In full throttle

The founder and chief executive of Carsales.com.au, Greg Roebuck, tells AMANDA GOME what it has been like driving a company from a standing start to 66% of market share.

Greg Roebuck is the founder and chief executive of Carsales.com.au, which he started nine years ago.

He is one of a rare breed of entrepreneurs who has survived from a start-up trailing behind other players to now taking 66% of market share, which is way ahead of nearest rival Drive at 12%.

And he has some tough players on his board including PBL’s James Packer and John Alexander. Greg tells us about how the online marketplace is changing, strategic mistakes and answers the big question: when will they float?

 To listen to the lunch with Greg Roebuck, click here. To download this mp3 file and listen to it later, right-click this link and “Save target as…” to your computer (Macs; option-click).

Amanda Gome: Carsales.com.au dominates the market space doesn’t it?

Greg Roebuck: We weren’t always market leader, so we’ve suffered through the times of trying to catch up to other players – and fortunately for the past five years we have been well in front.

When we started there was a little company called RP Data that I think had a property website as well, and they had 3500 cars, and that was our aim: “let’s get to 3500 cars and we’ll be right”.

How did you overtake them?

You need to have the most of what it is that you’re selling. So most houses wins, most jobs wins and certainly in our marketplace, most cars wins. So we focused on growing inventory. But really the number one thing for us is it’s got to work, and I think everything else – price, all the other issues – are a long way second compared to delivering what it is that customers are looking for, which in our case is selling cars.

What did you do to your site that made it better to sell cars?

Going back 20 years the Trading Post introduced this concept of pay only if you sell. I thought that was a pretty compelling consumer message, and online what we did was we introduced $10 total cost, so we basically backed ourselves and said “we’ll only ask for money once” because we believe what we do works.

So it was simply $10 total cost, no more to pay, and it was a compelling consumer message. And I think that what happened was we were able to grow our inventory and more importantly grow the fact that consumers were getting a result and happy to tell their friends.

You are up to $30 now, and you’ve still got the same offer?

We kept that $10 for probably nearly five years and to change it was a real gamble for the business. We were known as the “$10 until sold” company, but I truly believe that the first question a consumer wants answered is ‘does it work?’ and if the answer to that is yes, ‘how much does it cost?’ (becomes less important).

So we’ve been very comfortable making small price changes. We’ve found that price changes have resulted in a slight dip in volume and then it comes back anecdotally.

And it can affect your bottom line.

And it does. That’s the other good part of that equation.

And you had a very good bottom line: $11.8 million (net profit rose 100% during 2006-07 to $11.8 million).

We grew revenue 100%, which was a great result. We worked hard for the year and we made some acquisitions. We merged with Carpoint and Boatpoint and gave ourselves some scale, so year-on-year there’s an element of that bigger business kicking in. But organically I think yeah, we’ve just started to stretch our lead as number one, and that has translated through to the bottom line.

Do you build an online community or do people just visit, get a car and go?

There’s a lot of people who just like to keep an eye on the market. I think there’s a core group of people who come regularly, but most of our consumers are people that are there to buy or sell, and they’re there because they’ve heard that you get a result from other friends or family that have used Carsales in the past, and that’s the best sort of marketing that we could possibly get – word of mouth.

How has content worked for you?

I have a philosophy that says we don’t want to just abuse the people that come to the site by throwing up lots and lots of ads and trying to get our growth through that mechanism, so we’re very conscious about what sort of ads we take on the website because we want that consumer experience to be very focused, and we see ourselves as predominantly buy and sell.

What are some of the mistakes you’ve made just in the last few years?

I would say that when we came together with the Carpoint business we spent all our time and effort doing the deal and not focused on what was going to happen after the deal. It probably took us six or 12 months to integrate the two businesses together. In hindsight there would be more of a focus on after the deal, during those lead up months to actually completing a deal, rather than just totally focused on the mechanics of the deal.

What was the problem with that?

It was what were we going to do with these two previously competing sites. How were we going to integrate them. Where’s the line drawn between what this site does and what that site does, and it probably wasn’t clear early on. Now I feel really good about where we are today, which is that Carpoint is our ninemsn audience and Carsales is our other audience, and that works very well for us in terms of explaining to agencies why they need to be on both sides.

For example Ford Motor Company or Toyota or Holden should advertise on both, because it is about the audience not just the brand. And it took us a little while to get to that conclusion, and that would have been the sort of thing we could have spent more time on early on.

You’ve been saying you’re going to float for a while, and then you keep pushing it back. But you said it could be later this year.

The reality is that we’ve made commitments to our shareholders all the way back to 2000 when we became an unlisted public company. We’d been around for a while before then, but we did say that we would always list on the Australian Stock Exchange.

It’s more an ability to make it easier for our shareholders to know what is our share price if they want to buy or they want to sell. We’re not necessarily looking to raise a lot of money because we’re profitable, and the nice thing about being a profitable growing business is that you’re not desperate to dilute. Equally, if the market itself is a little bit shaky, and certainly over the last month it’s been a little bit shaky, it’s not necessarily the best time to go to market, so we’re getting ready but when we push the button.

I don’t think it’s going to get any better this year.

Not that it’s a big deal really for us, but again we want to do the right thing by our shareholders and ensure that when we do list they’re getting the best result. So as I say, getting ready, but not 100% sure when we’ll push the button.

How is the marketplace changing? Is it a slow move online or do you see rushes and then it plateaus?

For us it’s just continued growth. I wouldn’t say it’s a rush then a pause then a rush then a pause for us. It’s just steady, but I think the market leader gets an automatic benefit from other people’s advertising, so as our competitors realise they need to work harder and they start promoting their own offerings, we get a spin off from that as the name in most people’s minds.

What else is changing in online selling?

I think consumers are very focused on what sort of information they’re provided with, and we spend a lot of time delivering information about how their ads are performing – how many people have looked at their ad, how many people have enquired on their ad – and providing that sort of feedback is something that online can offer that offline can’t, so I think those sort of changes enrich the media.

How often do you provide that information?

We provide it generally weekly to our private sellers, but for our car dealer customers we provide it real time so they can see which of their inventory is getting the most interest, which of their inventory is getting the most inquiry, and make sure they’re stocking the right sort of cars for the people that we’re attracting.

And what else is changing?

It’s a good time at the moment. Online, like it was back in 1999 and 2000, is a high profile industry and people are wanting to work in online again, which is good for us. Our ability to attract good staff is continuing to enhance, so I’m enjoying the business. I think I’m seeing growth in our other verticals, in our marine for example. I think again, as we’ve seen in cars, the marine vertical is shifting online as is motor bikes. We bought another business and it operates like a fixed price car purchasing service, discount new cars, and I think again people are just looking for something different.

There’s lots of acquisition activity happening in the marketplace and we recently acquired a business called The Red Book and they provide vehicle valuation services among other things, but they have operations in other countries. I think that’s again an opportunity for us to broaden our horizons overseas.

How do you compare to overseas markets?

Asia is still very much behind where we are, particularly in our marketplace of online classifieds, so lots of opportunity in Asia. I think some parts of the world like New Zealand and areas of Europe have got some pretty good players, but I think as we’ve seen with realestate.com.au and with Seek, Australians can show the world that we have a lot to offer.

It’s been nine years and you’ve been one of these rare founders that have been able to start a business and stay as chief executive – and it’s not like you’ve got slouches for fellow directors.

It was certainly very daunting the first meeting with James Packer and John Alexander joining the board, but they’ve added a lot of value and we’ve recently added some other very experienced people to the board.

Do you think you’ve got a bit of an edge because you are online? You have such experience online and there are very few people that would have as much experience online as you.

That’s a big start, although everyone’s getting to benefit from our hard yards.

Have you been able to adapt and change so you are still running this business today? How have you been able to evolve your leadership skills?

I was a software developer way back at RMIT. I never actually completed my degree, so I’m in good company with people like Michael Dell and Bill Gates.

Any leadership courses?

I’m a big fan of learning on the job, and with people like those on the board, there’s some good people to learn from.

You would have developed your leadership skills with this business then.

Absolutely and I think it’s a matter of bring a great attitude to work and use that to bring the other people into the same vision that you have.

This is an edited transcript