• by Karl Greenberg , October 26, 2010

Auto shopping and research site AutoTrader.com has acquired Kelley Blue Book, giving the former the latter's sister companies, CDMdata and CDM Dealer Services. KBB will be a subsidiary of AutoTrader.com but will remain in Irvine, Calif.  

KBB President and CEO Paul Johnson tells Marketing Daily that it sought a dance partner some months back, when the privately held company's owners decided to diversify its portfolio of offerings. "It was back in June or July that the owners decided to go into the process of looking at strategic options, and we hired JP Morgan to help. It was a very aggressive process, and we reached out to several companies."

"We see a strong strategic fit because the two sites have a distinctly different focus," says Chip Perry, Atlanta-based AutoTrader.com's CEO.

Perry tells Marketing Daily that KBB, whose expertise is research and vehicle value, dominates the top of the automotive purchase funnel, where consumers are trying to figure out what they want and what their wallets can bear. AutoTrader.com is a destination for consumers who -- having pretty much made a decision, or narrowed it -- are ready (to borrow from W.C. Fields) to "make a deal, money wise, car wise." It's also a targeted marketplace for dealers and automakers.

Perry says that areas of collaboration will advance the business opportunities of both organizations. Specifically, KBB will begin offering new-car listings, and also its version of a program AutoTrader.com launched several months ago called Trade-In Marketplace.

The latter gives consumers an instant offer for their vehicle without having to find a buyer. To get the cash, they must take the vehicle to a participating dealership for inspection. If the vehicle is as advertised, they get the money on the spot. "Dealers like it because they get access to trade-in; and it solves a major pain point for consumers."

Johnson says that the Trade-In Marketplace is good for KBB.com because when consumers go there to research options, one of the first things they ask is how much their old car is worth.

KBB, which has a small in-house sales force, will also benefit from AutoTrader.com's national 900-person ad sales force. "So we have the ability through existing relationships with dealers to help them access the KBB.com network," says Perry.

He adds that the company hasn't finalized ad plans for KBB.com, which has not done a lot of advertising in the past. "We want to help them invest in the brand, but about 80% of their audience comes to the site organically, by typing in KBB.com. AutoTrader.com also gets around 80% of visitors organically, but we do a large amount of advertising."

He says the bigger strategic idea is that the Internet is not a commerce medium for the automobile market -- unlike shoes, music or airline seats, deals for vehicles are still done on showroom floors, not online -- but it is a powerful research and influencing medium.

"Most people visit the dealership for the first time when they buy the car they want," says Perry. "It means they are finding information online about dealer, price and car. It's an influencing medium and this partnership enables us to advance that cause. Today, third-party sites have done a good job helping people make decisions, but there's a lot of opportunity to make it better."