Economics of a Rate Freeze

Today motors.co.uk announced a freezing of our rates to automotive dealers.  The decision to announce comes on the back of feedback from the market about upward pressure on their media spend.  Obviously a lot of the spend is directed to one major provider, but there has been a trend in the market due to the increasing importance of the internet in generating response for dealers.

At motors.co.uk our aim is clear – to grow quickly to provide automotive dealers with a must-have source of media and to provide consumers with the best used car search experience.  However, our approach is to do it in a collaborative, transparent manner.  We believe that by increasing the confidence of both buyers and sellers we will make the market bigger.

The realities of business mean that whilst we have frozen rates, we believe there is a commercial value to the response we provide to dealers and that we should be recompensed for this.  To generate the response that we do, we have invested millions of pounds in marketing and will continue to spend heavily (as our latest TV campaign shows).  Although the internet lowers initial barriers to entry, it is expensive business building an online brand.

Whilst our rates have been frozen, our traffic and response continue to increase.  Consequently, we are becoming cheaper by the day on a cost-per-lead basis. 

We are lucky to have the backing of one of the UK’s largest media groups, Daily Mail and General Trust, who have a rich history of creating household media brands.  This has provided us with the confidence and resources to invest in marketing, technology and staff to ensure that motors.co.uk can handle fast growth and comfortably serve thousands of dealers.

The balance we have to find as a challenger online brand is to deliver clear value to our customers whilst ensuring we generate sufficient financial return to invest in marketing and technology and also generate a commercial return appropriate to the level of risk taken.  The internet has democratised some sectors but it has also over-rewarded established brands who can bypass the vagaries of search.  Although the current long-tail of poorly populated classified sites and aggregation engines may confuse the customer, I believe that consumers and dealers both deserve choice in classified advertising.  Obviously, I hope they then choose motors.co.uk!