CarsDirect cruises toward a profit

By Published on . opened its doors to advertisers at the end of July, hoping to prove that people in a buying state of mind are interested in ads.

The new-vehicle e-tailer-started by stumbling incubator idealab!-was launched in May 1999 as a site promising to find vehicles for buyers from its network of 3,000 dealers. Chuck Hoover, VP-marketing, said the timing is right to accept ads because of the traffic. The site's 2 million unique visitors monthly use for different reasons: some to get prices, some for research, some to buy vehicles. With its revenue to date only coming from purchasers, "We are looking for different ways to increase revenue from these people," he said.

While conceding the marketer isn't profitable yet, Mr. Hoover said "all the metrics are headed in the right direction." He cited the site's average profit margin of $300 per vehicle sold. Close to a third of CarsDirect's revenue comes from financing and leasing deals. It withdrew plans for an initial public offering last December, citing unfavorable market conditions.

Ford Motor Co.'s Lincoln Mercury is the site's first advertiser, starting July 30 with a four-week buy. Once a visitor clicks on a Lincoln Navigator sport-utility vehicle or Mercury Sable sedan in the "select make" and "select model" area, banner ads and rich-media ads from EyeBlaster and Unicast appear on the next page. WPP Group's Y&R Advertising, Irvine, Calif., created the superstitial. DoubleClick handles ad sales for CarsDirect.

Jennifer Beindorf, integrated marketing manager at the carmaker, said she's pleased with early results. In the first two weeks, Lincoln Mercury got 217 leads from CarsDirect visitors. She said Lincoln's goal for click-through rates on its banner ads was 0.35%, but it saw between 0.5% and 0.75% rates in the first two weeks. That compares with an industry click-through average of about 0.4%. Ms. Beindorf added that the marketer may tweak its banners before the buy ends to reflect the most popular ads.

CarsDirect plans to allow only one advertiser per page. Mr. Hoover doesn't expect an influx of auto advertisers on the site until next year, when he predicts they'll be increasing their Internet ad budgets.

The online car-retailing segment is in the midst of a shakeout. CarOrder went out of business in February., one of the oldest car e-tailers, expects to close its purchase of Autoweb during the current quarter. But Autobytel reported July 26 a second-quarter net loss of $36.6 million vs. a net loss of $9.8 million a year ago. CarsDirect acquired rival in February.

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