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The State of Automotive Marketplaces

We know, the automotive marketplace industry has always been very competitive with different industry-specific and social media platforms competing for dealers' marketing budgets.

Today, new technologies and advertising trends change the way dealers and the marketplace interact. So, what is the state of automotive marketplaces?

Heading over to Trustpilot and looking at some of Europe's and the US's largest automotive marketplaces, a grim picture presents itself. A short analysis shows that Europe's largest automotive marketplaces only reach an average 2.19 out of 5-star rating. In detail, users complain about a range of issues This includes decreasing lead quality, increasing prices, and lacking effectiveness.

We see two main elements driving user dissatisfaction: Higher market competition and new advertising trends.

Market competition for automotive marketplaces

Many marketplaces still enjoy a position as the market's go-to destination for vehicles in the respective markets. However, the dynamic has shifted with social and search platforms adding new automotive advertising products and new platforms emerging.

A key competitive risk is Facebook's automotive solution and Google's auto ads product. Users spend time on these platforms before moving on to the marketplace. Advanced auto advertising products on these platforms might fulfil users' needs before reaching the automotive marketplace. If not tackled, this increased competition will ultimately lead to customer churn and decreasing growth.

Another factor is competition by new automotive marketplaces. As the industry is moving towards e-commerce for cars, where the whole transaction is handled online, new entrants are challenging incumbent players' value propositions. Examples are Heycar in Germany and TrueCar in the US. With their different customer experience, these platforms are able to attract customers and decrease the prior high switching cost away from the market leaders.

Many marketplaces are already aware of these changes, however, often lack to find the right solutions to create a viable value proposition that can withstand external competition. One of the reasons is the approach of their advertising product.

The advertising trends impacting automotive marketplaces

A marketplace's success stands and falls with the effectiveness of its advertising product for dealers. The advertising product is often split into different parts. First, it is the overall traffic going to the platform that fuels the visibility of listings. Second, it is the on-site advertising solutions that can increase traffic to individual listings. Last, it's other external advertising products that some marketplaces offer. But what general advertising trends are relevant for marketplaces?

Digital advertising spending in the automotive industry is continuing to increase, expected to reach $19 billion in 2023 in the US alone. With this increase in spend and the named competition, dealers are faced with a variety of choices on where to spend their marketing budget. As a result, there is a market move towards outcome-based advertising. For dealers, not the advertising channel but rather the outcome, a high-quality lead or sale, becomes the key objective of the marketing campaigns. Marketplaces must therefore understand how they can drive positive advertising outcomes for all listings on the platform to stay relevant.

Another effect of the increasing competition is an increase in multi- or omnichannel marketing. As marketplaces are faced with competition from other platforms and solutions, their importance as a marketing channel for dealers decreases. Users are spending more time online and across different sites and platforms, requiring advertisers to be omnipresent. This is not part of the traditional marketplace approach. In addition, marketplaces are heavily reliant on search and social media platforms to promote themselves. Marketplaces need a solution in place for how to benefit from this advertising trend to be successful in the long run.

Both market competition and new advertising trends have a direct impact on the future of automotive marketplaces. To create success, there are two factors marketplaces should focus on.

Success factors for the future automotive marketplace

As marketplaces are looking into the future, they need to understand how to manage the complexity of new advertising trends and market competition.

The first element is to re-think their value proposition to dealers. Moving towards automotive e-commerce and with social and search platforms offering new products, marketplaces must rethink the value they bring to dealers and prospects to create a successful future. Only if both see a greater value in using the marketplace compared to other platforms, they are able to allow for the given price point. Examples are on-platform sales possibilities, a better search function for users to find the optimal car, and other dealer-specific products.

The second element is to create better advertising offers. With the increased complexity and competition, there is also an opportunity to create automated advertising solutions for dealers. Especially smaller dealers have difficulties facing the complex world of digital advertising and have a long-standing relationship with the automotive marketplaces. As a result, marketplaces can utilize external advertising to divert relevant traffic to individual listings, creating a competitive advantage and increasing their value as a marketing channel. For that, it is crucial that the platforms use an automated system to make such scalable.

Overall, it is clear that automotive marketplaces are in a difficult situation where more competition and new advertising trends are challenging their position in the market. While the challenge is clear, a renewed value proposition and better advertising solutions can reposition the marketplace as the number one marketing partner for dealers and create long-term success.


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