Section 1: The Current State of Online Marketplace Advertising

Overview of Major Marketplace Sites

Online automotive marketplaces, such as Autotrader, CarGurus, and Cars.com, have been pivotal in the digital transformation of car sales. These platforms offer unique features that have reshaped how dealerships interact with potential buyers.

Autotrader: Established as a leader in the sector, Autotrader boasts a significant brand presence, bolstered by advertising campaigns across various media, including TV and sports sponsorships. It offers a wide reach to approximately 20 million unique monthly visitors, focusing on the quality rather than the quantity of shoppers. Their website emphasizes customer convenience, with segmentation in search results and labeling of pricing based on Kelley Blue Book values.
CarGurus: Emerging as a strong competitor, CarGurus has excelled in digital marketing, particularly in organic search rankings and traffic. The site attracts over 40 million monthly shoppers, owing to its investment in paid search. CarGurus differentiates itself with a shopping experience that prioritizes price transparency and detailed vehicle information, although there are critiques regarding its assessment of vehicle value and features.
Cars.com: Serving as a substantial alternative to Autotrader, Cars.com engages in nationwide branding campaigns and attracts about 22.4 million monthly unique visitors. The platform offers a similar shopping experience to Autotrader, with featured dealer listings and a focus on relevance. Its approach to sales and customer engagement has evolved over time, adapting to changes in ownership and market dynamics.

Dealership Spending Patterns on These Sites

Dealerships typically allocate a significant portion of their budgets to these third-party sites, though tracking the direct sales attribution remains a challenge. The expenditure on these platforms can range from $2,000 to $20,000 per vendor per month. However, the return on this investment is not always clear-cut, given the platforms’ emphasis on reach rather than dealership loyalty or differentiation.

An analysis reveals that the spending on these sites as a percentage of gross profit varies widely, averaging around 4-5%. This expenditure is part of a broader trend where dealerships are increasingly shifting towards digital advertising.

Brand Positioning, Tactical Marketing, and Shopping Experiences

Each of these platforms has carved out a niche through distinct brand positioning and marketing strategies. Their approaches impact dealership clients differently:

Autotrader and Cars.com have leveraged traditional media and sports sponsorships, focusing on a comprehensive shopping experience that prioritizes dealership branding and customer convenience.
CarGurus, on the other hand, has capitalized on digital marketing prowess, emphasizing price transparency and detailed vehicle information to attract a larger online audience.

Challenges in Measuring Sales Attribution

Despite the reach and visibility provided by these platforms, measuring direct sales impact remains elusive. The value of a Vehicle Detail Page (VDP) on a dealership’s own website is estimated to be significantly higher than that on a third-party site. For example, the market value of a dealership website VDP is about $3.99, while a third-party VDP is valued at approximately $1.73. This disparity indicates that while third-party sites can offer extensive reach, the quality and potential of leads generated directly through a dealership’s website might be superior.

While online automotive marketplaces have transformed the car buying process, offering extensive reach and unique marketing opportunities, dealerships face challenges in quantifying the ROI of these investments. The focus for dealers should be on leveraging these platforms for their reach while developing strategies to enhance direct engagement with potential buyers through their websites and other digital channels.

Sources

Street Smart Retail: www.streetsmartretail.com
Hausman Marketing Letter: www.hausmanmarketingletter.com