So we think our data is more end-to-end than others in the market. We have the chops and are investing the resources to turn that data into insights. The way we’re bringing that to market today, we have done some a la carte pricing in the past. One example is Lead AI, where that’s another great example. Actually, we’re giving dealers more information on the shoppers that are coming to their dealerships. They have a better ability to close those sales. And — but really, right now, we found that in order to gain adoption of them, it’s better for us to bundle them in to packages and tiers of listings products. And when we do that, we get a couple of benefits. One, they’re upselling into higher tiers because some of these we only offer to higher tiers.
And two, they are stickier customers and we’re seeing better retention because they’re more reliant on our data. And the Next Best Deal Rating example is a great one. In a very short period of time, we have many thousands of dealers using it. 30% of them are getting that information daily. Like, the general managers are using it daily. And that’s just a whole different ballgame from where we were in the past when they may or may not open our dashboard. So yes, data is a theme that is growing volume. And yes, it’s the thread that’s holding together the end to end.
Tom White: That’s great. That’s super interesting. Thank you. Maybe just a quick follow-up. QARSD growth obviously continues to be super strong. And it looks like the guidance, by my math, kind of looks like another like double digit kind of growth quarter for QARSD. How should we think about the sustainability of this level of QARSD growth kind of over the next several quarters? Thanks.
Jason Trevisan: I’ll keep going. I’m on a roll. It is quite sustainable. I mean, we’ve talked about many levers that drive it. Most of those levers exist for a long time. And the example I just gave is a perfect reflection of that. As we add more value to dealers, even if we do it through bundling of a listings product, it’s actually adding a ton of value to their dealership. And so I think — we think their mindset is shifting from — I’m not just paying for leads, I’m paying for the ability to elevate the sophistication of my dealership. And it just so happens it’s coming from CarGurus, who is also providing me leads. So package upsells, I think has continued upside if we continue to execute on introducing these value-added features and insights, bringing dealers to market rate as we bring on new dealers, that’s — we had a lot of dealers that had been on for a long time and are still well below market.
We think our competitors are raising unit prices as well. And so the unit pricing ceiling continues to rise. And we still think we of course have very strong ROI because we think, on balance, we’re still less expensive. And then other products, Top Dealer Offers is a good example of that. We have a lot of new ideas. And you heard me introduce Elsh very briefly in the talking, in the script rather. And he’s bringing just a really terrific lens through the dealer customer-centric lens. And so between his — what he’s bringing in to be more unified activity with the CarOffer, we think there’s new opportunities for new products that didn’t exist before.
Tom White: Got it. Thanks so much, Jason.
Operator: Our next question comes from Doug Arthur of Huber Research. Please go ahead.
Doug Arthur: Yeah, thanks. Elisa, on the operating expenses, it seemed GAAP or non-GAAP sales and marketing was elevated, product tech was — product development was down, G&A was elevated. Can you — is there anything to read into a trend there or is that more just on the sales and marketing side opportunistic?
Elisa Palazzo: Yeah. Thanks for the question. It’s primarily the marketing that was elevated in the first quarter as we said, because we frontloaded our branding spend related to our advertising campaign. But as we said, we should decline into the fourth quarter and throughout the year. And our OpEx in the second half of the year as percentage of revenue should also continue to decline.
Doug Arthur: Okay. All right. Yeah, no, I know you mentioned that. Okay, great. Thank you. That’s fine.
Operator: The next question comes from Ron Josey of Citigroup. Please go ahead.
Jamesmichael Sherman-Lewis: Hi, this is Jamesmichael on for Ron. Can you help us unpack the 30% inventory lift you saw in the quarter? What trends are you seeing in the new and used autos macro and what controllables are you executing against here to expand inventory? And then any more color on the potential you see from the new inventory acquisition recommendations tool would be helpful as well. And if you think this is a drag on QARSD?
Jason Trevisan: Sure. I can, but I can ask to have you repeat the second part of that because that was fast. I mean on the inventory expansion, that’s largely — there’s two functions to that, paying dealers and how we treat our premium dealers and bring them on. And there was not a lot of change in terms of our treatment of premium dealers. We grew paying dealers modestly, so that will help it a little bit. But at the stage that we’re at now, it’s largely just market macro increases and decreases. And what you’ve seen recently is an increase in new cars for the most part. I think used cars have continued to tick up a little bit. They’re still not a pre-pandemic new is still nowhere near pre-pandemic, but the biggest changes most recently were new car inventory.
Inventory acquisition tool is you asked, I think, how that affects retention. First of all, it’s our most recent ones within pilot. And it’s still small numbers of dealers. We think all of these tools are going to have a positive impact on retention. I mean one thing to keep in mind is that different segments of dealers. And if you think about it really simplistically, there’s franchise, large and small, independent, large and small. And then there’s varying levels of sophistication and capability within each of those segments. And — so to some dealers, an inventory acquisition recommendation tool is going to be something that perhaps like Next Best Deal Rating, they use every day. Others may have other tools or may not be as reliant on it.
But we think each of these will for the segments that they apply the most will help with retention. To be honest, that’s hard to isolate that as a test to measure how much of an improvement it will have, any one tool will have on retention. But our philosophy and I think what you will see from us is we’re going to continue to introduce a lot of these insights, we’re kind of just getting started, especially as we bring CarOffer together with us that we think in aggregate will have a very positive impact. I did not catch the last part of your question.
Jamesmichael Sherman-Lewis: Yeah. I think you addressed the question on inventory recommendation tools. That’s helpful. My second question is just around the app obviously, some success in kind of downloads engagement, the 25% lead contribution. Can you talk about the investments you’re making in either marketing with the core app infrastructure to drive some of those gains?
Jason Trevisan: A lot of that is in product and tech. It’s not — there’s a little bit more marketing that is geared toward app, but a lot of it is that we’re improving it from a product perspective. In hindsight, we were probably a little bit behind the curve from an industry perspective in terms of investing in our app because we were being so successful in mobile web. And I think now as we start to invest more resources in the product, we’re seeing really fantastic results. In fact, we started to see improvement in results before we started putting resources on it as we put more resources on it. And when I say on it, I mean things like engagement and features that are unique to an app usage environment that’s distinct from a web usage environment, mobile web environment, we’re just seeing tremendous uptake we’re seeing in engagement and growth in the app.
Things like registration and things like frequency of use, engagement with dealers, time spent, our ability to message and communicate with them. So we’re really excited about the app, and we’re proud of how it’s getting recognized relative to others in our sector.
Sam Zales: Hey, James, I’m just going to add something. It’s Sam Zales here. Thanks for the question on both because Jason hit it all, but just a couple of pieces of color from the market. One is when you add things like Top Dealer Offer to your app and you say, we sell my car, we’re the only player in the market that offers either the white glove, pick up the vehicle at your home or drop it off at the dealership and make a little bit more money. It is a truly unique offering in the market. It’s one of the reasons 70% of the app users are registering and saying I want to think about this at some point in my future. I’m going to be in the long-term transaction model of auto ownership. It creates that incredible number one position in the app space for automotive marketplaces.
Number two is on the inventory acquisition report, as another example, as Jason was talking about analytics. A dealer typically says to us, quantity and quality of leads is the price of entry into this business. And you can see from our QARSD growth, our marketplace growth, the lead growth we talked about year-over-year at double-digit, the lead we have on our competitors for visitors and visits the lead we have in our competitors from an inventory perspective, that all fuels that lead volume and lead growth and lead quality that we have that we believe drives a higher ROI in the business and leads to that growth in our marketplace business. The second part of that, though, is can you teach me how to run my dealership more profitably? So all of those analytics reports that Jason is talking about, including this new inventory acquisition report, nobody in the market can take consumer demand with the largest audience in the marketplace and match that against inventory turns in a local market and help that dealer say, here’s your best option to meet the market demand in your market acquire that inventory and turn your inventory more quickly, which is both a CarOffer and CarGurus value proposition in the synergy of our businesses that we think is truly differentiated.
Jamesmichael Sherman-Lewis: Got it. Thank you both for the color. That’s very helpful.
Operator: Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I will now hand over to Jason Trevisan for closing remarks.
Jason Trevisan: Thank you very much. I just wanted to give a special thanks as we always do to all of our employees. We’re extremely proud of all the innovation and growth that we’re experiencing as a company. I’d also like to thank everyone today who joined for your interest and support of us. We look forward to seeing many of you at upcoming conferences. Have a good evening.
Operator: Thank you. Ladies and gentlemen, that concludes today’s event. Thank you for attending, and you may now disconnect your lines.
