine MacKenzie, executive director of multibrand events and agency relations at the Chrysler group.
"There's only so many third parties that dealers can buy leads from," MacKenzie says. "The ones that have been around for a while and have a good reputation probably will survive. But the fly-by-nights may not be around very long. I don't think their business model will allow sustainability."
You may e-mail Ralph Kisiel at [email protected]