Autobytel Inc. is nowhere near the 1999 heyday when the company’s market value hovered around $285 million.
But the Irvine-based auto sales leads aggregator has made substantial strides since Chief Executive Jeffrey Coats took over the reins in December 2008, when the recession sent car sales into a skid.
Autobytel’s shares followed, falling below $1 to bring a threat of delisting from Nasdaq. Slow but steady gains came with the tepid early stages of the economic recovery.
Last year saw a more dramatic boost and return to profitability—the company had $38.1 million in earnings on $78.4 million in revenue.
The company’s market value is up about 185% over the past 12 months to roughly $133 million as of last week, placing it at No. 59 on the Business Journal’s list of public companies based here (see related stories throughout this issue; list page 10).
Coats, who in the first few months on the job had to contend with a hostile bid from a major shareholder, just filed for shelf registration with the Securities and Exchange Commission for $75 million in a new stock offering. He said he is “always interested in growing the company.”
Any acquisition would follow several “strategic investments” that helped Autobytel strengthen its core business of generating automobile sales leads.
“When I took over the company, it was losing a lot of money,” Coats said. “The previous management team had focused more on trying to build an advertising-driven site, and the core leads business really did not get a lot (of) incremental investment and was more used as a source of cash.”
Leads
Autobytel was buying 97% of its leads, which it then sold to its auto dealer and manufacturing customers. That was just before the recession, when U.S. car sales were near all-time highs of 16 million annually and “everyone wanted to be in the car business,” Coats said.
That diluted the field of lead generators such as Autobytel. Auto dealers soured on the service as the quality of leads failed to match the increase in quantity.
Coats and his management team returned to their “roots” by rebuilding Autobytel’s internal lead generation capabilities through search engine marketing with paid listings on Google and Bing.
“Google is by far our largest expense,” Coats said, adding that the company pays “eight figures a year.”
The search engine marketing sets Autobytel up to reach potential car buyers who have
been spurred by advertising to start shopping online.
“It’s the most cost-effective way to target consumers that are already likely looking for a vehicle,” he said. “We benefit from all those advertising dollars that our competitors spend, so thank you very much to everybody else in the industry.”
Autobytel has also made a string of acquisitions and investments to strengthen its position, starting in 2010 with a $16 million acquisition of Cyber Ventures in Tampa, Fla., a company it bought sales leads from.
“It was a bargain for what it ended up doing for Autobytel,” Coats said. “Based on that acquisition, we were generating 60% of our leads internally; plus our competition was not getting them.”
Autobytel generated 2.7 million leads in 2010, nearly doubling that number to 5.1 million by 2013.
In 2012, it partnered with Long Beach-based RL Polk & Co., a firm that aggregates registration data from across the country and matches them with lead information Autobytel sells to dealers.
“It’s been game changing for us,” Coats said. “Now we can show a dealer who they are losing sales to and in some cases why.”
Autobytel acquired former competitor AutoUSA in Fort Lauderdale, Fla., for $10 million in January, a move Coats said was the quickest way to expand its dealer network, which now numbers 5,000. The acquisition increased its employee count to 160, 93 of whom work in Orange County.
“Autobytel had a national footprint, but [the deal provided us with] better coverage in more of the major markets across the country,” Coats said. “We got more dealers through which we could sell directly to retail and our other products.”
Advanced Mobile
The “other products” were part of a $2.5 million deal in September to acquire Advanced Mobile LLC, a provider of mobile communications services based in King of Prussia, Penn. The acquisition gave Autobytel access to technology that enables dealers to communicate with potential buyers via text messaging in a “regulatory-compliant” way, among other features.
That same month, it invested $2.5 million in Autoweb Inc. in Miami for a 16% stake. Autoweb’s technology helps win back the 95% of consumers who abandon sales lead forms before filling in their phone numbers or zip codes. A window pops up that gives consumers the option to return to Autobytel and look at different cars or to go to competitors’ listings, in which case Autobytel gets a small “finder’s fee” fee from Autoweb.
“Our business is driven entirely off those four to six people who complete the lead form,” he said. “We get a chance to monetize a huge amount of consumers that neither we nor anybody else have been able to effectively monetize.”
