Auto Dealers Remain in E-Commerce Loop Despite Fears

Despite concerns that automobile companies are angling to bypass their automobile dealer networks in the sale of new cars online, car dealers remain entrenched in the online car buying process.

Instead of bypassing dealer networks, car manufacturers are keeping dealers in the loop by sending prospective prospects to their closest dealer to complete sales that are negotiated online.

This relationship, furthermore, should continue to strengthen, as evidenced by Ford’s recent deal with Yahoo! and General Motors’ recent deals with America Online and NetZero, respectively. In all three deals, car buyers will be introduced to local dealers after searching for new car information on the Web.

Least Known ISP Forms Most Innovative Relationship

Last week, Internet service provider (ISP) NetZero, which offers its customers free Internet access in exchange for receiving targeted advertising, announced a strategic partnership with U.S. automaker GM.

The deal is highly innovative because GM will be trying to tailor advertising and opt-in e-mail messages to potential car buyers based on their personal profiles. NetZero’s customers answer questions about their lifestyles, buying habits and taste in consumer products when they subscribe to the service.

Advertisements based on those preferences are run in a separate three by one inch window in the right corner of the user’s browser. As an example of the deal with GM, young adults with a preference for camping might see ads for Chevrolet trucks and sport utility vehicles, while middle age users who express and interest in luxury products might receive advertisements for Cadillac or Buick.

As its part of the deal, GM said it will distribute 20 million CDs promoting NetZero’s service through its dealer network over the next four years. GM also received options to buy up to $35 million in additional services from NetZero, and to purchase up to a maximum of 575,000 shares of NetZero stock at $28.74 per share.

NetZero said that it could receive $68 million in revenues from the deal over the next four years, which would make it one of the largest advertising deals on the Internet.

NetZero’s New High Profile

In 15 months of operation, NetZero has generated three million users, 1.5 million of whom have signed on in the last month. This influx gives NetZero a strong claim as the second largest service provider in the U.S, although it is far behind AOL’s 20 million users.

Microsoft’s MSN has an estimated two million users, and Earthlink has about 1.7 million members. NetZero reported revenues of $7.7 million for the three months of operation ended September 30, 1999.

GM Generating Leads For Its Dealers

While there are numerous concerns that the automakers want to bypass their dealers to sell cars directly, GM has so far resisted the temptation. GM’s BuyPower Web site already generates about 600,000 to 700,000 customer visits a month that result in 3,000 to 4,000 sales a month, according to Patrick Morrissey, of e-GM, the company’s e-commerce division.

GM openly says that these figures are only the beginning. Morrissey says that deals with NetZero and AOL are designed to increase traffic to its site by a factor of 10. If this growth occurs, GM could be involved in about 500,000 car sales a year on the Internet.