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Online Car-Buying Services Finally Become Profitable

March 4, 2003

The Internet auto business is finally starting to hum, driven by renewed public interest, according to the Atlanta Journal-Constitution.

Last month, industry pioneer Autobytel Inc. reported its first quarterly profit after seven years of losses. Autotrader.com became profitable in June after about five years on the Web. EBay Motors, launched by an e-commerce giant with a powerful infrastructure and millions of daily visitors, reached profitability almost immediately after leaving the starting line three years ago.

In the 1990s, dot-com entrepreneurs bragged that they'd put traditional auto dealers out of business and revolutionize the way people bought cars. Because of everything from state laws that prohibit direct car sales by out-of-state companies to the reluctance by many shoppers to buy before kicking the tires, the industry hit the skids, according to the Journal-Constitution.

While the online auto sites offer private, person-to-person sales, all of them depend

primarily on traditional dealers for revenues. Those are the same venerable dealers that were supposed to go the way of buggy whip makers

just a few years ago, the Journal-Constitution said.

"Dealers are the only people that sell cars,"

said Autobytel CEO Jeffrey Schwartz. "Internet sites don't sell cars. Manufacturers don't sell cars. Dealers have been, and always will be, the center of the new-car selling universe."

The biggest beneficiaries of the online auto services, ironically enough, may be the

traditional car dealers that once feared the sites, according to the Journal-Constitution. That's because for dealers, auto sites offer an advertising and referral opportunity that's much cheaper than traditional outlets.

Using primarily traditional media, such as newspapers, television and radio, dealers spent an average of almost $400 per car sold for

advertising in 2001, according to the National Automobile Dealers Association (NADA).

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