AutoByTel's Flat, Tired

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Yesterday, auto marketer Autobytel (Nasdaq: ABTL) hit the brakes. Quarterly revenues fell. Operating expenses rose. A small profit during last year's third quarter reversed into a quarterly loss. It was yet another forgettable quarter in 2005, a year that now finds the company sporting a $0.15-per-share loss through the first nine months of the year on a modest 8% top-line gain.

What's that smell, Autobytel? Lemon?

Last year, I interviewed then-CEO Jeffrey Schwartz. I spoke to him shortly after we launched our Rule Breakers newsletter service, and my passing interest in the company peaked after I reviewed its business model. Was Autobytel a Rule Breaker candidate?

Car dealers were drawn to the company's referrals, while online heavies such as Yahoo! (Nasdaq: YHOO) and Microsoft's (Nasdaq: MSFT) MSN.com would rely on Autobytel for the data in its car portals. It seemed to be shaking up the auto industry. It was a great story, but I ultimately passed on Autobytel; the explosive growth just wasn't there.

Since then, the company has restated its financials, and its past few quarters have been forgettable. The company cites a J.D. Power study showing that Autobytel.com has a higher closing ratio than its rivals. It also points to its proprietary search-engine optimization skills and its 32% growth in page views since last year.

That sounds nice, but the numbers don't lie. Leads are dropping. For a company that cashes in on its role as intermediary in introducing prospective car buyers to auto sellers, the disappointing numbers are deafening.

Yes, it's been rough in the car market lately. Automakers didn't really need a lot of third-party promotional muscle with the success of employee-pricing promotions earlier this year. There is also cutthroat competition, as the proliferation of paid search has lowered the barrier to entry. Autobytel has the relationships, the domains, and the brands, but the results aren't encouraging.

That's why the company is also now exploring "strategic alternatives," as it seeks to either acquire smaller players, or -- more likely -- field buyout offers.

If there is any hope for Autobytel, it may actually come on the heels of the recent struggles by domestic automakers such as General Motors (NYSE: GM) and Ford (NYSE: F). Autobytel is a lot like Homestore.com (Nasdaq: HOMS) in real estate or Monster Worldwide (Nasdaq: MNST) in job search, both of which thrive on turmoil in their sectors. That's when businesses count on a third party like Autobytel to help clear out the showrooms.

So let's see whether another company will take Autobytel up on its offer now that it's putting itself on the block -- or on the blocks, in car terms. It's a buyer's market at the moment. A sharp online titan looking to beef up its content and paid-search business might just consider buying a banged-up but still-running Autobytel model.

Longtime Fool contributor Rick Munarriz was a big fan of Boston-based rockers The Cars in his youth. He's a lot like you. The dangerous type. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.