While News Corp is walking away from CarsGuide, with which it had struggled for about a decade before the dealers came on board in 2011, the company has a new strategy and indicated it is not all that unhappy to see the back of what it viewed as a troublesome business.
In spite of the fact that CarsGuide has been profitable for a year and is building momentum in the auto web space with around a million unique visitors a month, News Corp believes the better course of action will be to drive an online auto offering from its national readership base of 5.4 million unique browsers a month on news.com.au.
So, instead of the present link in the header of news.com.au (and News Corp’s state-by-state newspaper sites) taking readers to CarsGuide, when the handover takes place these links will go to the publisher’s new auto online offering.
According to The Australian newspaper, which is owned by News Corp and is often used by senior management to send cross-town memos, “News Corp has been looking to break a short leash in recent times” from CarsGuide.
The paper added: “Despite branding efforts and a boost in online traffic, CarsGuide continues to trail behind Carsales”, suggesting frustration that the promise of joining with car dealers in their joint venture from 2011 had not been more fruitful.
In fact, the venture between the dealers and News Corp has always been a difficult one with both sides showing disappointment with the effectiveness of what was being brought to the table.
News Corp was apparently operating under the belief that the dealer shareholders would use CarsGuide to exclusively list their cars for sale – or certainly thought that shareholders would adopt that strategy. Much was made at the time that the dealer shareholders collectively commanded more than half the total car market in vehicle sales.
But the dealers could never have taken that path because they were so reliant on leads from Carsales which were averaging 70 per cent of their online leads activities.
So dealer shareholders were never going to be able to turn their back on Carsales and list exclusively with CarsGuide without imposing severe financial stress on their businesses as CarsGuide worked on the task of increasing traffic.
On the other side, the dealers had put in $15 million in cash and News Corp was to balance that up with advertising to a similar value.
However, the dealers told GoAuto they were disappointed with the effectiveness of the advertising undertaken, where a lot of the value put on the table was through News Corp’s own newspapers at a time when advertising for online readers in newspapers was struggling to get results.
There was misunderstanding on both sides.
On top of that, when there was a changing of the guard at a high level in News Corp, the incoming management, who were dyed-in-the-wool, hard-nosed media types, could not understand why it had sold half of its national online auto classifieds business to its own advertisers.
Meanwhile, News Corp now faces the task of starting all over again, although the company has recently forged online arrangements with listed online real-estate advertising giant REA Group (which is majority owned by News Corp) and a partnership with online employment business Seek.
Such arrangements with the likes of Seek give rise to the potential for News Corp to do a Seek-type deal with Carsales in the auto space.
A key to the News site may be News Corp’s recently-acquired digital asset, Unruly.
Unruly makes video-based online advertising content for other News Corp business groups – including those related to real estate – and is expected to begin building content for automotive.
Though News Corp isn’t saying – it declined to comment on the direction of its car section – the new online site will be operational by the end of the year and be based predominantly on display advertising rather than on classified advertising.
By John Mellor and Neil Dowling
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