Ad Profits Needed to Cover Massive Staff Expansion

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DETROIT (AdAge.com) -- It the latest phase of a six-year online evolution, car-information publisher Edmunds.com
has redesigned its Web site as well as its business model. The big change is the addition of outside advertisers.

American Honda Motor Co., General Motor Corp.'s Buick and DaimlerChrysler's Chrysler division began test-driving the site's ad models last month. When Edmunds.com lets advertisers on board in May, traffic to the site will be tracked by a system created by DoubleClick.

"Edmunds is a good place to have Honda exposing its messages to people close to purchasing an automobile," said Bill Hagelstein, executive vice president on the Honda and sibling Acura accounts at Rubin Postaer & Associates, Santa Monica, Calif. Honda and Acura, via the agency's RP Interactive sibling, also advertise on other third-party car sites because shoppers visit them for data.

Separating ads and editorial content
With the goal of allowing visitors and advertisers to communicate with each other better, Edmunds.com President Jeremy Anwyl says he is open to exploring ad models that get away from the banner format that has fallen into disfavor. He is also taking care to ensure that visitors can easily discern between advertising and editorial content.

He said Edmunds.com plans to maintain its credibility by not, for example, running a automaker's ad on a page featuring one of its cars or trucks. And, to ensure visitors know the source of the carmakers' information, there will be clickable ad buttons that read "message from the manufacturer."

45 million page views monthly
He estimated that Edmunds.com would be able to charge carmakers a $100 cost per thousand. Currently, Edmunds.com gets 45 million page views monthly, which he expects to jump to as high as 70 million with the redesign. About 90% of the 3 million-plus monthly visitors to the site are in the market to buy a vehicle.

The privately held site should also drive additional promotional support through the launch later this year of a syndicated radio program, "Freewheeling Edmunds," with race car driver Lyn St. James.

Edmunds.com's business model first started to change last summer, when its multiyear, exclusive contract to link the pricing area of its site to Autobytel.com expired. Today, nearly 400 partners, including Autobytel, AutoTrader.com and CarsDirect.com, have deals to use Edmunds.com's True Market Value system of prices for used vehicles.

Although Edmunds.com is not a transactional car site, the company generates more than 90% of its revenue from its online referrals and less than 10% from the new and used car-pricing book it started publishing in 1966.

Search for profits
Anwyl anticipates that the new revenue will result in the site returning to profitability this fall. Edmunds.com was profitable until the end of 1999, when it attracted financing from Cox Enterprises, CNET and some smaller investors to fund the current expansion, resulting in a huge staff increase from six employees to 220.

Car shoppers visit third-party sites more often than the carmakers' and Edmunds.com is the fourth-most-visited car site, while Kelley Blue Book's Kbb.com is tops, said Tom Healey, a partner at consultancy J.D. Power and Associates. Eighty-nine percent of car shoppers visited an independent site in 2000 vs. 87% in 1999. Meantime, 75% of vehicle shoppers visited car marketers' sites last year vs. 69% in 1999. Non-Internet users pay $300 more per vehicle, he said.

One of the oldest online automotive operators, Edmund's launched as a Gopher site in 1994.

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