CarGurus, the Nasdaq company which claims to be the largest online car vendor in the US and also the fastest-growing in the UK (where it’s still tiny), is buying PistonHeads from Haymarket Media Group for a price believed to be about £12-15m.
The perfectly-branded online platform was launched in 1999 and acquired by Haymarket for almost £3m eight years later. Over the past 11 years, the distinctive editorial tone and and busy used car marketplace has multiplied its audience from 900k to a steady 4m monthly uniques. It is believed to have consistently generated EBITDA of some £1m at a 40% margin. It is the quintessential online community, although it has never been able to compete directly with the £300m-revenue AutoTrader as must once have been envisaged.
The sale underlines the privately-owned Haymarket’s transformation into a largely B2B information, content marketing and events company (where it all began more than 60 years ago) focused primarily on well-established media and events in the marketing-communications and medical sectors. Its key brands include: Campaign, Media Week, PR Week, GP, Medeconomics, Mims, and Management Today.
The £100m-revenue Haymarket built its reputation by giving B2B magazines (like the legendary 50-year-old Campaign) the design and content values of the sharpest consumer media. It was a pioneer too in the highly-profitable awards ceremonies that now crowd every B2B market. It’s always been great at events.
Although Haymarket retains some consumer brands (notably WhatCar?) it has sold most of them to: Future (including What Hi? and FourFourTwo); Kelsey Media (Stuff); and Autosport Media (Motoring News, Motorsport, Autosport, and F1). The company’s strategic slim-down followed the £80m windfall sale of its Thames riverside film studios which substantially paid-off its long-term debt. The sale of PistonHeads, similarly, to a hungry buyer (presumably prepared to pay some 13-15 x EBITDA) could not be passed up. It’s somebody else’s turn to have a go at the UK’s mighty AutoTrader.
CarGurus has been hunting in the UK for the past year and is believed to have bought PistonHeads on the rebound from losing out to Ebay in the October sale of the more mainstream Motors.co.uk. It remains to be seen whether the definitively non-mainstream PistonHeads really can help CarGurus (anymore than it did Haymarket) to conquer the non-enthusiast market in the UK. The mass market generally seeks relief from the pain of buying a car while PistonHeads’ disciples wallow in the pleasure of it all.
CarGurus was launched in 2006 by Langley Steinert, the under-the-radar co-founder of TripAdvisor. He says the idea was to create the “TripAdvisor of cars”, a site where people could read reviews from other users about their experience with their cars: “So we allowed user reviews, and we actually had a wiki model where people could edit articles about certain cars. And, at the end of it all, it didn’t work. I mean, we had some traffic, not a lot of traffic. We weren’t generating much revenue, and we certainly weren’t gonna be able to build anything of any substance. So I think we were about a year and a half into it, and I huddled with the six developers we had at that point and said, ‘Guys, this isn’t working. We’ve gotta try something else.’ ”
Plan B was the site’s re-engineering with proprietary technology, search algorithms and data analytics “to bring trust and transparency to the automotive search experience and help users find great deals from top-rated dealers”. The re-vamped site sought to answer some fundamental consumer questions: Which dealer has a car like this? What is a fair price for this particular type of car? Have others had a good experience buying from this dealer? Used cars are assigned one of five Deal Ratings: Great Deal, Good Deal, Fair Deal, High Priced, or Overpriced. It worked.
The 2017 revenue was $316.9m (60% up on the previous year) with EBITDA of $24.1m. Steinert notes that, both at TripAdvisor and CarGurus, a deliberately low cost-base enabled him to keep the ‘burn rate’ under control and, therefore, helped him to switch strategies after early disappointment. That might just be a lesson for another motoring-media digital business.
Enter DriveTribe, a much-hyped motoring site which two years ago looked like The Next Big Thing for car nuts everywhere. It was launched two years ago by Jeremy Clarkson, the punchy former host of the BBC’s world-conquering Top Gear TV programme and the team which now fronts Amazon Prime’s Grand Tour.
DriveTribe’s CEO Jonathan Morris, fresh from fin-tech startups, described the commercial model as embracing content creation, distribution, and data insights. Well, some were impressed. 21st Century Fox and Bayer invested $12m (£9.4m) in the platform, alongside millions from Clarkson and his Grand Tour team.
The TV presenter described DriveTribe as “YouPorn about cars”. His on-screen colleague Richard Hammond has said: “Gamers have got Twitch, travellers have got TripAdvisor and fashion fans have got, oh, something or other too. But people who are into cars have got nowhere. There’s no grand-scale online motoring community where people can meet and share video, comments, information and opinion. DriveTribe will change that. And then some.” Big ideas, and the site today has thousands of different ‘Tribes’ which group together content or conversations on specific topics. Sounds like the kind of powerful community engagement that the PistonHeads team would recognise, even if they never had Clarkson’s budgets. But that’s where the good news ends.
In 2017, DriveTribe’s scored pre-tax losses of £8.3m after losing £4.2m in the previous year: more than £12m burned in just two years. The statutory accounts show it generated nil revenue in its first two years. Zilch. Just to complete the picture, staffing costs and headcount increased by 80% in the second year. The company could assert it was a ‘going concern’ because its balance sheet was stuffed with £6m of cash, courtesy of its star-struck investors but that will soon be gone.
The air is thick with stories of rich advertising deals for Audi and Renault, and millions of users are said to be posting to it, taking part in live chats with other tribe members, sharing ideas, videos and experiences or playing online quizzes. Millions more are said to be consuming DriveTribe content on social media. But there are plenty of doubters: one online journalist noted in August that “the site’s monthly traffic seems to have been so minimal that it hasn’t appeared on ComScore at all so far in 2018, and the few months it was there in 2017, it was under 100,000 monthly uniques in the US”.
In 2018, DriveTribe’s third year has been marked – hooray – by its first revenue. But the alarm bells are ringing, and the media-star founders are in London searching for new investors or even a trade buyer that can be as impressed as the original funders. Phew.