CarsGuide Is Rebooting Its 'Broken' Business Model As Online Classifieds Enter A New Era

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CarsGuide chief executive Lauren Williams has conceded the classifieds model is “broken” and a lot of work needs to be done to revitalise the online marketplace for autos in Australia.

“The process of buying and selling cars is broken,” Williams said. “CarsGuide is breaking its business model to reinvent the car marketplace.”

The company announced today it would implement location-based search and flip its pricing model from pay-per-lead to pay-per-view – so dealers will pay for every person who sees their ad, rather than paying for every direct lead they receive.

“We know from our dealers that 30 per cent of the leads are actually wasted,” Williams told Business Insider. “So the dealers are paying for the contact details of consumers and they’re not getting anything from it.”

The new pricing model will start in November.

The arrival of online classifieds sites for jobs, real estate and cars has destroyed revenue streams for newspapers, making online listings a fraction of the price of print ads, but the value of the digital products themselves is now under scrutiny. Australian investor Daniel Petre, head of AirTree Ventures, has been actively looking for distruptive real estate startups to invest in because he believes the prices for listing properties are still outrageously high.

Williams wouldn’t reveal the average number of leads each of its 2,000 listed dealers receive, but said: “We deliver nearly 40,000 leads a month.”

CarsGuide CEO Lauren Williams.

According to Nielsen Answers, CarsGuide had a unique audience of 515,000 Australians in August, compared to 1.2 million for its main competitor, Carsales.

CarsGuide as a site is distant second to which IBISWorld estimates has a market share often exceeding 70%.

“The online car classifieds industry displays signs of a feedback loop, in that sellers want to advertise their car on the website that will get the highest number of potential buyers,” IBISWorld said in its 2013 Car Classifieds report.

Williams said when she took on the role as CEO about 18 months ago the board set her a challenge to become number one.

According to the IBISWorld report, revenue in the industry over the last financial year was about $246.3 million, with profit estimated to be $74.1 million. The annual growth since 2009 has been around 14% but projected growth over the next five years is forecast to be below 10%.

The AFR today reported CarsGuide, which is 50% owned by News Corporation and 50% owned by a group of about 35 car dealers, is considering a possible listing.

Williams said increasing its mobile presence, ramping up location-based search and flipping its pricing model should start to deliver an uplift to the company.

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