A growing number of dealers say they are drifting away from the third-party Internet lead providers that have dominated online vehicle marketing for 15 years.
Partly it's because they want "cleaner" online referrals -- no duplicates or 12-year-olds with a new computer -- and they want better closing rates from leads. Also, it has become easier and cheaper for dealers to develop their own robust selling sites.
"Dealers have gotten a lot savvier about creating their own leads," said Jared Hamilton, CEO of DrivingSales.com, an online training and social networking site for dealers. "That has put some pressure on the third-party lead providers."
Some dealers say they are cutting back on buying third-party leads. Others have dropped them altogether and now rely exclusively on their own Web sites or automakers for leads.
"A lot of dealers say the closing rates are higher because there is less competition," Hamilton said. "If I get a lead, I won't sell it to the competitor."
Nashville-based Dataium Inc., which tracks car-buying habits at more than 5,000 dealership and factory Web sites, says leads from dealership sites are growing at a faster rate than other portals.
"With dealers receiving more leads off the dealership Web site organically, they have less demand for third-party leads," said Dylan Snyder, Dataium's senior manager of business intelligence.
Lead generators such as Dealix, shopautoweek, Autobytel and AutoUSA take requests for price quotes and other information and pass them on to dealerships for a fee that experts and dealers say averages about $20. Others, including Cars.com and Edmunds.com, charge a monthly subscription rate. Mitch Golub, president of Cars.com, said fees can range from $300 per month for a small dealer to $15,000 for a major metropolitan retailer.
It's a big business. Internet leads generated by third-party, dealership and carmaker sites account for as much as 30 percent of all U.S. new-vehicle sales, according to Urban Science, a Detroit consulting firm.
But it's also a changing business.
Bryan Armstrong, e-commerce director for Volkswagen SouthTowne in Salt Lake City, hasn't used third-party leads for 18 months. He said many of the referrals were for customers who had just started their search and were as long as six months away from buying a new car.
"I took that $2,000 or $4,000 I used a month on third parties and converted it into building Web resources where people can get information," he said.
Armstrong said he built microsites, added blogs, put more information on the store's Web site -- and found he got better quality leads at "a much lower price."
Robert Alvine, owner of Premier Subaru and Premier Kia in Branford, Conn., dropped third-party lead providers five years ago. He gets leads only from his store Web sites and pays for better placement on Internet search engines.
Mike Sullivan, owner of Sullivan Automotive Group in California, said he's buying less from lead generators and relying more on leads from his group Web site, LAcarGUY.com, and the manufacturers he represents.
The third-party providers "are fighting for their livelihoods more than ever, they are trying to protect their territory, every lead and every prospect," said the Santa Monica, Calif., dealer, who sells Porsche, Lexus, Toyota, Scion, Volkswagen, Audi, Subaru and Fisker.
"We won't cut them out cold turkey," he said. "But Lexus and I, for example, have a good working relationship and the two of us have all the information and all the cards. Sharing that information with third-party vendors is silly."
Brad Burlingham, head of marketing for LAcarGUY, said he's pulling business from lead providers without strong consumer-recognized brands in favor of sites such as Edmunds.com that get a lot of consumer traffic.
"A lot of them do the same marketing efforts we are doing," he said. "We would rather spend the money to generate leads ourselves and brand ourselves."
Last year, leads from the LAcarGUY Web site had a 23 percent closing ratio, compared with about 8 percent for the third-party providers, Burlingham said.
Leads from the third-party providers cost about $18 each.
"We cannot generate a lead that cheap -- it costs us $60 or $70," Burlingham said. "That sounds like a lot more money, but ours are closing at a rate three times higher, and the money being spent is branding yourself rather than another company."
Doug Waikem owns 10 stores in Canton, Ohio, and is chairman of NADA's eCommerce 20 Group, which met for the first time in late 2011.
Ten years ago, Waikem said, he got 80 percent of his leads from third-party sites. Today they provide 30 percent of his leads.
"We are doing a better job as a dealer, and our manufacturers are also doing a better job of gathering leads from the consumer," Waikem said.
"As a dealer, we are using search engine optimization, search engine marketing, pay-for-click marketing and banner ads on the Internet," he said. "The dealers and the manufacturers have caught on. A dealer in Montana can compete with Autobytel for space on the first page of Google or Yahoo."
Technology has also gotten better, easier and cheaper to use.
"When we built our first Web site in 1995, it cost $50,000," Waikem said. "Now we can build one for $1,500."
He said 37 percent of his 5,000 annual new-car sales come from Internet leads. He said he buys 1,200 leads a month and has a closing ratio of 13 percent. But the ratio on leads he gets from branded sites such as Honda.com and his own Web sites, is 17 percent.
But Waikem won't stop using the third-party providers.
"A lot of customers do not trust the manufacturer, and they do not trust the dealers," Waikem said. "They like that they can go to a third-party lead provider because they feel the information is more honest and more accurate."