JOHNSTOWN – How difficult is it to make money with a website-based business? George Christman knows.
“A lot of people have a false-notion that you can just built a site with no revenue model and just offer everything for free, like Facebook and build a billion dollar company. The reality of that is that it isn’t going to happen very often,” Christman, the owner of cardaddy.com said. “Facebook monetizes that [web] traffic. So either you need to either monetize it, or you need to have another plan.”
Cardaddy.com provides an Internet platform for the sale of used cars and other vehicles, similar to a site like autotrader.com. Christman has operated the website since 2008, but he’s been working in the online car sales space since about 2004 when he created his first website, carsunder10k.com.
Christman’s career as an online entrepreneur has taken him through several phases of the evolution of e-commerce. His first website, carsunder10k.com attempted to provide a platform specifically for lower-priced used cars.
“It made some money, but it didn’t make a fortune because the cost of marketing was tremendous to get the name out,” Christman said.
When Christman first got into online car sales his business required hundreds of thousands of dollars in investment capital to purchase $10,000 computer servers, hire website developers and most importantly pay for marketing to try to popularize the carsunder10k name.
“In that first project I want to say there was at least [approximately] half a million, possibly three quarters of a million in the first project, just getting it built and getting it marketed,” he said. “The question always was does it take $500,000, $1 million or $100 million. That was always the question I was asked by investors. I had one investor say ‘this could cost $100 million in marketing and still never be successful’ because we were competing for market share up against big companies like autotrader, who will spend a couple hundred million in marketing a year.”
Then the financial crisis hit and after President Obama was elected the “Cash for Clunkers” federal program was instituted to help remove older vehicles from the market and spur the purchase of new cars. Both hurt Christman’s business tremendously.
“At the time we were so close to the [price] threshold of where a franchise car dealership would no longer have cars under [$10,000] on their lot. Then when they did the Cash for Clunkers – that completely dried up the market that was left,” he said. “So then whatever franchise customers we did have who were paying us were saying hey, ‘listen this site is great, great concept but we no longer have the inventory, or – if we do have the inventory – we don’t need to advertise it because it’s in such demand.’ That kind of collapsed the whole brand, so I rewrote the application, rebranded it as cardaddy. It was supply and demand. The supply was disappearing and that’s what forced us to rebrand the site because we no longer had a product that we could sell to a franchise car dealer, which, at the time – that was our bread and butter. We had to retool and at the time we didn’t have the money like we did initially with carsunder10k. We didn’t have the investment funds. We didn’t have nothing.”
Christman said when he created cardaddy.com he knew he was going to have to do things differently than he did during his first venture. He was also going to have to get a full-time job working as software engineer for a New York state.
“I let it go for awhile. When the recession hit, it about killed me financially. So I let it go, went and got a normal job … and in 2013 I started to notice that the traffic had picked up at cardaddy.com, so I decided to rewrite it again and I ended up scoring a contract with a company called Detroit Trader,” he said. “We partnered with them and that’s how we pull in hundred of thousands of cars.”
Unlike with carsunder10k.com, this time around Christman had no crew of developers and no investment capital, but he benefited from advancements in technology and in his own ability to program and design software.
“In the early days, we owned all of our own hardware. We paid data centers. We had to pay for the bandwidth and the electricity usage and all of that. We were also responsible for all of the updates and anything that happens with the servers. When I lost my crew of developers, we no longer had anyone in place to manage those servers. We ended up getting hacked. We don’t know by who, in the beginning of 2013 and it ended up taking the server down. And that’s when, I didn’t have the experience to maintain it. That’s when I made the call to use the Amazon.com cloud hosting service,” he said. “Where as it used to be incredibly expensive to do it on our own, I no longer needed to own any hardware, amazon would automatically replace the hacked instance with a new server. It brought the hosting bill down hundred and hundred of dollars a month to essentially just dollars. It’s incredibly cheap. You just pay for what you need, for as long as you need it.”
Cardaddy.com now gets revenues from sales leads it generates for car listings from Detroit Trader, $7 per email on a car listing and $8 per phone call from the listing. Cardaddy also recently began charging $5 per listing for direct car sales, in order to discourage fraudulent listings.
“[I’ve] decided to expand away from just cars and get into other vehicles like boats and RVs and all that stuff. Although that hasn’t really been anything strong like cars, but we’ve been kind of moving in that direction and we are working towards automotive social networking,” he said. “That’s my next move, where I offer almost like profiles for dealerships across the country and we become like mico-sites to them. We could offer them profiles where they would have interactivity similar to Facebook and what not. So that’s the direction we’re moving toward to differentiate us from like a full-on autotrader type classifieds site.”
Christman said one of his strategies had been to try to take what he’s learned about attracting web site attention to potentially attract a buyer for his company.
“My plan was to hopefully to disrupt the marketplace to be on autotrader’s radar and drive enough traffic to the point where it starts to impact their bottom line and then have them come along and buy [me] just to stop me. That was my thinking, but clearly that hasn’t happened. So now it’s just about putting the revenue in place.”
Christman said his more than 10-year journey in e-commerce has taught him a number of important lessons.
“If I were to start over again and do this again: No 1. I would make sure that the idea that I had is a very niche idea. I would not do the better, faster, cheaper idea. It’s very, very difficult to gain traction, very difficult to gain investment, when the idea is not a very niche idea; No. 2, is definitely the brand. I’ve learned a lot about the branding side and how you can cut costs with something as simple as the name of the company. I learned that ideally you want a two-syllable name if you’re going to be out in the web space. If you ever think about it, google, yahoo, bestbuy, walmart, all of those names are two-syllables. The interesting thing about it is that it’s easier for people to remember it, thus cutting the cost of marketing and lowering the cost of entry and makes you more competitive. It all goes back to getting it out there as quickly as possible and as cheap as possible.”