Section 2: Critique of Online Marketplace Advertising

Online marketplaces, such as Autotrader, CarGurus, and Cars.com, have become central in modern dealership advertising. However, there are growing critiques against these platforms, questioning their effectiveness for dealerships. This section examines these criticisms, focusing on high costs, lack of dealership differentiation, low conversion rates, and shifts in platform policies affecting dealership advertising.

High Costs and Low Conversion Rates

The Cost-Benefit Dilemma

The primary critique of online marketplace advertising lies in its cost-effectiveness. Dealerships incur significant expenses in advertising fees, often paid per click, for prominent placement on these platforms. Despite these costs, the return on investment (ROI) can be questionable due to low conversion rates. The average conversion rate for car dealerships, which measures the proportion of online traffic or interactions leading to sales or other actions, is around two percent, although some dealerships achieve higher rates​​.

Consumer Behavior and Trust Issues

Consumers often view sponsored listings with suspicion, preferring organic listings that appear high in search results but are not sponsored. This distrust towards sponsored content can lead to lower click-through rates and purchases, further diminishing the ROI of paid advertisements on these platforms​​.

Lead Quality Concerns

Another issue is the quality of leads generated through these platforms. Ineffective targeting of ads, poor customer communication, and unengaging calls to action (CTAs) can result in leads that rarely convert into sales. For example, a social media campaign offering discounts for referrals may not yield serious buyers, leading to poor lead quality and wasted marketing efforts​​.

Lack of Dealership Differentiation

Online marketplaces often provide limited options for dealerships to distinguish themselves from competitors. With numerous dealerships vying for attention on the same platform, it becomes challenging to stand out, leading to a generic and undifferentiated online presence. This homogeneity can dilute brand identity and reduce the effectiveness of advertising efforts.

Shifts in Platform Policies

Changes in Facebook Marketplace

Recent policy changes in platforms like Facebook Marketplace illustrate the volatility and uncertainty in online marketplace advertising. For instance, Facebook announced the discontinuation of automated inventory catalog listings on its Marketplace, impacting the way car dealers and social media marketers manage their used inventory feeds​​. Although manual listings and sponsored Automotive Inventory Ads (AIA) remain available, such changes necessitate dealerships to constantly adapt their strategies, adding to the complexity and cost of managing online marketplace advertising​​.

Evolving Digital Retailing Landscape

Platforms are continuously evolving to meet diverse consumer demands, such as the increased need for shipped goods with onsite checkouts on Facebook. While Facebook is still developing new solutions for the automotive industry, these changes reflect a shifting focus that may not always align with the needs and strategies of car dealerships​​.

While online marketplaces provide significant exposure and potential customer reach for dealerships, the challenges of high costs, low conversion rates, lack of differentiation, and changing platform policies raise serious concerns about their overall effectiveness. Dealerships must carefully evaluate these platforms’ ROI and consider alternative advertising strategies to ensure a balanced and effective marketing approach.

Sources

1. University of California – Riverside study on consumer behavior towards sponsored listings: phys.org​​.
2. Changes and challenges in Facebook Marketplace for dealerships: Click Here Digital​​.
3. Typical car dealership conversion rates and factors affecting them: EVOX Images​​​​.