RealTime IT News

Can Jumpstart Fading Stock?

It's hard to find any Internet stock that isn't trading far below the highs achieved in the spring, but few have fallen as far as Web car-shopping site

Shares of (AWEB) were selling Wednesday at $8.88 each, a pitiful 22% of the March 23 closing price of $40, when the Santa Clara, Calif.-based company went public.

In a bid to jumpstart its stock and broaden its revenue base beyond fees paid by auto dealers, insurance and finance companies and advertisers, Wednesday announced plans to begin selling cars directly through its Web site. The service will be tested in several unspecified states starting Aug. 30.

Until now merely has provided online car shoppers with information (invoice prices, reviews, insurance quotes, loan rates, etc.) and, once they're ready for some tire-kicking, referrals to dealers in their area.

Under the system, a customer chooses a vehicle from and then the company contacts the prospective buyer with a price. If acceptable, customers can pay a deposit and get the vehicle from one of 5,000 dealers in the network.

By getting a piece of the transaction, hopes to develop an e-commerce revenue stream and better position itself to cash in on the expected boom in Web-based auto sales. Forrester Research earlier this year projected auto sales generated from the Web would go from 15,000 this year to a half-million by 2003. last month reported Q2 revenues of $7 million, up 150% from Q2 '98, though only 22% higher than the $5.7 million generated in Q1 '99. In comparison, top online rival last month reported $9.2 million in Q2 revenues. hasn't yet announced plans to sell cars directly, but it will. (Two other sites, and AutoNation, already allow people to buy vehicles online.) A Wall Street Journal study estimates the market for new and used vehicles at more than $670 billion. You'd be crazy not to want a piece of that action.

The problem facing and the other information providers and e-commerce enablers is that the Internet works against middlemen, and that is essentially what they are. If car purchases are primarily price-driven, sites such as and will not be able to compete with the manufacturers, all of whom one day will sell cars directly through the Internet at factory prices. One company, Daewoo, announced plans earlier this year to sell vehicles through the 'Net.

The business model bridging the Internet with the auto industry is still evolving. And while and similar sites were quick to offer value by leading car buyers to dealers in a non-threatening manner, it's doubtful they'll gain sizable long-term revenue by selling better keep those referrals coming.

ALL NEW!'s HotWatch a monthly e-mail subscription for $99, featuring Internet Stock Report's top 10 noteworthy Internet stocks for the month. Each month you will receive in-depth analysis on the top 10 Internet stocks to watch with the information you need to assess the fast-paced nature of Internet stocks. Staying on top of market changes in the Internet Stock market is what counts. For $99 per year, you receive 12 timely issues sent to you by e-mail. Don't wait, our next issue will be out before you know it with a whole new perspective on the market. Sign up today at: e-newsletters