Monthly Archives: June 2016

3 Pillars of Car Classifieds


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Chileautos, the newest member of the carsales family, has the tag line “Vehiculos en venta con fotographias” which translates in English to “Vehicles for sale with photos“.

It’s great now that we take it for granted that a car classified ad should have a photo(s) because when carsales started out, getting the car list and details from dealers was hard work let alone a photo!

For all the great advancements and features we have made on all our sites in adding the depth for sellers to sell and buyers to make their purchasing decisions a little easier (and safer), the fundamentals of selling online are still prudent and the cornerstone to selling online.

These are the 3 pillars of car classifieds:

1. Competitive Price

A competitive price doesn’t necessarily mean the cheapest but over-pricing a car waiting for a “wood duck” to come along is long gone. Buyers are more educated than ever with all the information at their fingertips so knowing where you fit in the competitive landscape is vital and where products such as Price Assist and LiveMarket can help ensure you are in the game from the outset.
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2. Lots of quality photos

One photo doesn’t cut it. Lots of quality photos showing all angles, inside and out to take as much of the guess work out of the process for the online buyer is the key. These photos also enable an automated video with sound over to be created further enhancing the consumer experience.
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3. Descriptive comments

Comments should be about the unique features the car has; this is where the seller can actually sell the car. Seems simple but too many times we see sellers failing to capitalise on the free text they have here to actually sell the car. From my experience, here’s what the different types of sellers generally put in their comments:

Franchised dealers – Generally put more emphasis on their dealership than the car in the comments; I hate to spoil the party but the buyer doesn’t care. Having the right car at the price is far more important so tell them about the car.
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Independent dealers – This is where there is a bit of a mixed bag. The good ones generally make the effort to insert good quality comments about the car but then there are many that maybe insert a line or two (or nothing).
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Private sellers – Maybe it is because they are just selling one car (every 3-5 years) but they generally do a far better job than dealers in selling the car in the comments.
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These 3 pillars cannot be ignored and if nothing else is done, it is these 3 that must be done well.


3 Points to Win


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Who do you work for – you, your manager or the company? It’s an interesting question.

I’m a firm believer in the triangle philosophy to answer this question. I’m not sure where it came from but this is something I have used for many years and is really an over-arching extension of mastering managing up which I have talked about before.

At the top of the triangle is you. At one point of the triangle is your manager and at the other point is the company. In between each point is an arrow pointing both ways.
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What this depicts is a win-win-win philosophy in that there has to be a win for you as the employee, a win for your manager and a win for the company – as such you work for all three. I have found that by using this as an image can be very powerful in decision making whether you are the employee, boss or even the company owner.

Have a think about it and you will find that it can be used as a great starting point in decision making when looking after an employee and in turn looking after yourself and the company. It works three ways and if all parties are happy then all should get a positive result.

It can also be used for thinking about business relationships if you put a service provider at the top, you at one corner and the company in the other corner as a thought provoker to achieving a win for all parties in a business arrangement.

Oh, to be truthful it’s probably a stretch to call it a “philosophy” but I like the sound of it.

And if you don’t like it, agree with it or understand it, that’s ok. I’ll continue to use it.


2 Lessons on Diversity


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Ok, I’ll put my hand up to say that until less than a year ago I was ignorant about diversity.

As part of carsales‘ programs, I attended a session called Unconscious Bias. I went in to the session negatively I have to admit because I had been told it was about diversity so I immediately put my unconscious bias hat on (even though I didn’t know I had one).

I was ignorant on two fronts in particular and learnt a lot about them:

1) I had no idea what diversity actually was. What would happen if I had to solve a real world problem and I surrounded myself with people just like me? I’d get answers that would be similar to what I was already thinking. Now what if I had a diverse group of people around me to solve this problem? I’d most likely get a much more diverse discussion with lots of points of views that I would never have thought of and most likely get a better result. Pretty simple philosophy in hindsight. Lesson learnt.
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2) I had no idea what unconscious bias was. Well, it is a bias that we are unaware of, happens automatically and is outside of our control. To get the most out of any situation we are faced with, we need to be aware of the unconscious bias that we have and how it influences what decisions we make. For instance, we were advertising for a job a while ago and had 8 male applicants. HR told me that they’d prefer if I could interview at least one female in the candidate short list. “How can I when only males applied?”, was my call. Our unconscious bias when we penned the job ad lent itself to male applicants. By tweaking the ad (i.e. adding we are an equal opportunity employer) and re-posting, we quickly had a female applicant. Lesson learnt.

And here’s one tip I learnt and I liked which I think has a practical use in the office for everyone:
Get people to write down ideas in brainstorming sessions rather than getting them getting influenced by the first talker. This will give the introverts the chance to show their wares.

Again, pretty simple stuff in hindsight.

Well, it ended up being a fantastic 3 hours as I found enlightening answers and meaning in learning about two of my ignorance’s.


Valuing Your Business


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Starting a business requires a lot of passion, hard work and sometimes capital.

In addition it also requires some sound advice in structuring the company right from the outset, especially when outside investment is required. I’ve learnt this in my own businesses.

When we were looking to start a data aggregation and web services company back in 1999 we had 2 choices:

1) Build the technology required which would mean a longer time to market, greater investment required and more equity kept; OR

2) License proven technology from the US which would mean instant credibility, short time to market, less investment and less equity
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We went with number 2 in starting Digital Motorworks in Australia in order to immediately grab business that moved us to almost instant profitability even though we gave up nearly half the company. Was it worth it? Yes, maybe.

I was watching a little bit of Shark Tank on tv the other night and a great idea came on that has merit but like most things requires a lot of things to fall into place (including the right funding).

They were asking for $500,000 for an 11% stake valuing the company at around $5m. This follows a previous investment round just 6 months earlier valuing the company at $1.5m.
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For a company like this to increase in value by over 3 times in just 6 months, one or more of three things had to have occurred:

1) Revenue has sky rocketed;

2) A massive, long term contract shoring up the company has been signed; AND/OR

3) The first investment was under valuing the company or the future investments required

Unfortunately in this case it was number 3 – in their keenness to secure funds to underpin the business they didn’t think about the next round of investment that would be required. Maybe they didn’t think they’d need more money.

At carsales we get presented with lots of opportunities to invest in businesses just like this. It is great to see and hear passionate people who have put all their efforts into a dream. More often than not though, passionate founders go the other way and over value their business making a deal hard to do.

While it is great (and a prerequisite) to be passionate about what you are doing, it is very important to be able to take the blinkers off to understand the risks and future requirements as much as you do the opportunity.

The risks need to be understood and help to shape the business decisions as much as the opportunities do.


Building For The Future


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Anyone who knows me knows that I love to draw parallels between business and sport. Here’s one of those.

Our carsales‘ CEO regularly says to us that we should be aiming to build a business where our kids will work.

I love this as an aim as it promotes a long term sustainable view on building the business. This is an important balance for our company as we look to build shareholder value.

I also love the thought of my kids working at carsales. I’ve spent the past 20 years doing all I can to help them grow and this would put icing on the cake for me.

In late 2002 one of my best mates told me he was thinking of coaching our then local football club, Rowville. This was a big move. Rowville had finished 8th of 9 teams in 4th Division meaning it was effectively ranked 38 of 39 teams in the Eastern Football League (EFL). It was rabble (in their words)and not just in performance on the field, the culture was shot.
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Not only this but he had spent the previous 18 years at VFA and 1st Division level. This was a big drop so the question was why? “Our kids are going to play at Rowville and I don’t want them playing 4th Division so let’s get the club up to 1st Division by the time they are playing senior footy”, he said.

Fair call, I was in. I came in as assistant coach/chairman of selectors and dusted off the boots after two years retirement to play as well. We pulled together around a dozen mates and mates of mates most of which were 30 plus but had played higher levels of football. The club was nervous of putting “dad’s army” (their words) out on the park but we assured them that we’ll go ok and start the rebuild of the club to move up Divisions.

In 2003 Rowville did not lose a game to be Premiers and Champions with an average winning margin of 85 points. We moved up to 3rd Division in 2004 again winning the Premiership and losing just the 1 game through the season.
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It was time to execute the next stage of the plan. Most of the old guys like myself, finally retired after the 2004 win to bring through more ex-juniors who we were blooded over the previous 2 years. In 2005 in 2nd Division with a different looking side, Rowville made its 3rd Grand Final in a row, this one a little unexpectedly. It was a blessing they lost that one as they weren’t ready for the premier division just yet.

Fast forward to 2012 with my mate back at the helm as coach after a few years off and I was back as assistant coach. With a side containing 19 (out of 22) ex-juniors, Rowville wins the 2nd Division premiership to win promotion to 1st Division. The plan was complete, nearly.

Our kids weren’t playing senior footy quite yet so the club needed to consolidate in 1st Division. Well in 2016 my mate is now President of the club and they are well and truly in the top half of 1st Division with great kids coming through; kids that we have both coached through the juniors as well. The future was built. Sustained performance had improved through a complete change in culture.
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As with our long term strategic direction at carsales, Rowville had a plan that they executed and now can provide a great environment for our kids to enjoy at a professional, high level. I take my hat off to my good mate for following through to a great achievement.

Plan, execute and enjoy the fruits – build for the future. This is the mission at carsales too.


The Outsourcing Dilemma


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When should an online publisher use a third party service? It’s a question that comes up a lot in our space. I’ve been on both sides of the fence so I’ll have a go.

When I co-started a web services company the business model was relatively simple – partner with large online media players and their sales force sells your service for a recurring monthly fee. As they grow, you grow with them, achieving economies of scale along the way and carving out a nice business.

“There was one notable exception from that list – carsales. We just couldn’t get business with carsales…”


Before too long, my company supplied web based services to the majority of the big players in the Australian market in all forms of classifieds – Pacific Access/Sensis (Cars), News Digital Media (Carsguide, Careerone, Homesite, Gofish), Ninemsn/Trader (Carpoint), Fairfax (Mycareer), Seek, REA – all of which gave access to thousands of SME’s.

There was one notable exception from that list – carsales. DMi just couldn’t get business with carsales in the 10 years I was there as carsales has always been different to all other publishers in the use of third party providers in that they didn’t use them; they have always had the technology (or built it) in-house be it to aggregate inventory, manage inventory, manage leads, inventory search engines, web sites, etc, all the usual third party offerings used by their competitors.
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Pros and Cons
Before I share a Case Study where carsales made the decision to outsource to a third party service provider, I want to share my Pros and Cons.

The Pros for outsourcing to a third party service provider:

  1. These services are usually not a publishers core business so it makes sense to have your people concentrating on getting your core as best it can be.
  2. Time to market should be quicker

The Cons against outsourcing to a third party service provider:

  1. Recurring cost that increases as your services increase.
  2. Not being in control of the whole ecosystem around your core service.

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Case Study
A few years ago a new feature to accompany listing vehicle inventory online took off in the US and made it’s way into Australia. carsales‘ competitors were starting to use this new feature so there was an opportunity for carsales to also add the feature to the website as well as provide it to dealers for their own websites. The question was to build or license a third party service.

“carsales sought to lock in a monthly fee for the service”


carsales had always been one to build but had reached a stage where there was so much happening in technology that it made sense to license a third party service to leave the tech teams to do more important developments and to get time to market efficiencies (the two Pros).

In order to offset the first argument against using third party service providers, carsales sought to lock in a monthly fee for the service to use it across the business. The downside to this is that if carsales fail to sell the service to its dealers, carsales loses as it still has to pay the monthly fee. The upside is that the more dealers carsales adds to the service, the cost of the third party service doesn’t just keep rising, it is capped. The challenge was to find a flat fee that suits carsales and the third party provider.
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Once a third party service provider was found and terms were agreed to, carsales very quickly was able to start selling the new service, giving the website a new feature and forming a new revenue line. Using a third party service provider had worked.

“In the end this has ended up being a positive move for carsales”


The service was working well until the third party service provider informed carsales that the terms of the agreement would change after the initial term. This wasn’t acceptable to carsales so it did what it had to; put together a tech team to build the technology to seamlessly replace the third party service when the term was up.

In the end this has ended up being a positive move for carsales. The service and its features remained pretty much the same yet the cost of supplying the service was reduced by over 50% (which includes amortising the development effort over a number of years) and hence, the two Cons were adequately covered off.

My View
I think there is a time when it makes sense to outsource to a third party service provider and a time when not to. The two Pros stand up; as do the Cons. It all comes down to a business decision at the time that fits the business in the best way.

The most important thing though is to not be afraid of changing that decision. It’s ok to change your mind to get the right outcome.


Why Australia was different to the US, UK & Canada


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In automotive online classifieds I find it fascinating that the US, UK, Canada and Australia have very similar market characteristics and are all what we would consider developed from an online perspective yet there is one glaring anomaly – only in Australia has print not won online in this space.

I have a theory as to why and it is two pronged but first let’s look at the dynamics of each country.

US
Autotrader.com leads the way with cars.com a very credible and successful number two. Both have grown from print origins being the Autotrader magazine and Classified Ventures, a joint venture of five newspapers, respectively.
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Canada
Autotrader.ca is the auto vertical leader only recently shedding (finally) it’s print reliance from the Autotrader branded magazines.
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UK
Autotrader.co.uk is the clear leader growing once again from Autotrader branded magazines.
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Australia
carsales.com.au is the clear leader having grown out of leading Dealer Management System (DMS) supplier, Reynolds & Reynolds (R&R, now called Pentana Solutions).
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In my opinion a leading DMS supplier is in the best position to own the online automotive vertical space like what happened in Australia. This is because they have a natural advantage of understanding dealers, rely on technology and are able to integrate the day to day operations of a dealer into the online world.

So why did this happen in Australia and not in the other countries?

I put it down to two reasons:

1. R&R was a clear leader. This was especially so with the large franchise dealers which brought the bulk of the inventory, so vital to bringing consumers to the website. So when R&R set carsales up with a seamless, automated link to update inventory directly from the DMS, a great part of the early challenges for the competitors (i.e. Newspapers & Media groups) was solved.

2. The leaders of R&R. This is undoubtedly the key reason as these guys just made the right decisions from setting up a network to the dealers was before its time, recognising its key differentiators early against the newspapers/media players, learning from the US market and defining a business model that blew away the competition. Oh and let’s not forget, they took the risk to have a go against much bigger competition who had a lot more to lose.
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In the US the DMS market was a little more fragmented with Reynolds & Reynolds (R&R US) and ADP each having around 40% of the market each. But even then R&R US was perfectly poised to have a real crack at winning online as they had one of the first automotive classifieds sites called dealernet.com.

R&R US didn’t realize what they potentially had and decided to sell dealernet.com and sign on as a strategic partner with Microsoft and their Carpoint brand. This was a decision they quickly regretted and one that wasn’t lost on R&R Australia. As it turned out, Carpoint hasn’t won and it has been Autotrader.com and cars.com who have successfully migrated from print to online to win the market.

carsales has really been a remarkable story because make no mistake, the likes of News Limited, Fairfax, Pacific Access (Sensis), Ninemsn and Trader – much bigger companies than R&R with much deeper pockets – spent millions of dollars and leveraged all of their existing media assets to compete against carsales.

We know that competition will never just go away. We also know it takes more than deep pockets to win.