Working with online car sales leads since the early part of the dot-com era, the cofounders of the Detroit Trading Exchange saw firsthand the inefficiencies in the market and set out to address them.
The result is a robust and active trading exchange where car dealers and others bid to buy more than 300,000 sales leads generated by consumer-facing Web sites each month.
Two of the exchange’s founders, John Campbell and Pete Bonner, both worked for StoneAge, which acquired the Car.com domain name for its consumer-facing activities and which was later sold to Autobytel. Don Campbell, president and chairman of the company, is the Exchange’s third cofounder.
Integration Work
“We put our heads together and agreed there were a lot of inefficiencies in the space for both buyers and sellers and thought we should set up an exchange,” John Campbell, who is now a senior vice president at the Exchange, told the E-Commerce Times.
A widely recognized problem at the time was the integration work that buyers of sales leads — collected when consumers fill out forms on a host of auto-related Web sites — had to complete in order to receive leads from the Web sites and third parties that sold them. The market was also inherently inefficient, with companies that acquired leads shopping them manually to would-be buyers.
“We saw that as a huge bottleneck,” Campbell said. “We knew an exchange was a way to make the market much more efficient.”
The trio founded the firm in 2004 and launched it soon afterward upon building a technology platform. The company’s founders used their existing contacts in both the Web community and the car dealer worlds to attract early interest, and before long, the firm, which takes a commission on the sales of leads, was operating at a profit.
Tackling Fraud
Among the early challenges the firm faced was convincing buyers and sellers to use the platform, which is only as good as the volume it can generate. The founders overcame that hurdle by leveraging their past contacts and convincing would-be users of the value of the platform.
It also continued to perfect the technology behind the exchange to ensure that leads could be purchased in as close to possible to real time. “It started slowly, but we kept building it and then it started to create its own momentum,” Campbell noted.
Investors spent millions of dollars in developing business-to-business exchanges early in the dot-com craze, thanks to the promise of streamlined supply chains and cost savings, noted Forrester Research analyst Andrew Bartels.
The attention paid to B2B exchanges may have slowed some more recently, but many have found success in offering platforms for online trading. “The key is to bring a critical mass of both buyers and sellers to any online sales platform,” Bartels told the E-Commerce Times. The best platforms also operate intuitively and smoothly to reduce “friction” in the sales process.
Today, the Detroit Trading Exchange has its competitors, including Los Angeles-based LeadPoint.com, which brokers leads in a variety of fields, from student and home loans to educational opportunities.
The exchange platform uses ZIP codes, financial factors and other terms to sort leads, enabling buyers to make a bid on how much they would be willing to pay for a group of leads, a process that takes a matter of seconds. Sellers can then choose from the offers they receive, using the technology to sort them as well.
The Exchange believes one of the reasons some 50 buyers — including car makers and sites such as CarsDirect.com — turn to it to acquire leads is the time the firm spent creating uniform rules of trade, a sort of code of conduct that it works hard to see upheld.
“As far as leads go, quality is in the eye of the beholder,” said John Campbell, noting that the leads on the exchange come from dozens of Web sites, which collect them through pay-per-click and banner ads, organic search traffic and other methods, all ending with the goal of getting a consumer to fill out a form expressing interest in buying a car and giving some basic information, such as their ZIP code and contact information.
Slowly, car dealers themselves are recognizing that some sales take time to be cultivated, he added. “If a lead buys a car three months after filling out a form, that might be considered a bad lead by a dealer salesman who is focused only on making that next week’s quota. But in reality, it’s a quality lead.”
Because it is generating such high volume, the Exchange has also become a fraud-detection tool. “If all of a sudden someone comes from out of nowhere and start selling thousands of leads, that’d be a red flag that it needs to be checked out,” John Campbell said.
Going Up
The exchange’s founders also believe they’ve created a scalable platform and one expansion opportunity already being pursued involves using the exchange to help would-be car buyers obtain the credit they need.
In some cases, dealerships or car makers’ own financing arms may not be able to provide a loan to an individual, but if those declined can have their applications put onto a platform where banks or other subprime lenders can access them, they may be able to secure a loan for the consumer before they leave the car dealership.
“It would be very easy for the exchange to become a loan-trading exchange as well,” Bonner said.
While their platform could operate as an exchange for other types of leads, the cofounders believe their core market is both their area of expertise and a growth market.
The Web is becoming increasingly important to the car-buying process, said JupiterResearch analyst Belis Aksoy.
“Dealers are increasing their Internet usage in generating sales, and they are increasingly interested in high-quality leads that will turn into sales,” Aksoy said.
“We see the market growing,” John Campbell said, adding that the Exchange is seeing more interest from automakers themselves, who share the information with their own dealer networks. “More and more car purchases start with people clicking around Web sites and that interest, that buying intent, is very valuable.”
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