But we’re still winning new business. And it’s hard to believe. And when you look at our TAM out there, there is still a significant number of franchise dealers and independent dealers who are on the sidelines for one reason or another. Jason mentioned, they may be spending more money on local advertising, radio, TV, other forms of media that are not even trackable and to get them converted over. There’s still a lot of them saying, “I have not been on the third-party marketplace. Let me go to the one with the biggest audience driving the biggest ROI.” That’s our opportunity to continue growing and fulfilling that new dealer ads segment you’re asking about.
Christopher Pierce: Okay. Cool. And then on the turn time data that you referenced, is this data that you already have because you have the dealers’ inventory or a dealer has to send you new information? And I’m sort of asking because like you led into what that can help with CarOffer’s offer adoption, helping dealers know what cars to restock their lot with. Is this something that exists right now where the plumbing has to be put in place or dealers have to send you more data to kind of really hone this product?
Samuel Zales: It’s a great question, Chris. We have the data. So the inventory fees we get from our dealers are ones in which we then look at how quick those inventories are turning. We see when vehicles are on our site and go off of our sites. We’re able to look at that information in the turn time. And what dealers have asked us is two things, Jason pointed out, we don’t have to just provide leads and connections to provide value to our dealers. They want the consultative feedback to help them run their retail operations more effectively. So what they’re saying is combined consumer demand data, which is — and they all say it’s the same way. You have the largest audience, you can tell us where consumer demand is by geographic area down to a local market tell us what vehicles consumers are searching for and looking for what turns I have on those vehicles today, how are my competitors turning their inventory and then tell me what vehicles I should be sourcing.
So the great opportunity here is to combine the retail and wholesale capabilities that no other marketplace can provide with our combination of CarGurus and CarOffer. You got a CarOffer’s offer and you say, you have a matrix setup to buy these vehicles that you realize consumer demand is up in these other types of vehicles, you should be building your matrix around that vehicle acquisition strategy and helping them become more successful in a consultative way. And on the dealer side of the — on the retail side of the business is, which vehicle should I be planning for. And as Jason mentioned in his remarks, next steps deal rating, what price point allows me to get to the highest opportunity of winning consumer eyeballs on the CarGurus platform but not giving away too much gross profit.
So the entire process is looking at the synergies between CarOffer’s offer and care to maximize dealer profits, and that’s what they’re asking for. The feedback at our kickoff meeting our sales kickoff meeting this year from dealers was the price of entry is I need your leads and connections. I have to have those because they’re the best in the market. But can you also provide me with this data that helps me run my business more efficiently as a marketer and a sourcer of vehicles, and we think we have the only platform in the market to sell.
Operator: Our next question comes from the line of Ron Josey with Citi. Please proceed with your question.
Ronald Josey: Great. Thanks for taking the question, guys. I had two, maybe Jason and Sam, with the multiproduct attach increasing 36% year-over-year, Talk to us more about the specific products just driving that growth. And any insights on overall attach rate of the dealers would be helpful. And then a quick clarification on just sell my color top dealer offer. I know we’re live in 18 metro areas and covering 40% of the U.S. population. Talk to us about what needs to happen to go live in more metro areas? What are we — what’s the unlock here to maybe go nationwide?
Jason Trevisan: Ron, it’s Jason. So yes, the multiproduct attach rate, I mean examples of other products would be digital deals is a key one highlight is another product that has been particularly attractive to dealers lately, Geographic expansion is another as well. And it’s — a lot of it is actually dovetails with what Sam was just saying, which is that as we have more of these — as we have multiple products, but then give more insights to help them know how to use some of these products for more specific purposes, whether it’s to help or smarter — source cars smarter or market, certain types of cars differently. It all comes down to their volume and their margin. And so the portfolio of products were building, coupled with the insights we’re giving them are helping them to optimize that.
We’re also, I think, being much smarter about how we think about the package levels. And so that’s not exactly multiproduct attached, but that’s cousin of it because we are providing some of these insights for higher-level packages for dealers who are just much deeper into our platform and getting much more out of.
Samuel Zales: And Ron, it’s Sam, I think you’ll have heard this as a repetitive theme over the years we’ve talked, the tough dealer offer expansion to the rest of the country, which we’re excited about, but we’ll always be deliberate about is based first on consumer experience. We’ve said that about everything we’ve built here. We knew what our NPS scores were many of our products, IMCO being one of them. We’re measuring that. We’re watching that to ensure optimal consumer experience in this process. Remember, a consumer is choosing to bypass a white glove experience and saying, “I’m going to get more money at that local dealership, but I want the experience to be high quality, high integrity and consistent.” Hence, the use of this new intake tool that we’re out there in the market with right now, which creates a seamless and consistent experience between all the dealers who use it allows the consumer to say, I understand why the price point might be different than what you first offered me if something is found at the local dealership and using the same consistent tool set.
So one is consumer experience in making as high as possible. Number two is the dealer experience. earlier question was what kind of close rates are we getting? Now what we’re seeing is tremendously high close rates from those dealers who are having a consistent intake process for consumer acquisition of vehicles. There are a set of dealers who joined the program who don’t have as consistent a regional approach. So one dealer retail location might have a different intake process than another one. your close rates will be different by each. We want to make sure those are as consistent as possible or consulting and helping those dealers to be as successful as possible and the consistent results will say, okay, that ROI is high on your subscription program from Top Dealer Offer.
The last part I would say to you is our economics. So we’ve gone out with pricing in the market that we think is reasonable. But if the close rates continue as successfully as they are, we might change the pricing. So the subscription might be too low right now before we head to the rest of the market. I’m not saying it is right now. But as we do that going forward, it’s going to be really important for us to think about the economics of balanced ROI between the dealers access and what we get on our side at CarGuru. So we’re thinking about that pricing point and making sure when we do roll out nationally, it’s maximized for the win-win for both sides of that effort.
Operator: Thank you. Our next question comes from the line of John Colantuoni with Jefferies. Please proceed with your question.
John Colantuoni: Thanks so much for the question. I wanted to ask about Digital Deal. When thinking about the addressable market for Digital Deal, are there any technical barriers or product investments that you’re still working to address before expanding the offering across more dealerships? And when thinking about the opportunity set for Digital Deal, are there certain types of dealerships that are less likely to adopt the product? Or could you see every dealership partner adopting it over time?
Jason Trevisan: Thanks, John. So we’re always working to continue to make Digital Deal a better consumer experience, better dealer experience but no, there’s not really — there’s no structural technical barrier to faster adoption there. There is some, I would say, modest onboarding required at the dealer and for really sort of optimal results at the dealer, they do need to embrace things like heartful financing and they really need to, I would say, change the sort of flow of leads and how their sales team handles the leads. So for instance, it’s a really — it’s not a good consumer experience if the consumer does this work on our site and then walk into the dealership and the salesperson is not familiar with Digital Deal, and it’s not leveraging all the information that, that consumer has given.
And so neither — none of what I’ve mentioned is a big hill decline at all. It’s not even a big lift for the dealer, but it does require a little bit of change. Aside from that, there’s not really consistent reasons why a dealer wouldn’t adopt. It does cost money. So some may be price sensitive to it. That’s where consumers say they want the process to be. They say they want to do more and more. And in a lot of cases, most of the transaction online. And so consumer sentiment is there, and we think that’s where the market is headed. On the consumer side, we do have more work to do to make it a more obvious and seamless flow on our site. And so we are going to put more resources there so that it’s easier to find, it’s easier to do, and it’s just more part of the central flow.
Operator: Our next question comes from the line of Doug Arthur with Huber Research Partners.
Douglas Arthur: Please proceed with your question. Yeah, thanks. A lot of questions, I’ll just keep it to one. Just on a GAAP basis, is the true-up with the CarOffer close, is that done now? Or are we going to see some lingering true-ups in the GAAP numbers, say, in Q1?
Elisa Palazzo: We don’t expect to see any true-ups going forward. The transaction is closed and so we recorded approximately $50 million in share-based compensation in the fourth quarter related to the transaction, but that should be it. We don’t expect anything going forward.
Operator: Our next question comes from the line of Kunal Madhukar with UBS. Please proceed with your question.
Jason Chandler: Hi. Thanks a lot. This is Jason on for Kunal from UBS. Thanks for squeezing me in. I have a couple of questions. So first, could you please double-click into the recent trends you’ve seen within the dealer to deal the whole space? And also compact a little bit more the value proposition and differentiation of CarOffer compared to the competitor offerings? For instance, I was curious to hear more about what’s driving your pricing power cost there and of your customer base? And I have a follow-up.
Samuel Zales: Sure, Jason. It’s Sam Zales. The value proposition is very simple, and that is we’ve completely pioneered the industry in that, as you know, the wholesale market relies on an auction model for most of its business transactions today. That’s moving more digitally, and there are some players out there who are offering digital auctions. What CarOffer provides is a digital instant trade platform, which is very different, almost the stock exchange of vehicles. A dealer would like to purchase at the price point, the dealers — vehicles that a dealer would like to sell in their price points, creating a light capital model that brings a digital transaction and capability. It doesn’t require a wholesale buyer or seller to sit at a timed auction and watch the vehicles go by.
So it’s a completely different and new and innovative solution in the marketplace. We’ve said that it works perfectly for larger-scale acquirers of vehicles. It works for the larger players in the commercial space as well. In a down market, it’s a new adoptive tool because it requires in a price point market that’s going down a dealer community to utilize and watch the vehicles and make sure they’re inspected to the levels we’re inspecting them and to reduce the arbitration potential of those programs. We talked about our operational improvements in CarOffer. We’ve done phenomenally on that front. And what we’re seeing though is a business that we — Elisa mentioned upfront, we’re going to keep that business with a new leader intact. The reason we’re so excited about owning the CarOffer business eight months before we were going to, is that we are now running the business from the headquarters of CarGurus and with Zach Hallowell a better in digital wholesale leader in place running that business.
We’re looking at product enhancements, we’re looking at continued operational improvements that we’ve already succeeded at, but are going to push further on. And then a go-to-market focus, which is we’re turning our team from sellers into consultants, providing the inventory management tools, the consultation, the AI-based predictive tools to help dealers engage in this platform more than they have over the last few quarters. And that’s going to take us a couple of quarters to turn around. We’re excited about it because you’ve got a unique tool set with the value proposition no one else has. We just have to operate that business with new leadership to take it forward.
Operator: Thank you. There are no further questions at this time. I’d like to turn the floor back over to Jason Trevisan for closing comments.
Jason Trevisan: Thank you very much, and thanks to everyone who joined us this evening and for the thoughtful questions. I just want to wrap up by sharing how proud we are of our exceptional performance in Q4 and throughout 2023. And probably most importantly, how well we think we’re positioned for 2024. I want to thank all of our employees globally who have contributed so much to helping us become the number one digital destination for consumers and dealers to confidently and conveniently buy and sell any vehicle. So thank you very much, everyone. Have a good evening.
Operator: This concludes today’s teleconference. You may disconnect your lines at this goodbye. Thank you for your participation.
