“Even though in the UK, .coms can be seen as an American domain, they are accepted as UK companies.”

Interview by Mike Sullivan

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Mike:
Hey everyone, I’m Mike Sullivan. This is MO.com, where we feature small business owners and entrepreneurs and brings you hints, tips, insights, and perspectives on what it takes to be successful.

Joining us today is Louis Rix from Netcars. He’s joining us today from Manchester, England. Louis, thanks for being here, and to start off, can you just describe for us, what is Netcars?

Louis:
Yeah, sure. Netcars.com is a used cars classified website. It’s very similar to Auto Trader in the UK. Auto Trader is the dominant player in the used car classified market over in the UK. Me and my brother we’ve always had the idea of setting up and being a challenger brand, really. I mean, Auto Trader is a huge, huge company, but we just want to do things differently. We’ve got a completely unique billing model for the dealers in the UK. I’m sure you might want to talk about that a bit further on. Or would you like me to sort of talk about that now Mike? Or do you want to cover that?

Mike:
Sure. We can cover that now.

Louis:
Okay. The way it works. I mean, Auto Trader has been around for 25 years plus in the UK. They have transferred from the print model ads to a digital company. The magazine that Auto Trader has is getting smaller and smaller, and more and more car dealers in the UK are moving online. I mean, the automotive industry is [inaudible 01:39] in the UK. It’s quite a ways behind other sectors, technology sectors. It could be, I don’t know. Review digital cameras, just one [inaudible 01:54], but the automotive market or the dealers, should we say, are only just starting to realize the power of the Internet.

So we feel the timing is right, from our point of view, to enter the market with our offer. The way it works is car dealers can list all their cars on Netcars.com for free. There are no contracts. There are no set-up costs. We work purely on a PPC model. So it’s very similar to the way Google works. Whereas all our competitors in the UK, they are or they charge in the traditional classified way, whereby it’s so much per week, per listing. We’ve had some fantastic response from dealers and big dealer groups in the UK on our unique concept, because they’re investing a lot of time and money and effort and resource into their websites, car dealers and dealer groups, and they want traffic on their website.

Because they’re quite a way behind in terms of Internet marketing, dealers do struggle to appear in the organic rankings on Google. So the only way really that they get traffic on their site is they rely on their brand and they might do a little bit of PPC on Google, but organically, that they’re not great. There are obviously some dealer groups that are better than others. But they’re sort of four or five players in the UK, in the classified car sector. Auto Trader is, by far, the most or the biggest should we say.

There are a couple of other players. But we’re looking to try and really become the second largest player quite quickly, or within the space of 12 to 18 months, anyway. But the unique thing that’s been really well taken by dealers is our billing model and its transparency. There are no smoke and mirrors. We even go as far as giving the dealer each individual click information. We let the dealer know the time and date of the click, the IP address, and what car the customers clicked on.

We’ve got a policy in place whereby we don’t charge for duplicate clicks. We monitor every day, from a tracking point of view, we look for any behavior that’s not human behavior, if that makes sense. So we don’t charge dealers for any clicks that are generated from search engine spiders, for example. So, we’re looking for long-term relationships. To achieve where we need to get to, obviously, we need to be an open book really. But the good things is we’ve only been going for six months, and we’re doing well as a business. The feedback from most traders has been very good, Mike.

So, yeah, I’m [inaudible 04:58] a bit now, but yeah, that’s the basis of it. So, used car classified website in a nutshell looking to be a challenger brand with a unique billing model in auto trade in the UK and obviously the openness and transparency of the results that we deliver.

Mike:
Louis, where does most of your traffic come from right now? Is it organic searches?

Louis:
No, no. There are lots of ways that we generate traffic to the Netcars site. Granted yes, with us being a new business, we did have a domain migration from Netcars.co.uk, to Netcars.com. So the trust and authority that .co.uk had, it had eight or nine years history. We lost a bit of that. But 60% of our traffic at the moment is coming from PPC, and 30% or just above 30% is coming from organic. But the great thing about organic, all the organic traffic is the figures are rising very nicely. Yesterday, we had a record day in terms of organic traffic. We had just over 4,000 visits yesterday, organically. Unique visits that is. From where we were six months ago, month on month, we’re looking at between 25% and 30% increases in organic traffic. So not direct in referral. Just purely organic traffic.

We’ve got some cracking rankings. For example, “used cars,” we’re in position fifth, Mike, and that’s a huge generic keyword in the UK. “Used cars for sale” we’re in position of two at the moment, so. The generic phrase has started to kick in. But in other ways, obviously, we get quite a bit of direct traffic. We do quite a lot of consumer PR. We did a big event in London, whereby we had a group. We did a survey in the UK of what were people’s favorite celebrity cars from TV programs in the UK. So we had sort of Kit from Knight Rider, Del Boys three wheeler. We had the [inaudible 07:11]. What was it now from the “Dukes of Hazzard?” I think it was a big Chevrolet, a big American car. It was in Trafalgar Square in London. We got plenty of write-ups. We got a national newspaper write-up, a lot of local press on that.

We’re looking to drive consumer awareness, but it’s a bit of a catch 22 at the moment, Mike, because what we’re trying to do is we’re trying to build up the population of vehicles that we have on the website. So we don’t want to go mad on consumer spending and awareness and having TV or radio or billboard campaigns yet, because we don’t have enough content on the website in terms of cars to choose from. So we’re on a big drive at the moment to dealers all over the UK to get them to advertise their cars on our website, because there are areas of the UK where stock levels are very low but search volume is high. So we need to get up to a stage whereby we’ve got around 120,000 cars on the site. I mean, at the moment, there’s around about 58,000 cars. But within the next six months, the plan is to have 120,000 cars on the website there, Mike.

Mike:
You mentioned migrating from Netcars.co.uk, to Netcars.com. Can you tell me a bit about that, the strategy behind that?

Louis:
Yeah. It was from our investor’s point of view, really. Undoubtedly, we felt with .com, it’s the top level domain. There are lots of companies in the UK such as money supermarket, confused.com, thehat.com. Even though in the UK, .coms can be seen as an American domain, they are accepted as UK companies. So it was something that the investor wanted to invest in, when we first got the investment.

We were all a little bit, not unsure, we wanted to do it. It was just when was the right time to do it. We just thought, if we got it, the earlier the better. But we did actually have to purchase the .com from a chap over in the States who owned it. So it was a quite a big purchase for us, but hopefully, going forward in the future, the money that we outlaid to buy the domain will repay itself. We feel that it’s got a better ring to it. Netcars.com, rather than Netcars.co.uk.

Mike:
Louis, can you talk about funding? Where did you receive the financing to launch the company?

Louis:
It’s funny how it came about really, Mike. My brother had set up Netcars. We’re talking ten years ago now. It didn’t quite take off at the time. There was no broadband. Dealers did not have digital cameras to take photos of cars. They didn’t believe in the Internet. It was at the height of the .com boom and bust should we say. It didn’t take off as expected. But we’ve always had the Netcars.co.uk as a side sort of business move, a project really. [phone ringing]
Sorry about that, I’ve just got [inaudible 10:12], Mike. So I’ll just take my phone off, and that will sort it out.

But in 2008, the credit crunch hit big time in the UK. We do actually have a separate business, myself and my brother. Again, it’s on the Internet and it’s finance based. We were moving banks at the time, funnily enough. We were telling our bank manager about this great idea, about Netcars and how we’ve always had the idea to sort of bring a new concept to market in the UK that’s very simple and transparent. He said, “Well, have you got a business plan?” We said, “No, no business plan in place.” He said, “Well, I’ve got a cracking person who I know who has got plenty of motor trade experience and his name is . . .” Well, he’s now our Finance Director, he’s called Laurence Gilbert.

But initially we brought him in as a consultant to help us build or develop the business plan. He loved the idea, and as he got into helping us out, it was myself, my brother, Reg, and our IT director, Jonathan Wilson. He sort of got involved in the business, and we gave him a small percentage of the business to sort of come on board really and bring him out of retirement. Now, Laurence is an accountant by trade. But he’s had some very big roles with companies in the UK. He was finance director at Sigma. They were a very big dealer group in the UK. He was also a divisional director at Reg Vardy who were recently taken over by Pendragon. He’s a very experienced chap, and he added a lot of [inaudible 11:51]. Obviously, myself, my brother, and Jonathan, we’re young guys looking to raise a big chunk of money, and he just added that air of maturity, should we say, to the team or a dimension that was missing, let’s say, Mike.

Anyway, we got the business plan down on paper. We did a lot of market research. We’ve had a lot of experience. I mean, I’ve been sort of running the finance business, which is an online company for nine years now, since I left school. So we’ve learned a lot over the years in terms of what Internet strategies work and what don’t. We’ve got a lot of very good contacts here, over in the UK anyway, in terms of search engine optimization and conversion rate optimization as well. We’re quite big on that on our website, in terms of obviously delivering site traffic and actually converting it into a goal.

But back to the investment, we knew that it wasn’t going to be of any interest to a bank because we didn’t have any security or much security. We knew it wasn’t going to be a VC, because it was purely an Internet startup with no history, no background. It was a brand new business with no revenue. So we just saw this as being a venture. It was all feet on the ground stuff. We knew we had a good idea and the timing was right. But we just felt it would be best suited to a high net worth individual, someone who has had a taste of the Internet and who believes in it and can see the power in the Internet.

We got in touch with a lot of people. This was back end of last year. March time of last year, that’s when we started on the funding trail, should we say. That’s when we started looking for the money or the piece of money that was needed. We got in front of people who knew people with money. We got quite far down the line with a newspaper group. But we sort of had an offer from a chap called David Crossland, who was the Airtours founder, obviously very wealthy individual. We just felt that that was the best way for us to go. The reason being, I think the reason why David had an appetite for our business was because he had just recently sold a car hire business that’s based in the UK. Car Hire 3000, and that was bought out by Priceline.com, over in the States. I know they paid a lot of money. I think it was, I think the figures are public anyways, 90 million pounds plus for the car hire business.

So, David obviously has mostly seen that and understood that there’s money to be made on the Internet. We just maybe came along at the right time. But David made us an offer. We had to go for quite a lot of due diligence before we received the funding. We successfully got funding in October, last year. But it took a couple of months to get all the offices and the set-up and get the dev team in and recruitment, a couple of months.

So, really January was when we sort of really launched to market. Obviously, we’ve done about two years work in about six months, Mike. It’s been very, very busy, but very enjoyable at the same time, and we’re growing at a rapid rate. So things are looking positive. Still a lot of hard work to do, but things are looking good.