Cars.com is a leading two-sided digital automotive marketplace that creates
meaningful connections between consumers (individuals researching cars or looking
to purchase a car) and partners or customers (car dealerships and automotive
original equipment manufacturers (“OEMs”). While connecting advertising
partners with in-market car shoppers and providing data-driven intelligence
to increase inventory turn and gain market share, the Company empowers consumers
with resources and information to assist them in making better informed buying
decisions around The 4Ps of Automotive MarketingTM: Product, Price, Place and
Person. The Company has evolved into one of the largest digital automotive platforms,
connecting tens of thousands of local dealers across the country with millions
of consumers. Through trusted expert content, on-the-lot mobile features and
intelligence, millions of new and used vehicle listings, a comprehensive set
of pricing and research tools, and the largest database of consumer reviews
in the industry, we believe Cars.com is transforming the car shopping experience.
We generate revenues primarily through the sale of online subscription advertising
products targeting car dealerships through our own direct sales force, as well
as through our affiliate sales channels. We host approximately 4.9 million new
and used vehicle listings at any given time and serve over 20,000 franchise
and independent car dealers throughout all 50 states. We also generate revenue
through the sale of digital advertising products to national advertisers.
Cars.com was established in 1998 as a division of Classified Ventures, LLC,
a joint venture formed by eight leading media companies, to provide nationally
branded online services for classified advertising marketplaces. On October
1, 2014, TEGNA Inc. (“TEGNA”), our former parent company, purchased
73% of the equity interests in Classified Ventures, LLC it did not previously
own for $1.8 billion in cash. In August 2016, we expanded our editorial presence
through the acquisition of DMR Holdings, Inc. (“DealerRater”) which
provided us with new solutions to help car dealerships and OEMs manage, measure
and harness the power of social media. On May 31, 2017, we completed a spin-off
from TEGNA and on June 1, 2017, our common stock began trading “regular
way” on the New York Stock Exchange (the “NYSE”). In February
2018, we completed the acquisition of privately held Dealer Inspire Inc. (“DI”)
and Launch Digital Marketing (“LDM”). DI is an innovative technology
leader that has been rapidly increasing its market share by providing progressive
dealer websites, digital retailing and messaging platform products. LDM is a
provider of digital automotive marketing services, including paid, organic,
social and creative services. These proprietary solutions are complementary
extensions of the Company’s online marketplace platform and current suite
of dealer solutions. We now have broader capabilities and even more data-driven
tools to create deeper connections between car dealerships and in-market car
shoppers. Cars.com, DI and LDM thrive on a culture of innovation, and are in
pursuit of a common mission to enable the dealer retail system with sophisticated
digital tools that transform the car shopping experience for consumers. The
2017 financial results reported in this report do not include the impacts from
the acquisitions of DI and LDM.
In 2005, we added a direct sales team to join our affiliate sales team, which
was on board as a result of our media partners. To better serve our growing
consumer audience and drive more traffic, we developed an editorial team made
up of industry experts who launched robust, objective automotive information
for car shoppers. By 2010, all major OEMs selling vehicles in the United States
were advertising on Cars.com.
We were the first in our industry to launch a mobile application (“application”
or “app”) in 2007 and we continue to outpace the industry in mobile
today. The Cars.com app is rated #1 for both iOS and Android devices and our
active app users are the highest in the competitive set. It is not uncommon
that with media and technology businesses, user behavior and migration typically
precedes advertiser rewards, and we are positioned well to win. Over half of
all auto advertising is spent on traditional media where proof of impact is
relatively scarce. Traditionally, dealers rely solely on lead-generation metrics
where consumers provide their contact information. Today, consumers are using
mobile devices to shop anonymously. Accordingly, we track traditional leads,
which are connections from consumers to dealers in the form of phone calls,
emails and text messages, traffic to dealers in OEM websites and, most recently,
mobile walk-ins through our Lot Insights reporting tool, which is the first
of its kind in the industry. Using geo-fencing technology, we are able to track
Cars.com consumers on or near a dealer’s lot which delivers valuable insights
and demonstrable value of the influence that we have on mobile shoppers to dealer
advertisers. It will take time for us to educate the industry and transition
forward to measuring consumer behavior in this manner.
The automotive industry is a massive market for the U.S. economy. The U.S Census
Bureau estimates the industry to have been $1.2 trillion in 2017, with dealers
accounting for at least 85% of all vehicles sold according to the Borrell Associates’
2017 Automotive Outlook report. The automotive industry represents over 20%
of the U.S. retail economy. In 2017, according to research conducted by the
National Automobile Dealers Association (“NADA”), new vehicle sales
were 17.1 million units. However, the core of the U.S. auto economy is the used
vehicles market. In 2017, according to NADA and other industry research, used
vehicle sales are projected to have exceeded 44 million units.
We offer a suite of digital solutions targeting buyers and sellers of automobiles
and automobile services. Our flagship product is our digital automotive marketplace
that connects buyers and sellers on Cars.com™. Our automotive marketplace
products provide a compelling destination for consumers through extensive inventory,
intelligent pricing tools and credible user and expert automotive and dealer
reviews, which further empower consumer decision-making. This unique content
garners a highly-engaged audience that is open to influence from automotive
advertisers. We also operate Auto.com™, DealerRater.com®, NewCars.com®
and PickupTrucks.com™, which are specialized websites directed toward
different consumer segments. With the acquisition of DI and LDM in February
2018, we now also have DealerInspire.com® and LaunchDigitalMarketing.com®
as part of our portfolio.
We primarily generate revenues through the sale of online subscription advertising
products to car dealerships by our own direct sales force (retail revenue),
as well as through our affiliate sales channels (wholesale revenue). Additionally,
we generate revenue through the sale of display advertising to national advertisers.
Consumer Value Propositions
Car buyers and car owners interface with us primarily through the Cars.com
sites and mobile applications, where we strive to provide a best-in-class car
search and shopping experience. Our real-time behavioral data, and insights
from nearly 20 years of consumer data enable us to deliver an experience that
is defined by relevance for the user. We are continually optimizing our platform
to deliver intelligent search functionality and guided navigation that helps
users find the right car faster. We also feature contextual, dynamic filters
that help consumers better search inventory based on their needs. Powered by
a custom algorithm, we offer “Best Match” sorting that weights multiple
factors to arrive at search recommendations most relevant for each specific
user.
At our core, we provide car shoppers with access to information critical to
making a buying decision based on the 4P’s of Automotive Marketing™:
Product, Price, Place and Person. We are creating market-leading innovations
to enhance the consumer experience and empower consumers with all the information
they require — what to buy (product), what to pay (price), where to buy
(place) and who to buy from (person).
Product
Considering 70% of our shoppers are undecided on what to buy, we give them
access to inventory. Consumers can browse through nearly 5 million new and used
vehicle listings and learn more about each vehicle listed through the VDP. Shoppers
can gather more in-depth information on our research pages. Our editorial team
tests, reviews and photographs more than 100 different car makes and models
every year and creates independent and unbiased coverage of the automotive landscape
by focusing on consumer advice, trends and analysis. We provide expert advice
on a wide array of car buying topics, such as incentive information, financing
options and fuel economy, thereby allowing consumers to choose their future
vehicles based on the automobile characteristics that are most important to
them.
Price
Approximately 61% of car shoppers cite pricing as the most useful content from
third-party websites. Considering a vehicle is the second largest purchase most
consumers will make in their lifetime, consumers want to know whether they are
getting a fair deal. Our Price Comparison Graphs provide context around the
price of a new or used vehicle and educate shoppers on how factors such as trim,
mileage and certification impact the price of a vehicle in their market. Our
price badges take this one step further by featuring badge icons on the inventory
pages to help provide more context behind why a vehicle is priced the way it
is. Badging leverages machine learning to assess the closest comparable vehicle
and considers vehicle features either in high-demand for the region or those
that impact the price beyond year, make, model and trim.
Place
Almost all of our shoppers (approximately 94%) have not yet decided on a dealer.
We create meaningful connections between buyers and sellers. We offer millions
of dealer reviews for consumers to select the best dealership to do business
with based on their preferred experience.
Person
The two most crucial people in the automotive purchase decision are the shopper
and the salesperson. People buy from people. Even as consumers have access to
more digital research tools, the final decision about buying and servicing a
car still comes down to a shopper’s interaction with a person. As the
purchase decision becomes more complicated, this personal interaction is more
essential than ever. Each year, car manufacturers launch more than a thousand
make, model and trim combinations. These factors help explain why car buyers
would prefer to select their salesperson before walking into the dealership.
These person-to-person interactions are so critical to the purchase decision
that our VDPs were recently updated to include Salesperson Connect, a feature
that showcases salespeople profiles which are populated from the DealerRater
network. Through Salesperson Connect, we have now made it possible for shoppers
to select and connect with salespeople directly through our marketplace before
they walk onto a car dealership sales lot. As a result, shoppers enjoy a more
personalized experience with the dealership and dealers are better connected
with in-market shoppers who are motivated to buy.
Advertiser Services
Our network of approximately 20,000 dealerships produce listings of approximately
4.9 million vehicles across the Cars.com sites and mobile applications. Our
brand and products offer dealerships access to more than 33 million monthly
visits from consumers who are looking to buy, sell or service a vehicle. Our
integrated consumer product offerings on the Cars.com sites and mobile applications
target not only car buyers, but also car sellers and car owners. Through these
product offerings, dealers can advertise both their inventory of new and used
vehicles, as well as their service departments, while gaining access to an audience
of motivated consumers looking for a convenient way to sell a car.
Dealerships.
We offer a monthly online subscription enabling dealers to showcase their new
and used vehicle inventory to in-market shoppers. Vehicles for sale are highlighted
with multiple photos, videos and vehicle specifications and consumers are but
a few clicks away from contacting a dealer and moving further into the car buying
process. To enhance their vehicle listings, dealers can purchase premium advertising
that can be uniquely tailored to an individual dealer’s current needs.
For example, Event Positions promote dealership events to all car shoppers in
each market during a specific time frame. Our recently developed Lot Insights
tool uses innovative geo-fencing to measure the influence that we have in connecting
local in-market car shoppers to local dealers by tracking our mobile users on
or near a dealer’s lot.
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