Whose Best Interest Does Your Auto Website Vendor Have?

In our previous blog, How To Save $300,000 On Your Car Dealership Webpage In Over 5 Years, we discussed how dealer website vendors like Cobalt Group, BZ Results, Izmo Cars, ADP and others often offer SEM services with an expensive price tag and a host of unforeseen technical tribulations after you sign up. In today’s blog, however, we’re going to take an investigative look at the industry at large and disclose some of the shady business practices and conflict of interest issues that have steadily grown ubiquitous in the major-money-making auto-dealer website vendor industry.

Know What You’re Getting Into
For some time, a number of dealer website vendors have been suspected of unethical policies and shady biz tactics regarding conflict of interest issues and non-compete business practices with their auto dealership clients. Since dealer website vendors, by in large, monopolize the SEM markets for auto dealerships, it’s critical that the auto dealerships opting for the services first know what they’re getting into before they agree to relinquishing their e-commerce over to a vendor!

A Deeper Look At Auto Dealer Website Vendors
To get a better idea of the background of dealer website vendors, we’ll take a deeper look inside the Cobalt Group. Cobalt was one of the first auto web site vendor companies in the game; they made partnerships early on with some OEM’s. Recently, Cobalt made an agreement with General Motors that makes them GM’s preferred vendor. The result of this business marriage creates conflict for GM auto dealerships. GM dealers are now in many cases strong armed to use Cobalt solutions or else they can’t get a hyperlink to the local dealer. If, for example, Microsoft did something like this–there would be anti-trust talk; nevertheless, GM and Cobalt still get away with it.

In addition, Cobalt’s 2009 revenue is expected to hit $170 million this year. By the end of next year, John Holt—CEO of the Cobalt Group—anticipates that his company will be operating Web sites for 10,000 of the 22,000 auto dealers in the country! This is bad on a number of levels. For one, Cobalt (as do most all auto dealership website vendors) pay little attention to conflict of interest issues between competing clients. If you live in a metro area and own a GM-based auto dealership with a Cobalt website—chances are your competing GM dealership down the road also uses a Cobalt website. Secondly, dealers currently pay a monthly fee of about $500 per month for a Web site, with added services such as e-mail and search engine marketing bringing the total bill to as much as $10,000 per month for some dealers. With Cobalt’s projected growth and increasing monopoly over GM dealers, those rates may quickly jump to unprecedented levels.

Conflict Of Interest
Aside from Cobalt, many other vendors like BZ results, Izmo Cars, ADP and others are also known for having conflict of interest with their clients. If you’re curious as to how many of your dealership’s competitors also use the same website vendor, simply Google the competitors in your area and have a look at their websites. The results will undoubtedly be staggering. Another huge con to vendor services is that they offer you a website that’s not even conducive to SEO. BZ results, for example, offers “solutions” that include webpage design littered with “bling” and “flash.”  Though you may initially think it looks good, the truth is—search engines can’t even read it, much less rank it! In addition, there are much more technologically advanced programs that are more cost efficient and SEO friendly.

Bottom Line
When you look at the cost breakdown of most website vendor’s e-commerce solutions, the attached price tag is astounding: An inventory solution like IOL or others may run 200 dollars a month.  A good web site may run $2500 to $5000 a month, while a good CRM tool can cost well over $1000 a month plus all the other necessities with heavy premiums. So, if you look at the total cost these companies are charging ($5,000 to 6,000 per month) it comes out to be about $60,000 a year or more per client. The real knee jerker is that most of these companies like Cobalt serve more than 5000 dealers nationally, which equates to a revenue of upwards of $300,000,000 annually!

Why pay someone this amount of money when they clearly don’t have your dealership’s best interest in mind?