Business model similar to iProperty: Buy up businesses and leverage the resulting economies of scale
Strategy is to focus on becoming No 1 in terms of number of listings, traffic, and providing value to sellers/ buyers
ICAR Asia chief executive Damon Rielly (pic) removes all doubt of who’s actually running his company, a subsidiary of the Catcha Group, when told of his group chairman and chief executive officer Patrick Grove’s revenue projections for his company.
Just before iCar Asia was listed on the Australian Securities Exchange (ASX) last September, Grove had told Digital News Asia (DNA) that he was promising investors RM3 million in revenue in 2012, RM10 million in 2013 and RM30 million (US$9.7 million) in 2014.
“Patrick said that?” Rielly laughs. “Well, as CEO I won’t comment on his (Grove’s) revenue projections, but on our strategy: We’re absolutely focused on being the No 1 marketplace from a listings perspective, on growing our traffic, and providing value to sellers and dealers.
“That is all we’re focused on at the present moment. It’s not about revenue right now,” he says of Kuala Lumpur-based iCar Asia, which owns and operates a network of online automotive classifieds sites in three South-East Asian countries: Indonesia, Malaysia and Thailand.
“And I would say the same to our investors” he adds.
Rielly doesn’t mind putting Grove’s projections in perspective, having taken the wheel at iCar from his role as Catcha chief operating officer. From that vantage point, he would have had experience dealing with the group’s other online classifieds business, the ASX-listed iProperty Group.
Indeed, he makes no bones about it: iCar intends to use the same business model as its real-estate sister company.
“It’s a very similar story to iProperty back in 2007 – it acquired small businesses and digital assets, and to get funding it listed on ASX,” says Rielly. “And it has been very successful doing online classifieds for the property business.”
“The strategy for iCar is very similar to that; fast-forward five years. If you look at the classifieds business model, we don’t expect to turn a profit for three to five years, and the reason for that is the amount we have to invest in our strategy.”
That strategy involves the three thrusts above – listings, traffic and value proposition – and growing organically or through acquisitions when and where it makes sense. “We’re looking at other properties and if there is a willing buyer and a willing seller, and it makes strategic sense, we will continue with acquisitions,” he adds.
What the company did when it started was to look at the South-East Asian market for automotive classifieds. It quickly realized that there wasn’t one company leading across the region.
“We drew a line above countries which saw sales of one million cars a year, and there were three – Indonesia, Malaysia and Thailand,” says Rielly, also explaining why Singapore isn’t on its radar.
The business proper started with Catcha buying a 50% stake in Carlist.my last February for RM5 million (US$1.6 million). Since then, it has also bought EVO magazine from Catcha Media and in January announced it was buying DQBP Sdn Bhd, owner and operator of LiveLifeDrive.com.
Last May, iProperty Group sold its Indonesian portal mobil123.com to iCar Asia Pte Ltd, a wholly owned subsidiary of iCar Asia Ltd.
The first stumbling block came in Thailand, where there was no clear automotive classifieds site, so the company did the next best thing and bought a content site, Autospinn, for which Catcha paid just under RM4 million with a mixture of shares and cash.
When asked why iCar did not build its own classifieds site in Thailand, Rielly says, “We’ve only been in existence since September last year, so we need to look at this as a journey.
“We had the four businesses we acquired as our starting box, and our strategy is similar to iProperty. If you look at that market, it’s very fragmented, so it had to grow organically by acquiring and consolidating – which is what we’re going to do,” he adds.
Not that iCar had to wait long – merely days after speaking to DNA, it announced it had entered into an agreement to acquire Thailand's second largest automotive classifieds site, Thaicar.com, and its associated assets and business.
Thaicar.com will combine with Autospinn.com to offer a complete solution to car buyer and sellers in the Thailand market, the company said, adding that Thaicar.com has over 370,000 unique visitors each month, according to Google Analytics, and more than 23,000 car listings from over 600 car dealers.
The idea is to acquire as many relevant businesses as possible, aim these assets at becoming market leaders in the countries they operate in, and to leverage the economies of scale to create the region’s No 1 network. Think of it as the ‘acquire, consolidate and conquer’ model.
And the market is there to be owned. Citing a 2010 Frost & Sullivan report, Rielly notes that the compound annual growth rate (CAGR) of new passenger car sales from 2000 to 2010 was 8.7% in Indonesia, 4.2% in Malaysia and 12.2% -- higher than the population growth.
This growth increases the inventory of vehicles in the market, which helps drive the number of transactions in classifieds, the company said in a note to investors.
Frost & Sullivan expects automotive advertising expenditure to increase at a faster rate than overall advertising expenditure in these target markets; and also expects to see online increasing its share of automotive advertising expenditure (click to enlarge slide).
iCar is even more upbeat after an Accenture global survey found that consumers are turning to a variety of online and offline services to help them make their car-buying decisions because industry websites do not satisfy their needs.
In Malaysia, car buyers visit an average of 11 different websites prior to making the purchase, with almost one in 10 buyers visiting over 21 different websites. In addition, more car buyers review other consumer online feedback (81%), followed by Google ads (78%) rather than car makers’ websites (70%).
Accenture said the findings demonstrate that there is a notable lack of integrated digital marketing in the auto industry, which is lagging behind other retail sectors.
“The Accenture report really just validates what we’re trying to here and why we’re doing it,” says Rielly of the white space his company is trying to fill.
Other macro factors are fueling his optimism too. “Internet penetration is above 60% in Malaysia, and as that continues to climb, as it will, this will be a very positive thing for us,” he says.
“What we’ve been focusing on the first few months is to ensure we became the No 1 destination to buy or sell cars,” he adds. “When we launched, Carlist had 35,000 cars listed, mobil123 had about the same; now Carlist has just under 80,000 and mobil123 about 88,000. We’ve dramatically increased the number of cars listed, and that’s the first phase of our strategy.”
While driving the number of listings is a key part of its business model, the company acknowledges that one problem is the number of duplicate listings that appear on its website.
"For most online classifieds businesses, the duplication of listings is one of the most difficult things to control since they are posted up by a third party – whether they are dealers or private sellers,” says Rielly. “Our moderation team is constantly going through our listings each day to comb through and suspend listings that are duplicates in nature or are in violation of our listing policy.”
Saying that each of the three different countries is different, he adds that Malaysia is the most advanced in terms of the number of businesses and listings. “We’re ready to move into the second phase of attracting more traffic.”
Not that it’s going to be smooth sailing here either. When talking about barriers, Rielly doesn’t see the heated competition from other online sites as his main concern – indeed, he waxes poetic about what Paul Tan has done to create his popular automotive site.
“Paul Tan has done a great job creating a very successful automotive news and reviews site; he has built a fantastic brand and reputation,” he says.
However, he notes that in terms of the industry, Tan has essentially been building up the space by himself. To make advertisers really take notice of the online space as a proper marketplace, there has to be more than one avenue.
“I think together we can pull this off; so the more successful Paul Tan is, the better it is for this space,” says Rielly.
“When you look at the discrepancy that the average Malaysian spends online, and the amount of advertising money that goes to the Internet, it’s completely out of whack. 90 cents of every advertising dollar is spent on print,” he says.
There is a lot of activity in the market however, with even traditional media outlets pouring more investment into their online classifieds business, while horizontal or general classifieds sites are paying more attention to car sales as well.
The other big challenge is getting dealers on board. For those not quite online-savvy, iCar sends teams of people to take pictures, get down the information and update the listings for them. But these teams also train the dealers on how to do this themselves.
“We’re teaching them how to do this themselves, but are willing to do this for them for as long as they need us to,” says Rielly, adding that increasingly, dealers are also approaching iCar to help them build their websites.
He admits that Carlist had a reputation for not listening enough to dealers. “Now, we’re absolutely focused on listening to car dealers and are rolling out products and services in the next three to eight months to help them.”
To pull in traffic, iCar aims to be the most trusted automotive classifieds site, and is trying to deal with the duplicate listings issue.
“Whilst we await further system upgrades to improve the user experience on our site, we’ve just implemented a Quality Listing campaign with the car dealers to further educate them on the benefits of having high-quality listings on our site.
“Naturally, this includes education on the duplication of listings as well as other unfavorable activities. Basically, we’re trying to change mind-sets of the players within the industry and improve industry standards.”
World, or Asean, domination
But getting dealers to become more online-savvy is only part of the equation. “It’s a real challenge trying to sell them value of something intangible like online, so it’s really about generating sales leads for them,” says Rielly.
“That, for me, is the key focus for us -- educating the dealers on the value. If we can do that, I am very confident we will be successful.”
The online marketplace, unlike offline media, comes with fine-grained tracking and analytics tools so that every advertisement or listing can be measured for effectiveness.
“We see it as our duty to educate the market on the value of the online business,” says Rielly. “We are going to be held accountable and will be ‘trackable,’ so that customers can measure the value of working with us. We are ready to be judged this way
“That’s what they’re employing us to do: To provide leads and communicate a value proposition to their target market, and if we fail to that, then we’re not doing our job,” he says.
He says currently iCar is not interested in generating revenue off dealers. “We want to get to a critical point of how we introduce a buyer to a seller, and getting sellers to understand the value of our site – and that’s when we can take the business forward.
“If you look at online classifieds business, there is always a dominant No 1. Our strategic focus is to become that dominant No 1, and once we have that, then the revenue and the value of our business will grow.”
To do that, it willing to play the ‘loss leader’ game when it comes to its business activities and initiatives.
“We just want to have the most number of people coming to our sites; the most number of vehicles listed; and provide the most amount of value to sellers,” says Rielly. “We don’t want to jeopardize that by trying to charge.”
The online automotive classifieds marketplace is definitely heating up in Malaysia, and in the region, with Tan and his team employing a similar strategy of working closely with dealers with its oto.my site.
Rielly, again, acknowledges what Tan is doing. “Our competitors will continue to do a good job in what they’re doing.”
“But we believe we have the right strategy;, the funding to support this strategy; the right businesses to launch this strategy; and in the last three four months, we’ve been incredibly focused on getting the right kind of people in to implement this strategy.
“We’re also working hard to ensure we have the right technology to see this through,” he adds. “We are very confident we will own this market.”
That would certainly get Grove off his back.
Patrick Grove about to get his hattrick
Auto industry needs to get with online program: Accenture
Paul Tan: From personal adversity to professional triumph
Catcha Media subsidiary, iCar, lists on ASX
iCar Asia acquires another auto website
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