NEW YORK — AutoTrader.com this year will reach more than $1 billion in revenue, up 44 percent year-over-year from 2010 and about three to four times the revenue it was generating when the parent company eliminated most of its print publications little more than two years ago, CEO Chip Perry projected today.
The growth will come in part from incorporation of the four new businesses AutoTrader.com has acquired during the past year, but also includes significant projected growth at the core online auto site.
Perry said AutoTrader.com revenue grew from $626 million in 2009 to $720 million last year, and projected 2011 revenue at $1,037 billion.
He wouldn’t comment on persistent talk about the likelihood of an initial public offering for AutoTrader.com, which is now majority-owned by Cox Enterprises with a 25 percent equity stake held by Providence Equity Partners.
Perry’s presentation sounded like a warm-up to a roadshow for an IPO. But in a side conversation, he said he’s heard the persistent talk about an IPO but “I leave those conversations to others.”
“We don’t talk about that – no decisions have been made,” he said. “It’s up to our owners.”
The company has an 800-person sales force, and is represented directly in all but about six states. (The map he showed didn’t identify any offices in New Hampshire, Vermont, North Dakota, South Dakota, Wyoming or Alaska.)
Perry noted that AutoTrader.com is not just an automotive website any more; the company now owns Kelly Blue Book, VAuto, CDM Data and HomeNet Automotive. The latter three provide services to auto dealers and the industry at large. (We’ve written about those acquisitions before; just search on our site for more info.)
“What we’re moving towards becoming is being a media company that offers deep software solutions to our dealers that enable them to leverage our tools,” he said.
Because of the acquisitions, AutoTrader.com has a debt estimated (by us, not confirmed by Perry) at about $900 million. Perry said. His reply to a question about the debt: “We’re modestly leveraged and we’re deleveraging quickly,” meaning the company is fast paying down that debt.
AutoTrader.com has shown a 56 percent compound annual growth rate since it launched in 1999 and generated about $5 million in revenue, Perry said. In a conversation, he noted that the Cox group’s automotive advertising margins are much higher than when it published its print magazines, and it’s been able to grow significantly since Cox and Landmark Communications split up the old Trader Publishing in Sept. 2006.
He pointed out that Cox operated AutoTrader.com entirely independently of the print AutoTrader magazines; in fact, the first indication he had that the main print publication was being shut down was the morning it was announced by Cox.
AutoTrader.com will soon be rolling out its guaranteed used-car valuation pricing model on Kelly Blue Book, Perry said, because 80 percent of the people who visit KBB.com are there to determine the value of their used cars. The program allows prospective sellers to input valuation information about their cars, get a fixed price and take the car to a local dealer for either a trade-in or to receive a check for the amount of the valuation.
Perry said auto purchases are inherently a hands-on, in-person business, so AutoTrader.com does not believe that e-commerce will play a significant role. More than three-quarters of all AutoTrader.com users who contact a dealer before walking into the store make a telephone call, while 22 percent contact the dealer by e-mail. But 63 percent never contact the dealer at all before walking in the door.
By comparison to AutoTrader.com, Cars.com, a division of Classified Ventures, is likely to do about $450 to $475 million in revenue in 2011. While it’s more of a pure-play than AutoTrader.com, which will do an estimated (again, by us) $750 million to $800 million in revenue on its eponymous website this year, that’s still a remarkably strong business.
And if, between the two of them alone, online auto advertising will amount to $1.2 billion, there’s probably at least another $1.2 billion in online automotive advertising out there on other dot-com sites, newspaper sites, broadcast sites and other. Last year, NAA figures show newspapers in the U.S. did about $1.2 in automotive advertising revenue (which may include some online revenue). This year, auto numbers have been up for some newspaper companies but down for others this year. You do the comparison.