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Acquiring the domain, Pulse on the car market, EVs, DTC, Disrupting vehicle trade-ins

Full transcript from Ep. 11 of the CDG Podcast feat. Alex Vetter, co-founder and CEO of Cars.com

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Timestamps

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01:25⁠

- Acquiring *the* domain

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02:44⁠

- 25th year anniversary

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05:13⁠

- Company background

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09:08⁠

- Keeping up with the pace of tech

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12:03⁠

- Tailwinds & headwinds

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13:24⁠

- Where are we headed as an industry?

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18:38⁠

- EV search share

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21:38⁠

- Direct-to-Consumer

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26:07⁠

- Wholesale and Retail

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36:31⁠

- Leaning into AI

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40:13⁠

- The Future of Cars.com

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Transcript

This transcript has been edited for brevity and clarity

Acquiring the domain

CDG: Alex Vetter on the pod. Alex, Cars.com – probably one of the most epic domains of all time. How did you get that?

AV: Look, one of the best moves we've ever made was securing that domain name. I got to tell you, it was owned by a proud Corvette owner. He had a picture of his orange Corvette in his front yard. I called him and asked him how much he wanted for it. He thought I was talking about the Corvette. I was wanting to buy the domain name. He registered it on the internet for probably $15. We offered him five grand for it. Initially, he accepted. The next day, his attorney was on the phone, which I knew was a bad sign. And long story short, we settled about a month and a half later for $70,000. And at the time, there were so many domain names that were available for 15 bucks. People, our investors were like, "What are you doing spending $70,000?" But we felt if we're going to be the authority for the industry, you have to own the domain. So, in hindsight, it was one of the better investments we've made.

CDG: He got you good at the time, 15 bucks to 70 grand.

AV: If that guy is out there listening – it's our 25th year coming up this year. I would love to find him and bring him on stage at our company event just to thank him, but I don't know where he is these days. I've got to find the files and see if we can track him down.

25th year anniversary

CDG: 25 years. How many years have you been with the company?

AV: Since the inception. 25 years.

CDG: And how many years have you been CEO?

AV: 2014. Coming up on almost ten years.

CDG: How do you do it? I mean, that's a hell of a tenure. How do you do it?

AV: You know, look, I don't view it as work. I mean, at times it can be difficult, but we've got a great company culture. The people that work at Cars are amazing, both past and present. And I derive a ton of satisfaction seeing other people grow and advance. And that's been one of the more exciting things. I mean, when I look at our business, not only we've done well, but I'm really proud that we've got at least 15 leaders in other companies, technology businesses that have grown up at Cars and that they've moved on, but they're now running other tech companies. And I think that's incredible. And I love that that we've seen so many people matriculate through our business and go on and run other businesses. It's really rewarding in that sense.

CDG: I mean, I can't even begin to fathom just growing one company for so long. It's really admirable. What have been the "Oh shit" moments for you? When you didn't think you'd make it or that you were really concerned about the future. What were those, and what was that like?

AV: First of all, I don't think it's been one company. We've had three phases of ownership. Each one has had its pluses and minuses and different challenges to navigate. So that has been intellectually stimulating to figure out in its latest form being publicly traded, even that's had its elements. The "Oh shit" moments, boy, there were a lot, you know. When we first started the business, myself and others, we would have to go carry AOL diskettes into dealerships and help them install AOL on a PC if they had a PC in the store, over a 14-4 modem. And I bet many of your listeners don't even know what 14-4 modem is. We had to create email addresses for dealerships as part of the first generation. And there are many days where I said, there's no way this thing's going to work.

CDG: And you were just trying to get Internet adoption.

AV: We were trying to get them Internet adoption so that we could access their inventory files and post them online. And so, having to get up every day and put ten new AOL diskettes in your in your backpack was a humbling experience. But you learn that you've got to teach the industry new skills. That's always been part of our ethos, I think, is that we're always pushing the industry forward.

Company background

CDG: Give us a sense, for the listeners, what is your scale? Dealer count, annual revenue, website visitors?

AV: We have over 20,000 dealers as clients. Our website, just Cars.com alone, reaches roughly 30 million people every month. If you look at our website business, we've got over 6000 dealer websites that were powering, about 10,000 dealers that use our various technology solutions. And so back to the evolution – it's not the same company it was when we started because today, we're an enabler of technology solutions across the industry. People hear Cars.com and they think about the website, but if you peel back the onion, we've got a lot more layers and depth to the business than ever before.

CDG: So, your first product was a listing site that we all know, super ubiquitous, right? Everyone's heard of Cars.com. And then from there, now you're saying you've evolved and you're offering other stuff that's complimentary to the dealer.

AV: Yeah, if you think about our strategy – Amazon came first, but AWS is the bigger business at Amazon because they took the infrastructure that Amazon built to run its marketplace and then they started enabling other businesses to run on that backbone. That effectively is our strategy. We want to give the infrastructure that was built for Cars.com to the local dealership to run their website off our platform, the technology and tools they use to run their business. And by doing it that way, we can enable the dealership to operate digitally at a fraction of the cost than if they try to build it in-house. And so we're all about enabling technologies that help the dealership run their business more efficiently and stay relevant for consumers who clearly are digital first.

CDG: Yeah. Shopify has a nice saying that I like to say, "Arming the rebels."

AV: I've used that line at many townhalls. The analogy at Shopify. Open Table is another one, right? Open Table started as a lead-gen platform for restaurants, but now the bulk of their revenue comes in through software that runs reservation systems in the actual restaurant. So I think owning both sides of the marketplace is core to our strategy and it allows us to bring solutions to market at a much better path because we're not just giving the dealership technology, we're embedding consumer demand into that tech.

CDG: So what's your actual website visitors per month?

AV: 28.5 million last month. We've been number one in total users now for I think sixteen months. According to comScore, we've got the highest rated app and most downloaded app in the category as well.

CDG: Why is that? Like, why do you have the most downloaded app. What are you doing?

AV: I'd be remiss if I didn't credit it back to that domain name. I mean, most consumers are only in the market once every seven years. And so they're not waking up every day thinking about car sites. So when they do enter the market, Cars.com is a pretty easy domain to type in. We get the majority of our traffic directly and organically, which enables us to really invest in other things like product innovation as opposed to what a lot of our peers have to do is they just have to keep spending marketing dollars every day just to stay relevant. We also, though, we're one of the few sites that employ a pedigreed team of automotive experts.

CDG: What do you mean by that?

AV: Well, we have an editor, and she employs a staff of automotive experts that we get the cars directly from the manufacturer before they're put on the retail floor. And so we're test driving cars. We will critically assess them – best bets, what we like, what we don't like. We're not shy. If our editors think a car, you know, cut corners on anything, we'll call it out. And I think that also leads to why consumers come to us, is because we're truly unbiased. We see the good and the bad in everything. And we approach the industry with the curators mindset.

Keeping up with the pace of tech

CDG: Is that an important tenet for you, to educate the consumer? I can tell you, for me personally, if you look at my Twitter handle, I actually A/B tested this. I used to put a ton of different words at the top. I said, you know, "What means a lot to me?" and I put "transparent insights into the car business" and then I added "unbiased and transparent insights into the car business" and follower growth started rising. It just showed me that I think nowadays, with all this media and the Left vs Right and whatever, all these politics – people are craving an unbiased source of truth anywhere. I think we can all agree the car business can be very opaque at times. So I just think it's a very interesting that you said the word unbiased, because that's just something that means a lot to me, and I think people really crave it nowadays.

AV: Every great business has a secret. And if you want to know, mine, it's that, this is the second largest purchase in most people's lifetimes next to a home. Buying a car is a big deal. And there are so many choices and products. We know that there's tons of choices in terms of the seller. And so consumers are overwhelmed with information and they need an unbiased, trusted advocate that's going to help them navigate what is truly one of the bigger financial decisions of their lives.

CDG: Technology is changing so fast. As a dealer, I see what's happened in the last five years and since 2013. We know online car buying was really around since the early 2000s with eBay Motors, but it really became a thing in the early 2010s. So with all this constant change, you being a tech company, how are you keeping up with this, and how do you protect that lead, especially web traffic?

AV: Well, I think you have to constantly invest in innovation and growth. And it always hasn't been that way. I mean, Cars.com has been around for 25 years, but we've had to climb our way up the food chain in terms of traffic leadership. And I think it's taken a deliberate investment in product innovation. You know, we were the first to launch on a mobile device. We were the first to launch an app. We were the first to, you know, do many things in the category that were at the time pretty controversial. We launched invoice pricing when it first came and the argument was, wait a minute, you're going to put invoices out there. But, if you know anything about technology, it will disrupt the market. So, you either have to participate in it or it will disrupt you. I think we've had a culture and a DNA that's always been willing to push the envelope. I know when we bought DealerRater, there was controversy that we were going to rate dealer experience. But let's face it, you're not going to go buy a car from anybody if you can't get insights on the seller.

CDG: If only there was a Twitter account for that.

AV: Right. Part of the reason I'm here. I love what you're doing to push further ahead. And so I think we've always had a DNA that says, look, experiment, fail fast, try new things. And if you continue to do that, you're going to hit a lot more hits than you'll whiff.

Tailwinds & headwinds

CDG: What are some tailwinds for your business, and also what are some headwinds?

AV: Tailwinds, that inventory levels are coming back, right? I think that, you know, in this more recent period, inventory levels have been so depressed. In some respects, that's made people flock to my site because they can now search market wide and find inventory that's hard to find. But at the same time, you know, dealers and manufacturers have a need to compete as much for vehicle sales. And so when inventory levels return, I do think you're going to see OEMs have to get back in the game and that's been a headwind for my business. I mean, we've had very little OEM participation over the last, call it, two and a half, three years, and they've been having fewer cars to promote.

CDG: So OEMs are just advertising because-

AV: I mean, that business used to be over $100 million business with us, and it's a fraction of that today because OEMs aren't needing to spend more money on limited supply. And now that that's coming back, I think dealers and OEMs are starting to step up. I don't think OEMs need to go back to the big incentive pushes that they used to. I think they can start with the marketing lever first and help make sure their cars are seen, found, and compared before they have to start providing steep discounts.

Where are we headed as an industry?

CDG: You know, I talk about this a lot right now. Cox just put out – they put out a stat that the average new car that was sold a month ago or so was actually at MSP or below, which hasn't happened in two years or so. So we're definitely seeing that it's very much just like many things nowadays, a K-shaped recovery where you have Stellantis, and their inventory levels are like shooting through the moon right now. And then you have Toyota, Kia, whoever, where they're still super low supply. Of course, it's a function of demand and supply always, but you still can get them. There's a Toyota Sienna waiting list, which I just ordered one. Yes, I'm joining the minivan gang, but there's like a one year wait. I had to use my connections to get one. It's crazy. I never thought I would have to use connections to get a Toyota Sienna. I used to use connections to get into clubs, and now I'm using that to buy minivans.

AV: Life moves fast, doesn't it?

CDG: Times have changed. Alright, so I want to dig deeper into this point. I was thinking about this conversation. You've got a hell of a pulse on the market. You mentioned 28 million visitors per month, which is crazy to have that kind of access to information. What are you seeing right now? And this is very open, I'm just curious. Supply, demand, pricing, EVs, what are just some notable things that you're noticing in the market and where we're headed as a car industry?

AV: Well, look, the average user comes to Cars.com with about a six month purchase horizon, even more so, 90-day window where they're actively shopping, or "digitally kicking the tires." So we do see ahead of the market. And for your listeners out there, I know there's another business model for us to explore where showing search trends by brand, we can predict the market because if I look back at actual sales history, our traffic trends correlate to those sales trends. They're very much aligned in terms of what we see in the market looking out ahead. What I'll tell you right now in Q2 is that the traffic signals remain very robust and strong. There has been a little pullback in terms of conversion, meaning people contacting dealerships ready to buy, but they're absolutely out there shopping and looking at product. And that suggests to me that Q2 is going to be a very healthy market for those that are continuing to embrace technology as the primary way that they move inventory.

CDG: To that point, we're seeing a similar thing where that customer traffic has been very stable, but conversion is down. For us, as a used car dealer where we skew a little bit heavier on the near-prime/subprime side, it's very much driven by lending. Lending has just kept getting tighter and tighter and tighter. And so people are still looking for that car. But at the end of the day, if you're going to have to pay, you know, some crazy interest rate and the pay will just be exorbitant, you're just not going to buy that car. So that's at least what we're seeing.

AV: Well, that and you know, the new car market and used car market compete. So as new car inventory levels come back, you're going to see that pull people from the used car market because if you can get the brand new technology, even if you have to spend a few more dollars, you're getting the latest and greatest tech versus tech that could be three or four years old. What we see in our shopper data is, more and more, consumers are focused on - is this car equipped with the latest and greatest technology? I do think as you see new car markets come back into the picture, that's going to put pressure on used car pricing. I do think you're going to see some softening on the used car pricing trends over the course of this next year, just because there's got to be more product on the shelf.

CDG: So you're saying that what you're seeing is, features in cars is what people are looking for. That's one of the top things that when people are searching for a car.

AV: Technology relevance is only getting more and more important to younger generations. They want to make sure that their devices connect dynamically. You've been reading about Apple CarPlay. I'm certain that some of the main brands and consumers are searching on those attributes, more now on used cars than they were five years ago.

CDG: I'm laughing because my wife said, she's like, "If the car doesn't have CarPlay, I don't want it." It doesn't matter, the four wheels, the engine, I just want my phone to connect and have my navigation show up.

AV: You look at the trend of work from home. You know, what COVID did is like, the car is an extension of your home, right? Your home office goes with you when you go on the road and people are viewing their continuity of going from my home office into my car as I run an errand.

CDG: That makes sense.

AV: They're still connected. And so they do want technology that's going to enable that.

CDG: All right. So let's some that up for a second. In terms of demand, you're saying that, six month time horizon, people are still shopping and it's been pretty stable. What are you comparing that to?

AV: Just over time. I mean, we measure this stuff daily. We see the same signals that I'm sure you can see in your own dealer website. We look at our 6000 dealer websites. We see that conversion has softened on dealer sites. And so that gives me comfort to know it's nothing we changed on our marketplace. But, the traffic levels are persisting, people are looking, they're configuring loans online. They may not convert, but they are looking at affordability. And so we're constantly measuring these signals to help us inform what's going on in the market.

EV search share

CDG: Okay. And then, EVs. I'm super curious to know what your insight is into that realm, the demand that we should expect for used EVs, new EVs – what are you seeing now?

AV: Chicken and egg. But I will tell you, we don't see the demand curve the way the industry sees it. I mean, EV search share on Cars.com is around 3, 4%. At its peak, it was at 8%, but only in California when you had government incentives at 70 $500 per sale. So even with big government stimulus, California got 8% search share. And so these projections of getting to 50, I think it's a hard putt. Infrastructure is holding back.

CDG: What are you seeing in the near term? Like what's the slope right now? Are we seeing this like rapid growth of searches on your website?

AV: Yeah, look, it's rapidly going, but to get to 50% sales volume I think is a little bit of a birdsong. I don't see it happening in the modern era. I think it's going to take a lot longer time. I think going to have a lot more infrastructure being built, a lot more competitive priority. You know, just this week, I know one of your biggest fans, Elon, announced that he's going to be doing that. Like he's got to market EVs. It used to, you know, have this halo effect. And the good news is that every company is now putting more product in the market, which I think will help the overall category. But there's got to be more product before the search share or the sales share grows to the levels that are being projected.

CDG: Yeah, I've been reading several companies that put out stats that even searches on their website are growing specifically on the U.S. side. I'm just learning a lot about it. In the beginning part of the year, EV prices started tanking when Tesla lowered their prices. Since then, dealers were kind of gun shy initially. People held all these EVs that lost all this value. Then, I've been noticing that now there's some stability, or at least it feels like it, and dealers anecdotally have been buying more of them. So, I do think that the lower prices now help with a bit more affordability and ultimately sales.

AV: EV search share is going to correlate mostly to gas prices. We saw this as gas prices are running up, getting north of $5. EV search share was doubling.

CDG: Really? By the way, that surprises me because I feel like the average EV customer today is still a luxury shopper, or maybe not even luxury in the traditional term, but above average. And so if I were to buy an EV, I don't know if it would be directly correlated gas prices, but that's my take.

AV: Our search trends correlate more to gas prices and how they ebb and flow. And so as gas prices have come down in the more recent period, we've seen a cooling off on EV search share. So, whether you're on the wealthiest spectrum or more focused on affordability, let's face it, you want to take into account, what does it cost for me to to own this product? And even luxury shoppers are cognizant on gas prices being a big driver to move to EV.

Direct-to-Consumer

CDG: Let's talk about another hot topic that I've been hearing about: DTC, direct to consumer. What does this look like? What's your overall take on direct to consumer right now?

AV: So I'm dating myself here. My favorite athlete growing up was Bo Jackson. I don't know if your viewership would know Bo Jackson. Google him. There aren't many two sport athletes anymore in the world. I know my teenage kids were sort of conditioned that they had to pick a sport by fifth grade. The coaches were like, "You've got to choose your path." And I think this notion that manufacturers are going to build cars and then service customers is a little bit like trying to be a two sport athlete. It takes a lot to build an automobile. It takes extraordinary focus, precision, and obsession about getting it right. Equally, taking care of customers? Not easy sledding, right? They have all kinds of ownership issues. They have servicing care needs. And I just think the two-tiered system works really well. Dealerships really helped curate the market, making sure the customer satisfied. The manufacturer, builds the cars, the best quality. And I think the two tiered system works. So I'm not a big fan of the DTC model because I don't think it's the best consumer model.

CDG: That was what I was going to say. From the consumer perspective, if we put everything aside, ultimately, is it a better experience for the industry to adopt this? Will it even get adopted?

AV: You've seen examples of this with Tesla changing the prices on cars to people that had reservations. When you're a one-tier system, there's too much control at the top. I think when you've got a two-tier system, the market naturally drives a much more level playing field, both on product and on price and on service, which, let's face it, these are machines. They're going to have problems, they're going to have issues. And having somebody local who can help care for your product in a expedient manner is far better than waiting for a monolith in a distant state to take your ticket.

CDG: So with that said, how do you think dealers are going to evolve because there's going to be an evolution, no doubt about it. But the dealer in five, ten years – do you think it's the same type of service and experiences today? Do you think there's some core differences?

AV: So I'm going to warn you right now that your brand may be irrelevant if I do my job, because we're trying to move the industry away from being a dealership and being a retailer, right? So, CarRetailGuy[.com], you need to register that.

CDG: Someone probably already bought the domain by the time you said that.

AV: Pay up for it.

CDG: Just like they took CarDealershipGuy.com away from me.

AV: I think dealerships have got to evolve and become much more like other categories in retail and be much more transparent and forthright, creating a great experience. The Internet has gotten us away from worrying about the price of the deal, which is where the name came from. But, it's really more about creating a great retail experience. I think the industry is adopting technology in a very rapid fashion. And by using technology, dealers are becoming retailers and creating these wonderful experiences that go far beyond the sale and really get at the heart of ownership. I think that's the right model. And the manufacturers that wrap their arms around their dealer partners and focus on working together to create that great ownership experience, they're absolutely going to take market share. And I believe that in my heart, dealers today have done such a great job of evolving their businesses. We always hear about the bad stories, right? They're easy to post and share. But when you look at what we see every year, 10 million reviews coming in from consumers out there, enormously satisfied with the retail experience happening all over this country. I really believe that the local system can win.

CDG: Yeah. I think the dealers have long had a stigma. I mean, we all know the stereotypes and just like anything, there's both sides to every story. So I try to show just the reality and not show one side or the other with anything I tweet. But I do agree with you that, you know, there's a lot of really good people in the business. And, you know, just like anything, there's some bad actors. I feel like I'm trying to help get to a point where everyone's experience is better for the consumer and we bring more transparency as well to the business.

Wholesale and Retail

CDG: What about wholesale and retail? For the audience listening, wholesale, traditionally, there would be a certain pocket of dealers that would be just selling cars to other dealers and do that with various mechanisms. And by the way, that's actually the next episode. We're doing a deep dive into wholesale. It's gonna be really cool. Then of course, retailers is your dealership. You know, I think the lines have really gotten blurred over the last couple of years. We're seeing this vertical integration and companies and whatnot. What do you see on that side and what's happening there in the business?

AV: Well, look, I think the if you want to get the essence of what we're trying to enable here, it's that dealerships, while they compete fiercely for sales volume and customer loyalty, they absolutely are an incredible brotherhood of colleagues that really work well together. And we want to use technology to enable that community of operators to work together to trade inventory that isn't right for one store, but is best suited at another. Technology can be that enabling force to enable dealer-to-dealer trading. And today, the system is sort of old school, it's like we all come lick our wounds on cars we can't sell to a big virtual or physical lot. And then trade them like baseball cards to each other to see if somebody else locally could trade it better. I think technology can absolutely better optimize the fleet using the dealer network as a distributed infrastructure to enable this retail system. I mean, we're one of the few industries that has four tiers. You've got the manufacturer building the car, you got the dealer retailing the car, you've got the technology platform being where people shop, explore, or learn, and then you've got the wholesale segment with our Accu-Trade acquisition, we're enabling dealerships to more accurately get to the health of the vehicle. They know exactly what the car's worth, which will make it much more easily tradable to other dealers who also are trusting that technology.

CDG: What's Accu-Trade? Could you explain that for a second?

AV: Sure. So Accu-Trade was built by one of the nation's best wholesalers, Robert Hollenshead. He'd been buying cars profitably for years and built basically the best technology.

CDG: I bought tons of cars from Hollenshead.

AV: Yeah, and he absolutely loves his dealer partners as well, and so Bob and I started talking a few years ago. It was about basically how do we bring your secret, your buying secret, and unlock that power to the dealer community? And he's at a life stage where I think that, too, would have been part of his legacy was that he was going to give power back to the retail system and enable them to do what he's done profitably for years.

CDG: So basically, for the audience, this guy is considered a legend in the car business. He's very good at wholesaling cars to say the least. I guess one day, he has this idea and he's like, "Hey, I know I have the secret sauce. I've made a shitload of money already. I'm super successful. Hey, by the way, I can take this, put technology behind it, and like we said before, arm the rebels. That's basically the thesis here.

AV: Correct. And, you know, we want to turn retailers into professional buyers. Dealers today are going to auction. They're using things like MMR, which is historical, you know, daily rate data, right? I wasn't able to retail this car, so therefore, I'm going to wholesale this level. What Bob liked about, you know, our platform vision was that we were going to use predictive forward looking data or retail demand data. So not only the Cars.com data we see looking out in terms of what a car is going to be worth over the next few months, is there persistent demand? But also we can see that across 6000 dealer websites so we can predict what a car is going to both sell for and how long it will take to turn in a forward-looking fashion. So we want to move the industry from using historical data to trade towards predictive data.

CDG: And how are you doing that?

AV: So, Accu-Trade today, we ingest all of Cars.com's retail demand, supply and demand data signals. So you can see what the car is fetching at auction. You can see what it's fetching in the retail marketplace and therefore we can guide the buyer of the car on what the car is actually worth. What's important about this is that, the average consumer, when they go to the dealership, is spending 40 minutes to get their car appraised. That's pretty conservative too. Many surveys are showing consumers spending up to an hour waiting for an appraisal. And then when they get that number, it's a black box. There's no data behind it. It's just, the buyer's word versus the customer. And we all know the customer has an inflated sense of self-worth for their vehicle. And so data is the truth broker there. So with Accu-Trade, dealers can print a condition report that takes the intrinsic signals in the car. You plug in an OBD scanner into the dash, the car sends the data signal to the cloud. We then feed that data right back to the dealer so we can print out a report that says, "Here's exactly what work needs to get done on this car, how much those repairs cost." So when you're giving the customer the number, it's broken down into their parts and therefore it eliminates the distrust, it eliminates the back and forth over value.

CDG: And what do you mean by it's broken into parts?

AV: So, like, you know, we'll tell you that if you don't have two sets of keys, it knocks down the price by $75. And we'll do that by brand. We'll know on a Mercedes its worth, you know, $90. So the customer will say, "Oh, wait, I have another key. I can bring you the other one." Okay, we'll give you a 90 bucks for that.

CDG: Oh, I see. Make it like a la carte, itemizing.

AV: Very itemized in detail, so that the customer sees the breakdown of the cost of the car. It's also generated by the Cars.com Accu-Trade system, so the consumer isn't saying that this person made the number up. It's coming from a trusted, unbiased third party. And so dealers that are using the Accu-Trade system, it's just like, look, it's eliminated so much back and forth time where people are leaving the dealership frustrated. They're going to get another price from another dealer because we're giving them all the data they need to know on what the car's truly worth. And so they're speeding transactions, they're bypassing auction fees. They're now able to inspect a car in 4 minutes as opposed to 40 and buy cars off all their service lane customers. And so dealerships are going to start working more with technology to lower their overall operating costs, but speed the rate of transactions running through that platform. And that's the key to profitability in this industry. You've got to be able to move more units, both buying and selling, with greater operational ease and at tremendous efficiency and velocity if you want to run a very profitable business in the future.

CDG: Yeah, look, we everyone remembers that, you know, trades used to – and I'm sure in some places it still is, but it was a very opaque thing. You know, you get a trade and the used car manager, whoever would try to steal the trade or get a great deal on the trade. And, you know, a non-educated consumer would obviously lose in that sense, whereas an educated consumer would come out pretty well because a dealer would still pay up for it and they don't need to transport it from the auction. You know, they don't need to bid against other dealers. And so still worth it. But I think that's I think it's fascinating to hear you say like down to like that level of a key. I know I know these keys. I know that if you're missing an Audi Q7 key versus a Honda Civic key, it's a very big difference. You know, we made it, we made a lot of keys. So I didn't realize it at that level.

AV: Well, the thing about retail experiences, many progressive retailers have these no-hassle return policies and just wow customers with support and dealerships know this, that if they can take care of a customer, getting them out of a car, the chances of them buying the next car from them are through the roof. And so they want to keep that customer relationship, use data, trust and transparency as creating their brand identity. And by doing that, they're going to win customer loyalty.

CDG: Yeah. I think that's why people ask me like, "CarDealershipGuy, where should I go buy a car?" I say, well, "I can't tell you that. But what you should look for is a brand or a dealership that's been around for many, many years." And that's just one of the many things. The reason I say that is because I know how we functioned, having been in business for a very long time. When you play the long term game – and I've tweeted about this – but I say it's not in our best interest to try to clobber customers, because at the end of the day, they're going to come back to me. They're going to buy another car. They're going to bring their family. They're going to buy another car. It's only if you play the long term game. If you're just playing a short term game and you have bad reviews and all that, of course you're not going to care. But at the end of the day, if you want to build a long term business, you got to actually deliver a good customer experience because ultimately those people are going to come back to you.

AV: Reputation matters. So I'll give you a little hint what we're working on right now that will be releasing this year. Through DealerRater, we're now surveying Cars.com shopper experiences in real time. And then we're taking that dealer feedback and posting it directly into the algorithm on Cars.com. And so over the course of the next year, we're going to start weighting down the dealerships that are generating a low net-positive score for the user.

CDG: Wait. How are you measuring that?

AV: So we'll survey consumers based on leads that send them in the dealerships, phone calls. We're even using geolocation technology so that we can survey people that we know are physically at a store to rate the dealership experience. And over time, we want to reward the world class retailers. Frankly, we don't want to help the bad actors that are creating a bad identity for our industry. So we're starting to use reviews more as currency in our smart algorithms, which is just going to reward the best players and continually make it harder for those that are, you know, not really helping our industry's reputation.

Leaning into AI

CDG: On another big note, something that's been going through my head and just trying to think about myself in your shoes. AI, you know, there's a lot of – from what I'm reading, and on the street and just in general within the investor community, it seems like this is something that people are – it's not like web3 or crypto. people are really taking it seriously that this may be like a big inflection point. You were around in the dot-com era and all that. I wasn't, or at least I wasn't in this business at the time. What's your thoughts about that? I'm just curious what it's like to be in the head of Alex Vetter in the world of emerging A.I. right now.

AV: Well, our company DNA is to lean into these technologies. We want to be first to explore, experiment, and use. If you look at our website business, we're taking thousands of calls from dealers every day to create content for them for their own website. So now we can use AI generally to build that content in a fraction of the time that we were manually creating it. So, immediately we see a huge savings potential to increase our throughput. We're now launching websites and building websites faster than ever before. I think on the content side, you know, we're harvesting tens of millions of reviews every day or every year on the industry, building that into word clouds, sentiment analysis, not only around stores, but brands. Huge opportunities for us to be a first mover there. So, again, we're going to continue to lead by being involved in this tech and I don't think it's ever going to replace the need for actual expertise as opposed to computer generated expertise.

CDG: Give me the bad ass ideas. I want to know the juicy stuff, like what can you do with this to really wow dealers and consumers with AI?

AV: Well, look, I definitely think that we can run our reviews database against AI to better catalog cars in classes of who they cater to and who likes them and who doesn't. So I do think you're going to see personalization take off a lot more. If we know you're a luxury shopper, we're going to be able to gravitate you towards luxury brands that are more aligned with what you're looking for and conversely, down payments. We're going to take people that are struggling on affordability and guide them in terms of which banks can lend them money and use generative AI to guide people to the destinations that are going to convert them at the highest rate.

CDG: Is there any innovator's dilemma when you think about AI and just opportunities there? I mentioned on a previous pod that I did about a future where I just go to a website and it's like, "Hey, what can I help you with?" I say exactly what I want, where I live, and it just all happens behind the scenes. Like, is there any of that that you're dealing with?

AV: Yeah, well, you want to index your data so that generative AI can actually leverage it and create new experiences. So again, we're all-in here experimenting with it, learning how to use it, empowering our teams to fail fast with it and try things.

CDG: And how do you do that?

AV: Well, you just create a culture that encourages experimentation, right? We want to we want to be first to market on things. So if we can recognize an employee who's developed a prototype for something that we can release to either our 30 million users or 20,000 dealers, those people are getting promoted. We want to reward those people for experimenting with new technology and helping us run a more efficient business.

The Future of Cars.com

CDG: Yeah. Now, I think just to end on a more high-level macro note or big picture. Cars.com, the Cars suite of products. You've done a lot. You've really expanded and it's very, very impressive how you've grown. I'm really curious. 5 to 10 years, how does the business evolve? Again, you've been around for a while. You've sort of evolved in multiple phases, which I didn't know the way you described it today. So I learned something new. But how does the business evolve over the next 5 to 10 years?

AV: Well, look, I think our businesses–

CDG: Or are you in Aruba laying on the beach?

AV: No, no, no. Look, it's a phenomenal industry that's always evolving. I will tell you that dealerships hold the keys there. If they use technology to run their operation, they're going increase their throughput and they're going to enjoy record profitability. But we have to build this industry to be technology first. And you asked me the question about headwinds and tailwinds in my business. I'll tell you, one of the tailwinds is that generationally, younger and younger owners are taking over stores being passed on through generations. And what they're doing now is they're not questioning whether or not they should be working with, you know, Cars.com or DealerInspire or Accu-Trade, like they are immediately wanting those tools and they're putting them to work. And so as I look at dealerships, you know, trusting the next generation of leaders that are going to be running the industry, I'm really pleased to see how much they are leaning into technology first, because they know that every customer coming in their store has been on their device, has been able to you.

CDG: Yeah, you don't need to sell that. You don't need to convince, it's obviously a given.

AV: Well, you'd be surprised. We only have 20,000 dealers in a universe of 40,000 today. So I sit here and I say, boy, until we get to that 100% market share where everybody is using our technology to run their store, we've got a lot of work to do. But I think the industry's embracing tech now more than ever. Sure, it took a pandemic to kind of push our industry forward, but the number of operators that are now using technology in their day to day operation is so exciting to see. And this industry has got a lot of upside still to go in creating a great retail experience.

CDG: Yeah, and I think to your point, great retail experience, I just think that it's really good for the consumer ultimately because all that transparency – it's a hard pill to swallow at the time for many dealers. I got to speak to a lot of dealers. I've experienced it myself in certain cases. I think ultimately, like you said, it's good for the industry. It creates better reputation, good for consumers, and I think elevates everyone together. So I think it makes total sense.

AV: CarRetailGuy, I appreciate you elevating our industry conversation and doing what you're doing. It's great to see the industry be put such a positive light and your voice out there matters. So keep up the great work.

CDG: Appreciate you coming out to [expletive] over here in the middle of a forest to record this podcast. This was awesome. Last but not least, where can everyone learn about you, Cars – obviously, Cars.com. I think that's a given.

AV: My email is easy, it's alex@cars.com. You can also follow me on Twitter as well.

CDG: Love it. Alex. Dude, thanks so much.

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