When it comes to competing for ad dollars from such categories as automobile dealers, the Internet has been a looming threat to media outlets like local cable television. But the Web is emerging as a powerful partner for cable operators to secure a piece of the nearly $7.5 billion that automobile dealers and dealership associations spend each year.
Such is the case with Vehix.com, a Salt Lake City-based company that is owned by cable company Comcast and Utah dealer owner Garff Enterprises.
“Our whole purpose in existing is to help cable companies increase their automotive revenues,” says Vehix CEO Derek Mattsson. “Cable on a local level typically only gets about 6% of dollars being spent. Our objective is to change that and help them steal share away from newspapers.”
Of the $7.5 billion spent in 2004 by car, truck, and van dealers and dealership associations, 55% went to newspapers, and another 38% went to spot TV, according to Nielsen Monitor-Plus. Ad-tracking firms like Nielsen do not measure spending on local cable, but Mattsson isn’t kidding: Not much goes to local cable.
To help local cable increase automotive advertising, Vehix serves primarily as a lead generator for dealers. Here is how it works.
Access to Vehix is offered by cable account executives to dealers as an added-value component in a media buy. The amount of advertising needed to get the addition of Vehix varies by cable system, but the concept is consistent around the country. A dealer places a certain amount of advertising on local cable, and that dealer’s inventory is put onto the Vehix Web site. Consumers searching the site are then directed to cars for sale in their neighborhood.
1,500 Dealers Opt In
Vehix estimates that, in 2004, it brought 695,000 prospective buyers to automobile dealers, which it says resulted in $1.2 billion in sales. Moreover, Vehix estimates that it helped local cable operators generate $80 million in dealership expenditures.
The company gets most of its revenue by taking a cut of the ad dollars secured by its cable partners.
“We deal with over 1,500 dealers across the country, and, typically, when they’re on this program, they see a minimum of a two-to-one return on their investment,” says Mattsson. “This gives cable companies a tangible way to show they’re impacting a dealer’s sales.”
The combination of the Internet and local cable makes sense to Jason Reitelback, Internet sales manager at Scott Honda in Philadelphia. The dealership uses several Web-based lead providers besides Vehix: Autobytel.com, AutoTrader.com and others.
“Based on my experience,” says Reitelback, “I’d say close to 50% of people who are buying have seen our ads on the Internet.”
That sounds about 100% right. According to J.D. Powers & Associates, which compiles auto research, about half of all new vehicle buyers say their purchase was influenced by information found on the Internet. Moreover, a bit more than one out of five survey respondents say searching the Web influenced which dealership they chose.
“Quality and Volume”
Perhaps the greatest draw of local cable and the Internet to dealerships is its combined focus on small geographic regions.
Says Reitelback: “Being able to tweak your radius parameters, in addition to the heavy [Vehix] advertising in our market and the enhancements they’ve made to their Web site, has brought Vehix right up to the same level as some of the more established Internet lead providers. I’m not getting tons and tons of low-quality leads, but I’d rather have a happy medium where there is quality and volume.”
Vehix isn’t the only Web site Scott Honda and other dealers are using, but it is essentially the only site working specifically in partnership with local cable. That has been the case almost since the company was founded in 1996 by President John Garff.
“At the time, I was working in the cable industry for TCI,” says Mattsson. “We were looking for a mechanism to grow advertising revenue.”
He says he partnered with Garff and originally sold cable systems in Salt Lake City on the Vehix concept: “We grew our auto revenue over 50% the first year.”
In 1998, cable operator TCI bought half the company. Since then, TCI was acquired by AT&T, whose systems were subsequently acquired by Comcast.
Go to the Web for Details
Vehix seems to be catching on big time. “In the past six months, we’ve increased our dealer count from 900 to over 1,500,” Mattsson says. “We’re working with eight multisystem operators and expanding with all of them.”
Other lead-generating Web sites emerged around the same time. Currently, Cars.com is owned by, and partners primarily with, newspaper groups like Tribune Co. The independently owned CarSoup.com works with local television and radio stations, including some owned by Clear Channel.
“Television could never give dealers exposure for their inventory,” say CarSoup President Larry Cueno. “Now what happens is, the Web provides detail, and television provides the motivation to get people to come to the Internet to get that detail.”