DETROIT (AP) -- Two of the largest used-vehicle buying sites on the Internet announced plans today to merge, a move that could provide access to nearly 1.5 million used car and trucks listings.
AutoConnect.com and Auto Trader Online will join forces in the fall under the name AutoTrader.com in what is one of the fastest-growing segments of commerce on the World Wide Web."These online classified sites are soon going to be the dominant way people search or locate used vehicles for sale," said Chris Denove, director of consulting operations for J.D. Power and Associates. "This merger clearly creates a new leader in the field."
AutoConnect.com was started in May 1998 by Manheim Auctions Inc., the world's largest operator of wholesale car auctions, and Automatic Data Processing Inc. Manheim is a unit of Atlanta-based media conglomerate Cox Enterprises Inc. Most of AutoConnect's listings come from dealers.
Auto Trader Online is the Internet subsidiary of Trader Publishing Co. of Norfolk, Va., a joint venture of Cox and Landmark Communications Inc. that's best known for its regional classified vehicle ad guides distributed nationwide. Its Web site was started in April 1996 and carries more of a balance of dealer and private-party ads, virtually all from the guides.
Analysts said the merger was notable for the new site's potential scope. Together the two sites now carry about 1.47 million vehicle listings with connections to about 50,000 dealers.
"These two properties are relatively significant," said Rob Enderle, an analyst with Giga Information Group. "The merger gives them the No. 1 position in terms of total ads."
James McQuivey, an analyst with Forester Research Inc., said the merger also will give AutoTrader.com access to a tremendous amount of data on used-vehicle sales trends that can be sold to dealers. "There's just all kinds of uses for that information," he said.
Denove said that each site also brings strengths the other lacks. AutoConnect has several significant online partnerships with America Online and Internet "portals," such as Lycos and Yahoo, which provide a home base for Web surfers to find what they want.
Auto Trader, meanwhile, has been in the business much longer and has an established brand name among consumers. The fact that Auto Trader draws in more private party listings is important because those tend to be for slightly older and less expensive vehicles, which gives the site a broader, more balanced inventory, Denove said.
"Our research shows that the type of person who goes online to try to locate used vehicles for sale is also the type of person who feels most comfortable purchasing through a private party," he said. "For that reason, it's critical for online classified Web sites to find ways to attract more private party sellers."
While new-car buying on the Internet has attracted more attention from the news media, some analysts say the purchase of used cars is better suited to the new medium. It's also a larger market: last year used cars outsold new cars by a margin of four to one. For dealers, profit margins generally are higher on used cars than new cars.
While new cars are a commodity that's easy to find, the buyer looking for a specific make and model of used car with certain equipment has to search through a maze of classified ads and dealer lots. The Internet can simplify and speed the process.
"There is absolutely nothing like the Internet in its ability to put a diverse group of buyers together with a diverse group of sellers," Denove said. "From the perspective of the consumer, you're probably going to see more impact from these used-vehicle sites."
The used-car buyer, however, still will usually want to examine the car in person before the purchase, which limits the ability of Web sites to become directly involved in completing the transaction as some new-car sites have, said Michael May, digital commerce analyst with Jupiter Communications.
That leaves most used-car sites trying to generate revenue by selling advertising to businesses that want to reach buyers, such as insurance and financing companies. That's the model that the Auto Trader and AutoConnect.com sites are using. Neither charges for its classified ads.