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CARS - cars.com


Arski
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Been looking into this business as well. I think it's quite cheap. Investor concerns appear to primarily center around CarGurus.

 

There was a VIC post in March that also discussed the business (https://www.valueinvestorsclub.com/idea/CARS.COM_INC/1477017723#description), and one of the comments notes that this will likely be a "structural winner take most" market as dealers do not see incremental sales when they list on multiple sites vs. just CarGurus.

 

Here's a report that essentially says the same thing: https://www.bateswhite.com/newsroom-insight-Comparison-car-vehicle-listing-platforms.html (Figure 15 is the relevant chart, there is no significant decrease in inventory days). CarGurus is also cheaper (and offers a free product).

 

So the question is whether over time dealers will slowly stop listing on sites other than CarGurus and Cars.com is a structural loser. I'm having a hard time seeing why this won't happen.

 

One of the points in the March 2020 post was also that CarGurus was significantly impacted by the Google algorithm change in Q1 2019, which negated a lot of CarGurus' aggressive SEO tactics and put Cars.com organic traffic into the lead. However, third-party traffic data (I use SEMrush, would love to hear if you're seeing something different on SimilarWeb or a comparable platform) shows that this has largely reversed and CarGurus is once again enjoying significantly greater organic traffic vs. Cars.com.

 

I'm encouraged by the Dealer Inspire business, and the company generates a lot of cash and obviously still has a lot of brand value. It looks like traffic is growing again and dealer churn is less of an issue now, which means that things may be looking up. I still haven't decided whether to take a real position yet though.

 

PS I thought that this would be a good strategic acquisition target for CDK, but unfortunately CDK just sold off its marketing business to Advent International and likely won't be making a big acquisition in this space anytime soon.

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Just an anecdotal story, I recently tried to sell a car on cars.com and I also put it on craigslist and FB marketplace.  I got about 25 people contact me about it from craigslist and one eventually bought it, but not a single person from either cars.com or FB.  I wonder if they focus more on dealer listings than personal listings?

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