The growing number of consumers that surf the Internet to look for a new car is driving more local ad-sales revenue to cable operators.
Comcast Corp.-backed Vehix .com said it provided 695,000 qualified sales leads to local automobile dealers in 2004, which resulted in $1.2 billion in sales and $139 million in gross profit for the auto dealers. In turn, Vehix (www.vehix.com) helped local operators secure $80 million in local cable advertising sales from the automotive sector in 2004, up 33% from 2003.
The service was launched as AutoMallUSA.com and was first offered on Tele-Communications Inc. systems in Salt Lake City in 1997. Two years later, Vehix.com was formed by TCI Media Services, the ad-sales arm of the former cable behemoth, along with majority owner Garff Enterprises, which controls a number of automobile dealerships.
Cable ownership in Vehix .com shifted to AT&T Media Services after TCI merged with AT&T Corp. in 2000, and later to Comcast after the MSO acquired AT&T Broadband.
The Vehix.com business model is based on collecting fees from cable operators that run Vehix.com ads on local cable systems as an incentive to lure more ad-sales revenue from auto dealerships.
“Our whole game is to drive auto ad sales for MSOs,” said Vehix.com president and chief operating officer Derek Mattsson.
Vehix.com’s cable partners are Comcast, Adelphia Communications Corp., Bresnan Communications, Charter Communications Inc., Insight Communications Co., Mediacom Communications Corp. and Buckeye CableSystem.
The company runs local cable ads in 19 of the top 25 television markets, including Boston, Seattle, Philadelphia, Detroit and San Francisco, directing viewers to the Vehix.com Web site to search for new cars.
Automotive companies spend more on local advertising than any other industry, but local cable trails local newspapers, broadcast spot, direct mail and radio in terms of budgetary share.
“Our objective is to raise cable’s share well beyond 4%,” added Mattsson, who worked at TCI for 10 years, and held posts later with AT&T Media Services and Comcast.
Mattsson said Vehix.com cable affiliates use the company as a way to gain more business from local auto dealerships, as operators only provide sales leads generated by Vehix.com to some 1,300 local dealers that make a “significant” spending commitment to local cable.
“Typically, it’s mostly a share play. So cable at a minimum wants 10% of a dealer’s total ad budget [in exchange for providing Vehix.com sales leads],” Mattsson said.
Mattsson said Vehix.com’s cable affiliates use unsold local advertising inventory to run Vehix.com spots. The company supplies operators with three new spots each quarter.