dealers are buying 

and so is wall street

Imagine you drive a 1997 Toyota Camry you bought new and still pay the same monthly payment you did when it was brand new. Crazy right?

Car dealers are paying massive sums for technologies that were built more 20 years ago.

To put it plainly, more than $1 trillion is spent annually on decades-old tech. Of the products with more than 500 dealers, the newest solution came to market in 2003. And that product was acquired in 2011 for $100 million.

It is a prefect storm of timing.  Dealers are looking for something new and large companies are on buying sprees.

The Main Buyers

these companies have been the primary automotive solutions buyers in the last decade

Cars.com

  • Based in Chicago
  • More than 13,000 dealers
  • Core Solutions:  Cars.com classified site, Websites, Marketing, Reputation Management

With the recent acquisition of Dealer Inspire  (websites & marketing) for $167 million Cars.com is now offering dealers operational retail solutions.

Our opinion:  Of all these players Cars.com is in the best position to bring new technology and innovation to the industry.  It is still inhibited by similar internal bureaucracies to the other giants though.  Speculation is Cars.com is looking for buyers.

Our relationship:  Many friends are working at Cars.com.  Joe Chura, (CEO of Dealer Inspire) can receive an additional $40 million by hitting performance objectives during the next three years.  The highest priority of those objectives is to introduce a CRM to the market.  Joe has made separate offers to recruit two of us to head the creation of the Cars.com CRM.

CDK

  • Based in Chicago
  • More than 6,000 dealers
  • Core solutions:  DMS, CRM, Websites, Marketing, Service, Compliance, etc.

Our opinion:  We know CDK is positioning itself to be sold. It is a monster in the DMS area, as that is where it began, and used to be called ADP Dealer Solutions. Yes, the same ADP of Payroll Services. Currently involved in varying lawsuits pertaining to data usage and the blocking of it, CDK is a barrier to entry for any solution that needs to utilize a dealer’s customer data and inventory.

Our relationship: We have worked on data integrations with CDK at past ventures. There are excellent relations with CDK’s most recent acquisition:  eLeadOne CRM.

Cox Automotive

  • Based in Atlanta
  • More than 18,000 dealers
  • Core Solutions:  Autotrader, KBB, DMS, F&I, CRM, Websites, Inventory, Manheim Auctions, etc.

Our opinion:  Cox Automotive is a giant in the space and part of the same company that delivers cable and Internet services: Cox Communications.  More than 30,000 people work for the automotive division.  With the exception of Autotrader every Cox Automotive product was acquired in recent times.  They are struggling to find a cohesive strategy for integrating all the things under their gigantic umbrella.

Our relationship:  all of the FrikinTech founders have friends at many different levels of the organization.  The amount of information we get, about Cox, comes so often we are working hard to stay up to date.

DealerSocket

  • Based in San Clemente, CA
  • More than 3,000 dealers
  • Core Solutions:  CRM, Websites, Inventory

Our opinion:  Since losing their original founder it seems DealerSocket is struggling to successfully launch updated products. It acquired DealerFire websites and then Inventory+ from Dealertrack, and have not been able to get traction on either product. DealerSocket recently launched a new version of their CRM called Blackbird to many dealers’ dismay.  More and more of their core employees are leaving and we can only assume the company will be acquired soon.

Our relationship:  Almost nonexistent now.  Whatever turmoil is happening there has reduced the number of friends who were employed there; most notably the past CEO Jonathan Ord.

Acquired Dealer Inspire for $207 million in 2018

Acquired DealerRater for an undisclosed amount

Acquired Dealer.com for $1 billion in 2014

Acquired ASR Pro for $14 million in 2014

Acquired Autoaccelerator for $12 million in 2013

Acquired eLead for $660 million in 2018

Acquired Inventory+ for $16 million in 2015

Acquired DealerFire for an undisclosed amount

Acquired Dealertrack for $4 billion in 2015

Acquired Xtime for $325 million in 2014

Acquired VinSolutions for $100 million in 2011

Acquired HomeNet for $93 million in 2010

Acquired vAuto for $240 million in 2010

Acquired KBB for $500 million in 2010

Sold 83% of its shares for $27 million in 2017

$10,000 invested in 2011 became $4,770,000 in 2018

Dealer Inspire’s deal was split between the original investors and those who wanted to stay an additional 3 years at Cars.com.

$167 million went to the original investors.

$10,000 invested in 1998 became $22,000,000 in 2015

The sale was reported as $1 billion in 2014. The final price, in 2015, was closer to $1.3 billion because a portion of the sale was held in escrow for 12 months.

Also in 2015, Cox Automotive acquired the new Dealer.com + Dealertrack for $4 billion.

 

$10,000 invested in 2003 became $1,000,000 in 2011

VinSolutions remains one of the most unstable code-bases in the automotive industry to this day. Because they added features based on dealer feedback they saw explosive growth in their CRM offering.

$10,000 invested in 1999 became $540,000 in 2017

CallRevu was purchased by Serent Capital.  This is a group of investors that has not had a deep involvement in the automotive industry.

Ever since Warren Buffet purchased the Van Tuyl Auto Group interest in the automotive sector has jumped.

Dealer Sentiment

There is no other way to say it. Dealers are not thrilled about the technologies available to them at present.  Innovation seems forgotten among all the acquisitions, and these large players are paying more attention to their share prices than their customers.

Market Size

16,000 franchised Car Dealers spend over $1 trillion per year on software solutions

This does not include 20,000 Independent Dealers (also known as Used Car Dealerships) nor does it include any advertising spends

The timing has never been better

This is a marketplace full of aging tech, owned by oligarch-like companies that focus on stock prices before their clients. No wonder dealers are seeking new fishbowls.

We estimate that there will be at least 6,700 car dealerships looking to change one piece of their major operational technologies in the next 24 months.