Magazine group Dennis Publishing still gets the majority of its online revenue from advertising, but it’s betting on e-commerce for its future.
The publisher — home to The Week, a portfolio of tech brands and auto magazines including Auto Express and CarBuyer — is moving beyond the typical affiliate link e-commerce offering many publishers tout. It’s selling cars. A lot of them.
That’s because last year it bought e-commerce business Buyacar.co.uk and moved its five staff into the Dennis proposition. Since then it has hired 17 more people to help run the business, which sells both new and used cars, and has plans to get the staff count to 100 people working on the e-commerce marketplace if it meets its growth targets, according to Dennis managing director of digital Pete Wootton. Around 30 people in total within Dennis currently contribute to the proposition.
“We’re a publishing business, so this was a big change for us and an important way to diversify revenue streams,” said Wootton.
Integrating an online marketplace for big-ticket items into a publishing business was not plain sailing, he added. After all, not just anyone can flog cars at scale online, and it’s a heavily regulated market. Plus, Dennis is a quality brand and doesn’t want to muddy its reputation by inadvertently selling a dodgy car from any old dealer. The publisher’s teams personally vet the dealers it has affiliate ties with and has dropped two for being below par.
These are uncharted waters for Dennis, and since the acquisition, it’s had to jump through numerous regulatory hoops to get the license needed to guide and advise customers from financing to delivery.
Dennis has had to make some big changes in how it operates, including getting accreditation for the license to even sell cars from the Financial Conduct Authority. “Getting accreditation from the FCA was something we’ve never done before, and was a big change. We’re now licensed to give advice on financial products. Because there are all sorts of legal safeguards between us and the consumer, we need to ensure our staff are trained to give the right financial advice,” he said.
How the revenue model works.
Prices range from around £6,000 ($8,300) for a used car up to over £40,000 ($55,500) for a new car on the site. Most of the sale price goes to the dealer, who pays an affiliate cut to be featured on the site. The rest of the money is made through incremental payments. That comes from offering warranty packages, and the other bells and whistles that go with a usual car purchase, which a dealer would normally handle. If an individual wants to trade in their existing car to reduce the price of the new one, Dennis can also make a margin on the resale of the trade-in.
It can also offer financing options via a partnership with Barclays and other institutions. If a buyer wants to take a loan out, for example, Barclays will do that for them, and Dennis will take a cut for having facilitated the service.
Buyacar founder and managing director Austin Collins said he wants the online buying experience to be “Amazon-like” in that buyers don’t even need to know the location of the car, because it’s not necessary — Dennis will sort the delivery from wherever it is.
It also doesn’t take on any of the risk associated with owning the stock itself. “We have a just-in-time model, which means no showroom, no stock, we never touch the cars so don’t have that level of exposure or depreciation. We retain the dealer’s profit margin in the sale. We earn our revenues in other sales,” said Collins.
Ambitious growth plan
Although it won’t divulge Buyacar revenue figures due to competitive reasons, Wootton said it sold 1,500 cars last year (two-thirds of which were used), and the plan is to sell 3,000 used cars this year.
Dennis is investing seven figures in expanding Buyacar this year, and that will include an aggressive marketing plan. For now, it’s focusing on an overhaul of the 12-year-old website, complete with new logo which will launch in the next few weeks.
The new site is mobile responsive and has new features which let visitors build their own car from a series of options. For example, they can choose what kind of gear box it has to the fuel it uses, to how many doors it has and the type and color of paint. As people chop and change their preferences, the price quotes will adapt accordingly underneath.
In terms of overall traffic, Buyacar is small, with 300,000 unique monthly visitors, according to the publisher. Dennis’ car titles alone have significantly more: Auto Express has 2 million monthly unique visitors, and CarBuyer 1 million, according to comScore.
“In media we’re used to dealing in scaled audiences, but make far less money per visitor. It’s not about the size of the traffic but how close they are to the final purchase decision of buying a car. If you have 300,000 people coming to the site looking to buy a car that suddenly looks really big. Our goal in next two years is to be selling 1,000 cars a month,” said Wootton.
That said, given Dennis is a magazine business, this also includes ambitious plans for content. It will look at ways to drive traffic from its auto magazines to the proposition. It has also just hired an editor who will write for and maintain the content side of the new site, which will feature pieces related to whatever a car buyer would want to know when researching their car.
‘Display advertising isn’t dead’
Last year, Dennis generated £17 million ($24 million) in online revenue, 70 percent of which came from online advertising, and £6 million ($8.4 million) of it was profit. “There’s no doubt the landscape is challenging for publishing. You’ve got the perfect storm of Google AMP, Facebook Instant Articles, ad blocking, mobile revenue. But we believe display advertising is sustainable. It’s far from ‘dead’ as some people describe it.”
That’s not to say that the continued rise of ad blocking, clients demanding higher viewability rates, the migration of mobile audiences aren’t concerns for Dennis, said Wootton; it’s just online display is doing pretty well for it still.
But putting all your eggs in one basket is never a safe bet, and Dennis wants a better balance of revenue streams. Wootton believes the e-commerce business will get it closer to a 50-50 split.