I N T R O D U C T I O N

Very few people in the United States truly enjoy their hunt for a new or used car. Although many auto
dealers have worked to improve their customers’ experiences by introducing fixed pricing and “no-haggle”
policies, a number of auto dealers continue to use aggressive sales approaches that can leave buyers
exhausted, confused, and even worried that they might have been cheated in the transaction.

In 1995, Autobytel launched an online car-buying service that
promised purchasers a haggle-free experience and offered car dealers a way to increase new vehicle
sales volumes and reduce selling costs. Autobytel also acquired the operations of several competitors
and continues to operate their Web sites, including Autoweb.com, AutoSite.com, Autoahorros.com,
Car.com, CarTV.com, and CarSmart, as part of its business.
Buying a car with the assistance of Autobytel requires that the buyer register with an AutobytelWeb
site and specify the desired auto in detail, usually after researching the vehicle’s options and features on
the Internet or by visiting local dealers. More than 90 percent of car buyers today do research on the
Internet before buying their cars.Autobytel provides the buyer with a firm price quote for the selected car,
then forwards the buyer’s contact information to a local participating dealer. Dealers pay Autobytel a
subscription fee to receive exclusive rights to referrals from a particular geographic area for the brands
of vehicles that they sell. The dealer contacts the buyer, who then completes the purchase transaction
at the dealer’s location.
The buyer benefits from a speedy, straightforward, and predictable buying process. The dealer
benefits by selling more automobiles and not paying a commission to a salesperson. Autobytel receives
the monthly subscription fee from each dealer that it has under contract and sells advertising to
insurance and finance companies on its Web site. Autobytel currently has contracts with more than
23,000 auto dealers. Autobytel’s revenue from fees paid by auto dealers on these transactions is more
than $70 million per year. Internet sales referrals to dealers from Autobytel and companies like it
accounted for 22 percent of all U.S. new vehicle sales in 2005.
Autobytel experienced rapid growth in sales from its inception in 1995 through 2002, when sales
growth flattened. Like many other companies launched during the early boom years of electronic
commerce, Autobytel had to change its focus. Instead of pursuing a strategy of revenue growth at all
costs, it began to examine its costs carefully. The company also took steps to improve the quality of its
service by ending relationships with a number of dealers who were generating significant numbers of
customer complaints. In 2004, Autobytel expanded by buying other companies and offering sales
management services and software to auto dealers.
After a year of cost cutting and finding other ways to generate sales growth, Autobytel began
growing again.Autobytel has been earning a profit since 2003.Thus, Autobytel emerged from the difficult
years of 2001 through 2003 as a growing and profitable participant in the second wave of electronic
commerce that you will learn about in this chapter.