The Lead-Gen Death Throes

They came dancing into our lives back in the mid-’90s and totally transformed our industry. In fact, I recall the first time I saw Autobytel exhibiting at the National Automobile Dealers Association (NADA)’s convention. I shook my head and said, “That ain’t gonna happen.”

Well, it did happen, and we all saw a growing parade of competitors in a vicious dogfight to dominate the space. My hat’s off to the few who prevailed.

The real game-changer, however, was Scott Painter and TrueCar. Painter’s business model reflected his thinly disguised contempt for car dealers. Unlike other lead-generation providers, whose primary purpose was to connect car buyers with dealers, TrueCar’s main objective was to set prices and broker deals at a loss for the dealers. We all know how that worked out.

But hundreds of other companies followed TrueCar’s lead and got into the brokering business. But the landscape is rapidly changing, and the paradigm has shifted enough to loosen their stranglehold on dealers.

Today, the dominant players in this space are Autobytel, Autotrader, Carfax, CarGurus, Cars.com, Edmunds, and TrueCar. To their credit, Autotrader and Autobytel have never based their business models on slandering dealers. I can’t say the same for the others. They would have you believe they own the only computers capable of tapping into a wide audience.

But the worm is turning. Dealers are tired of paying good money to lead providers that portray them as greedy and dishonest. They are now taking back their turf by generating their own organic and paid traffic. But these vendors will tell you that canceling their program will put you out of business. Don’t fall for it! No dealer ever went out of business because they dropped an underperforming lead provider.

They will also tell you they’re actually “advertising sources,” not lead providers, to justify their poor results and soaring prices. What a joke! Nonexistent ROI is just that.

Many dealers I have worked with have seen tremendous results from each of the companies previously listed, including firms I have railed against the most. If you have forged a mutually beneficial partnership with a lead provider — and the price is right — I won’t twist your arm to drop them. But I would encourage you to take a hard look at your provider’s numbers.

If you’re wondering what the future holds for these vendors, take a look at what’s happening at TrueCar. Painter is out and my friend, Chip Perry, is in. Good move. Painter seemed willing to change course, but he kept steering the S.S. TrueCar into the same iceberg. If Perry can avoid any hint of anti-dealer sentiment, the company has a chance to make it.

The TrueCar story is unfinished, but it’s nearing its final chapter. It has a lot of haters out there and a lot of damage and double-crossing has been done. The odds are not favorable, but I would love to see the firm come through this as a new and viable company in “true” partnership with the dealers and the consumers.

Regardless of what TrueCar or any other lead provider is or pretends to be, the bottom line is this: Are they producing sales at a profit? Don’t tell us about vehicle display pages, search results pages, impressions and pageviews. That’s a smokescreen. Stop forcing us to sell cars at a loss. We don’t mind fair, but you are an abomination when you steal customers who would have bought from us anyway.

Finally, stay out of our profit centers. Stop selling F&I and service. Stop sending shoppers who click on the cars we paid to advertise to other dealers and other manufacturers because you have made side deals against the best interests of your customers, the dealers! You sell your leads to multiple dealers and we all pay for the same customers, and then you sell them to a broker who sells the same customers we paid for to other dealers. If they click on our unit, they’re ours. Don’t market them away to other dealers and even other manufacturers who have paid you to steal our customers.

Lead providers have a definite place in our business. We would like to have you as a part of our marketing plans, but not at the extravagant, excessive prices you charge. Stop slandering us and defaming us with the consumers if you want our money. Doing the right thing is the best way to ensure you’ll still be around when the dust settles.

Thanks for reading, and please keep those calls, emails, and social media messages coming.

Jim Ziegler is the president of Ziegler SuperSystems Inc. Contact him at [email protected].