On the Record with John Holt

Few sectors have been battered and bruised as much as e-automotive stocks. Can The Cobalt Group somehow buck this trend?

We'll see. Cobalt chief John Holt sure thinks so. While investors sort through the carnage in the e-automotive space, Cobalt continues to methodically sign dozens of new clients and aggressively ramp revenue.

Founded in 1995, The Cobalt Group today provides Web site building and management services to over 50 of the 100 largest car dealer groups in the U.S.

In May, Cobalt signed an agreement with DaimlerChrysler in which the auto giant will become a minority shareholder and close strategic partner. Cobalt is now in the process of building over 2,000 Chrysler and Dodge dealer sites.

The deal seems to be a perfect fit with Cobalt's long-term goals. After all, in the words of Holt, Cobalt is the "glue at the intersection point" between the dealer and auto manufacturers.

We recently sat down with Holt to discuss the future of the e-automotive sector and to learn what separates his company from typical lead generators like Autobytel.

ISR: What is The Cobalt Group really today? I guess you started out hosting and designing Web sites for car dealers.

Holt: Yes. I think that what we're really doing is providing two fundamental sets of services. The first is a variety of products and services that help dealers manage, what are in effect, their b-to-c Web sites. To do that well, we're providing them with Internet based products, many of which they control. So we're sort of acting as an ASP. We're providing all the hosting services and we provide all of the maintenance services. Last but not least, we provide access to deep training because it's our belief that the execution of the Web site is critically important and perhaps even more important than the Web site itself.

ISR: How big is the learning curve still for dealers to get up a site that you've designed?

Holt: I don't see it as that steep. The technology learning curve is not steep. Fundamentally, we build a Web site in five days. That's kind of the typical turn around time. The dealer has to give us content. So he writes some text and provides us with digital assets. We'll activate those and then the second step is that he has to learn how to use some of the products that we've given him.

ISR: Okay. I'm following you.

Holt: So when you think again that we're acting as an ASP, we give him an inventory management tool that give him access to put new inventory up for immediate activation on his site. He has access - depending on what he buys - to a lead management product to track all of his leads and measure response times and closing rates. He has access potentially to an ad creation product called Ad Wizard Plus to create his own unique ads. So there is some learning curve to understand those tools, but they were all built as wizards and they are fundamentally "Step A", "Step B", "Step C" products. So that's not the biggest issue.

ISR: What is then?

Holt: I'd say the biggest issue is actually figuring out how to manage it in the store. For example, if the goal is to answer your e-mail once an hour seven days a week - you have to staff against that with personnel that understand the sensitivities and attributes of the digital car shopper. You need people that can write clear and plain English. So all of that takes some work. The third leg of the stool, when you think about what execution is all about, is advertising. The dealer is fundamentally responsible for driving traffic to his Web site. So we do spend a fair amount of time teaching them that "Smith Toyota" is a brand and that you want to invest in that brand. So that's sort of one half of our business, which is helping the dealer manage a Web presence to deal with both prospects and owners.

ISR: Right. Acquire versus retain.

Holt: Those