How did Dennis Publishing end up projected to make 40% of its 2018 revenue from e-commerce?
On 13 November 2018, Bibblio, with Media Voices, What’s New In Publishing and Sovrn Holdings put on ‘The Present & Future of Publishing’, an event exploring key industry developments in 2018, and a look forward to what will be making headlines in 2019. With so much covered, it was impossible to sum up everything in one recap, so this is part two. In part one we looked at the Media Moments 2018 report by Media Voices, and in this part we’ll be looking at Pete Wootton’s talk about how Dennis Publishing is projected to make 40% of its revenue from e-commerce in 2018.
Pete Wootton is Chief Digital Officer of Dennis Publishing, and his talk was about BuyaCar, the e-commerce platform which is pointing the way forward for publishers looking to diversify their revenue streams. He started by talking a little about Dennis’ business as a whole. Dennis has turnover of around 170 million pounds, and operates in the U.K. and the U.S.. The business is based on four publishing verticals, or pillars: automotive, technology, lifestyle and current affairs. Their biggest brand is The Week a well-known current affairs title. What fewer people now is that they’re also very big in the automotive space.
Dennis’ Digital Strategy
Pete prefaced the main part of the presentation by setting out the three key parts of Dennis’ digital strategy. Firstly, the primary focus is to build audiences in their key verticals. The vertical market piece is really important, because general online audiences have been quite commoditized. If you can build an audience in a specific sector, particularly one where users are likely to be interested in making a purchase, then it's easier to monetize them (and in a variety of ways). They're much more valuable than a generic audience in a vertical like current affairs, for example.
Secondly, Dennis have set out to launch a lot of new digital products. They publish a portfolio of 15 different media sites and one e-commerce business, and of those over half of them have been launched in the last few years. It's not just about taking a traditional print brand like The Week and turning it into a website. It's about imagining completely new products online to make sure they're optimizing the opportunities to monetize users across their digital portfolio.
The third and final part of their digital strategy is about diversifying revenue streams. Pete referred back to the Media Moments 2018 presentation, where Peter Houston had already referred to the need for a ‘mix of six’ revenue streams. Pete repeated that you can't just rely on display advertising. Dennis do very well out of display, but it's crucial to find other ways to monetize your audience as well.
BuyaCar is the main reason that Dennis has been so successful in diversifying their revenues. As e-commerce sites are getting into content, Dennis, as a content business, is going the other way, getting into e-commerce. It's an unusual story for a media business, but potentially a sign of things to come. For people who haven’t heard of it, BuyaCar is the market leading platform for purchasing and financing a used car online. It’s a completely end-to-end service: you click ‘buy’, and the car is delivered to your door. It’s unique, and there’s quite a lot going on behind the scenes. Pete went on to describe the process.
BuyaCar gets its cars from franchise dealers (it's nearly always franchise dealers, because they have the best quality stock), so first of all they have to agree deals with them. Each dealer has a stock feed of perhaps 500-10,000 cars, which BuyaCar then list on their site and promote to their in-network audience of car buyers. The aim is to get an audience member, either directly through BuyaCar or through one of Dennis’ automotive properties, to convert and put a deposit down for a car. One a deposit has been made, BuyaCar reserve the car with the dealer. Because they don't reserve a car until they've got an order from a customer, they avoid the liabilities associated with holding stock. When someone buys a car, they need to insure it, finance it, and perhaps choose a warranty, so BuyaCar also try and sell those options to the customer. It’s only once the purchase is confirmed that BuyaCar actually buy the vehicle. On the same day, usually, they get a payout from the finance company, the consumer pays their deposit, and then BuyaCar pay the dealer. It happens essentially simultaneously. Then BuyaCar send a delivery driver to the dealer to pick up the car and deliver it to the customer.
Why buy BuyaCar?
The first question that Pete asked himself when Dennis were debating the purchase was whether people would really buy a used car, sight unseen, on the internet. It’s understandable that people might be skeptical, but it works. Dennis were taking a risk when they bought BuyaCar, but it was a calculated one, with a number of factors influencing them to go ahead.
Firstly, Dennis is a leading player in the automotive publishing sector, which means they’re trying to build audiences from people who want to buy a car. They commissioned some independent research, and found that readers of Auto Express and Car Buyer, which are their two biggest motoring brands, were 74 percent more likely to configure a car on a manufacturer site, and 50 percent more likely to book a test drive, than standard traffic. These aren’t just people who are interested in cars: these are people who are ready to convert. Buying BuyaCar meant acquiring a ready-made channel to monetise that inclination to convert that Dennis’ audience already had.
If you're in the market for a car in the UK and you're researching online, which is a lot of people these days, then there’s a good chance you’ll come to one of Dennis’ sites at some point. They’ve done a great job of getting in front of engaged audiences. About one in five pounds which is spent on display-ad spend in the motoring sector is spent with Dennis at the moment, but how do they make sure that that’s sustainable revenue? Pete showed the audience an old screengrab from Car Buyer, one of Dennis’ sites. It had a high level of display advertising, which is one of the factors that leads to ad blocking and turns consumers off. He admitted that it wasn’t a good user experience, and it’s not a viable long-term strategy. BuyaCar is one of the solutions to that, and that was the second factor influencing the purchase: with BuyaCar, Dennis can put e-commerce opportunities directly in front of people they know are interested in the product, in a way that doesn’t compromise the experience at all. In fact, connecting people to truly relevant purchase opportunities makes it better.
To illustrate how it works, Pete showed the audience a screenshot of media brand Autoexpress. It has a few million unique users a month looking at car content. Dennis have an API which pulls in the latest cars from BuyaCar. E.g. at the bottom of a Volvo V40 review page they pull in the latest related cars that they've got available into a widget which then links straight through to BuyaCar. They're using media assets directly to get their audience in front of BuyaCar e-commerce opportunities and get conversions into car sales.
The final factor in the decision to purchase BuyaCar was the hunch that Dennis had that online car-buying was going to take off. Dennis did a lot of consumer research before they bought BuyaCar, and it showed in 2013 that not many people would be confident buying a car online: 17.5% of them. A big change in attitudes was required. Despite this, Dennis were sure that the trend was going upwards. Sure enough, they repeated the same research in September last year – the figure was 35.5%. This is backed up by all the other evidence in the market, and the trend is now very positive. One of the big reasons for that is the changing demographic of car buyers. Today's car buyers are increasingly the millennial generation. They're used to doing everything online, and not only online, but also on a smartphone. That applies to buying cars too. Pete asked why anyone would expect that people are going to suddenly go back to buying cars from dealerships in the future?
Pete said that he felt that the physical experience of going to a used-car dealership can be quite patronizing and intimidating, and he sees that as part of the reason why people are getting more relaxed about buying cars online. He thinks that female users will become an increasingly large part of their audience demographic, and it was a deliberate tactic to make the site gender neutral. Their customers are over-indexed to a younger demographic and female, but that’s not surprising.
Some other interesting data are the average distance somebody will go to buy a vehicle. The reason why Autotrader ask you to put your postcode in straight away when you land on the site is that the next thing you do is specify that you want to search for cars within a certain distance; nearly everybody searches within a 50 mile radius from their postcode. Unsurprisingly, most people won't drive more than 30 miles to go and see a Ford Focus. It’s another advantage for BuyaCar, because their cars are delivered directly to consumers. However, because people expect to be asked their postcode on a car buying site, it actually created friction for BuyaCar that they couldn’t. People were confused when they couldn’t find the option to enter their postcode. So, if you try and enter your postcode on BuyaCar, a little modal appears which says "good news you haven't got to put a postcode in because we're a completely end-to-end online platform... act quickly in order to secure a car". It’s a new and, so far, unique way of doing things.
When Dennis bought BuyaCar it was a very small business. There were five employees, including the two founders, and the site was very basic and certainly not responsive or optimized for mobile. Since then it’s been completely replatformed, and is now very mobile friendly, which is important because over half of traffic comes from mobile. It's also a very scalable platform that allows for multi-variate testing, and it’s put them in a good position for the growth of the business in the future, which is crucial: they’ve just taken on their 65th person. That’s a lot of growth in four years, and at the current trajectory, they’re already looking at hiring potentially another 40 people next year.
The business is now consistently delivering over 400 cars a month. Pete said that sometimes it's easy to forget that Dennis is a media company. They produce magazines and websites, and they’re physically selling 400 cars per month to consumers all across the country. It’s also crucial that they have other ancillary revenue streams form the business: they’re providing over £4,000,000 per month in car financing, and they make over six figures a month just in commission from that finance. Pete said that it was quite an eye-opener when he realized how much money there was in the industry. They also sell warranties, which are another high margin product.
There’s also been really good growth in user interaction. One of BuyaCar’s KPIs is directly linked to collecting data by getting people to fill out forms. Providing a quote for a used car is really just data gathering for them. In order to get a quote a user has to put in their name, address, email address, and hopefully phone number. The user can then go straight into a nurturing process of automated emails and telephone calls to try and get them to convert. It’s data that makes it possible to nurture and convert someone.
With this in mind, one of the key ways that Dennis leverage their media properties is to gather data that allows them to make e-commerce more effective. They’ve done a lot of work to build traffic to their automotive properties through their content strategy, which is almost entirely organic. They spend virtually no money on marketing. The only marketing budget for 2018 has been a few hundred pounds a month on brand protection PPC. The benefit of an effective organic content strategy is that it generates an audience that they know is more likely to convert.
Pete talked about other ways that they’ve improved the business, saying that, in the past, BuyaCar maybe hadn’t always given the best customer service. BuyaCar don't actually see the vehicle prior to delivery; they only see the pictures and the information the consumer does, and an outsourced delivery driver picks it up. Sometimes there are quality control issues, and they’re not in control of that, but what they are in control of is what happens to the consumer when it happens. They’ve made dealing with any complaints or unsatisfactory purchases a top priority.
The result of all of this work and growth is that BuyaCar has been staggeringly successful for Dennis. It's predicted to provide about 40% of the company’s turnover this year, roughly £62 million, which is even more impressive bearing in mind it was £400,000 when they bought the business. Orders are up significantly, and probably just as importantly, 90 percent of all sales include financing. Pete thinks that that turnover could climb to 4-500 million in the next few years.
Where does it go from here?
Looking to the future, they’re focusing on three main areas: customer acquisition, above-the-line advertising and improving conversion. With above-the-line advertising the plan is to experiment with radio and TV. They can certainly envision BuyaCar being a big consumer brand. When it comes to conversions, one example of something that they’re looking to improve is delivery time. The longer the time between somebody placing an order and getting a car delivered, the more likely they are to cancel. Part of the reason is that users don't stop looking for a car after they’ve ordered one, and the deposit is fully refundable. If a user goes down to their local dealer and the dealer has a very similar car to the one that the user has just ordered, and they can have it that day, then people can get buyer's remorse and cancel. So by speeding up delivery they can really improve here.
There are also more major plans in the works which they haven’t begun to put into action yet. One thing that they’re thinking about is whether or not it's a product that they can license into other territories. The reason the licence is valuable is that there’s lots of knowhow in running a business like BuyaCar. It’s very hard to just clone the platform. For example, what’s the best process for onboarding a new dealer? It’s not just building a nice-looking website, there’s also lots of operational complexity.
Pete ended by repeating the point about the importance of diversifying revenue streams. Not only has Dennis done that successfully, but Pete feels that they’re also revolutionizing the way people buy new and used cars in the UK. Not bad for a publishing company.