Yesterday we began to stroll through the virtual showroom of auto marketer Autobytel (NASDAQ:ABTLE). The company has a few of the traits one likes to see in ground-breaking Rule Breakers. It's the market leader -- and that's impressive when researcher comScore claims that one in every three Americans visited an online auto site last quarter. It was the first mover, dating back to the pre-Internet days by relying on online services like Prodigy to drive its tire-kicking traffic.
These days the company is a proficient source when it comes to the automotive trade. Even Web titans such as Yahoo! (NASDAQ:YHOO) and Microsoft's (NASDAQ:MSFT) MSN.com rely on the company for the data in its car portals.
While you are right to be suspicious when a company sports a five-letter ticker symbol ending in E -- meaning it has been delinquent in filing its quarterly financials -- we already covered the small amount involved in the restatement and it shouldn't be long before ABTLE is ABTL again.
We left yesterday's introduction with three questions. After interviewing CEO Jeffrey Schwartz earlier this week I think I can flesh out some answers.
Why isn't the Autobytel network a major player in the paid search market?
Thanks to Yahoo!, Overture, and Google (NASDAQ:GOOG), many popular content publishers are making a killing by teaming up with search portals to provide contextual text ads. Autobytel figured to be a natural given the sector's big-ticket appeal, yet Schwartz explains that the company is already selling 100% of its ad inventory, making a princely sum selling ad campaigns for roughly $40 for each thousand impressions -- which certainly add up for an active, sticky site. It probably also bears repeating that the company averages $150 for each car sale it generates. The last thing it needs is for paid search to whisk car shoppers elsewhere.
Won't continued consolidation in the auto dealership market hurt Autobytel if car sellers get more Web savvy?
Not really. It's still a highly fragmented sector. AutoNation (NYSE:AN) is the country's largest dealer and an Autobytel customer. Yet it and the other 99 largest ownership groups account for roughly 10% of all car sales. And Autobytel is not just a facilitator between the buyer and seller. While marketing cars is two-thirds of the company's business it is also a provider of dealership software. DaimlerChrysler (NYSE:DCX) is one of its software clients -- Autobytel's CRM software powers every Mercedes showroom.
Will Autobytel be able to avoid the cyclical car market trap?
It has done well so far, thanks to wider Web adoption. More people are getting comfortable leaning on the Internet to land the best car deal, so traffic is climbing. Autobytel is also able to seal the deal with a larger percentage of those visitors as they have grown more comfortable with doing business online. The company accounted for 7% of last year's total domestic car sales, and that figure will rise to 8% this year. Autobytel is looking to land 9% of all car sales generated in 2005.
So while the company may suffer through a few quarters of bottom-line hiccups until its profits keep pace with its revenue growth, it's a company that bears watching -- and not just in your rearview mirror.
Have you been looking at the new 2005 car models, or do you go for the hefty price breaks available on used cars? When is it time to buy your next automobile? All this and more -- in the Buying and Maintaining a Car discussion board. Only on Fool.com.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.
