Google Inc., the Internet's dominant search engine, is now selling sales leads to dealerships.
Google confirmed that it has launched a pilot program, only in the San Francisco market. But given Google's online heft, it's a potential game changer nationwide -- for dealerships and for such top lead providers as Edmunds.com, Cars.com and kbb.com.
The service was launched two weeks ago with dozens of new-car dealers in the San Francisco Bay area.
Dealers who sign on with Google can list their complete new-vehicle inventories with no upfront or monthly subscription fees. They pay by the lead -- only if a shopper using Google requests to be contacted about a specific vehicle.
The per-lead cost is determined by bid, with the highest bids earning the most prominent positions in search results for a specific model.
Google is the 800-pound gorilla of the Internet search world. Its share of U.S. Internet searches in May was 66.5 percent, according to comScore Inc., a digital marketing data company in Reston, Va.
So if the service expands nationwide, Google stands to capture millions of shoppers and connect them directly with participating dealerships without the shopper leaving Google.
Already, two of three visitors to dealership Web sites get there directly from a Google search, auto industry statistics show. A Google spokeswoman confirmed that the company is testing the service and gathering feedback from the Bay area. She declined to discuss when or if the service would spread nationwide.
The service is appealing to Mike Shum, general manager of Toyota Sunnyvale, one of the Bay Area dealerships participating in test. That's because car shoppers can now see what his dealership has in stock without having to leave Google.
"For them to have this type of auto placement tool or lead providing tool I think is fantastic because it mirrors what the consumer is doing already. It's just removing the layer of them clicking to my site," he said.
One Los Angeles-area dealer familiar with Google's plans said the search giant has been talking to manufacturers and dealer groups about the service. Preliminary tests have been conducted on and off for more than 18 months, the dealer said.
The dealer, who spoke on condition of anonymity, said the Internet search giant has been "pretty aggressive" in its pursuit of the lead-generation market.
"They will be a monster to deal with," he said. "There is no one of this magnitude."
Google's potential rivals sought last week to stress their own perceived advantages.
Avi Steinlauf, CEO of Edmunds.com, said: "Our focus is to connect dealers with the millions of customers who have deep trust in edmunds.com and to leverage that relationship with dealers in a way that isn't easy to replicate through a search engine."
Linda Bartman, vice president of marketing at Cars.com, said: "The benefit of third-party shopping sites like Cars.com is that we're built around guiding the consumer through that process and ultimately connecting them with a dealer."
Google's service differs from competing sites in a few significant ways. First, shoppers searching for vehicles on Google can browse detailed listings of vehicles in inventory at local dealerships without leaving Google's site.
"The thing that differentiates it is that it's an inventory search tool. It's got real cars on it," said Peter Welch, president of the California New Car Dealers Association.
Google personnel briefed Welch on the service in June. Since then, he said, dealers in general have been intrigued by the service.
"The dealers seemed pleased because at this point they weren't interfering in the dealer's pricing models," Welch said.
Google's service does provide price information, such as sticker, invoice and regional transaction prices. But Welch said because the invoice and regional transaction prices are labeled as "general" in a new window, and consumers must contact dealerships for quotes on an actual vehicle, the service is not intrusive in dealer pricing practices.
On the other hand, many shoppers like all the information on big online shopping sites, such as reviews and interactive tools to compare competing vehicles side-by-side, which the Google service lacks.
Dealer Shum says Google's $10 minimum cost per lead is inexpensive. But he estimated dealers' eagerness to sell in-demand vehicles with big margins could push bid prices to more than $50 per lead.
Google also is trying to be different by allowing shopper anonymity. Dealers only see a customer's first name when they receive a lead.
Google generates an anonymous e-mail address or phone number for the dealer to use for follow-ups. Correspondence is forwarded automatically to the shopper's actual e-mail address or phone number.
"This service will reward the dealer with the best Internet processes," said Brian Pasch, CEO of dealership consulting firm PCG Digital Marketing.
The anonymous follow-up system is one reason Google's system is consumer friendly, said Pasch, who first wrote about Google's vehicle shopping tool last week on his company blog, automotive-advertising.net.
Pasch said Google's shopping service is designed for consumers who are ready to buy a car -- an approach that would provide dealers with high-quality leads.
Google analyzes search terms using algorithms, or complex mathematical formulas, to determine when a consumer seems ready to buy a car. So a casual shopper on Google might not see a participating dealer's inventory.
Pasch expects consumers to continue to use services such as edmunds.com, kbb.com and others for vehicle research and comparisons. Google's service is designed to send ready-to-buy consumers to a dealer.
Said Pasch: "After they decide, 'I'm going to buy a 2012 Toyota Camry,' this [Google] product will be there front and center."
Mark Rechtin and David Barkholz contributed to this report