Can online car sales benefit from the infomercial treatment?
That’s what prominent infomercial producer Guthy-Renker LLC and L.A. entrepreneur Scott Painter are betting on.
The duo teamed up last week when the TV commercial company made an unusual equity investment in Painter’s TrueCar Inc. website, which offers shoppers recent sales data from nearby dealerships.
Guthy-Renker’s transaction is part of a larger group of investments in TrueCar that the website company expects will reach $100 million by the end of the year.
Guthy-Renker has grossed billions of dollars hiring high-price celebrities to promote products such as exercise equipment and self-help DVDs. Its biggest hit has been pimple cream Proactiv, which has been pitched by Jessica Simpson and other celebrities who are paid big sums.
With TrueCar, the Santa Monica-based marketing giant is stepping out of its comfort zone and getting heavily into the Internet business. The equity investment will help fund TrueCar’s expansion, and pay for a print, radio and TV ad campaign that will cost up to $75 million annually.
“There’s a really good chance to become the market leader,” said Guthy-Renker Chief Executive Ben Van De Bunt.
Santa Monica-based TrueCar is the first site of its kind that allows would-be car buyers to browse real sales prices without having to provide personal contact information that can be used as sales leads.
Comparable companies like Kelly Blue Book Co. Inc. make money from selling dealers the personal information of its site visitors, but TrueCar makes its money by charging a dealer $300 for each car sale the site facilitates. TrueCar customers must ultimately provide personal information to either accept a dealer’s lowest posted offer.
The site is the brainchild of Painter, whose 36 other startups have also mostly been in the automotive industry. They include first-generation online car site CarsDirect.com and 1-800-Car-Search, both of which were bought by larger companies. He currently operates a site similar to TrueCar called Zag.com, which is not open to the public.
The five-year-old TrueCar had its first profitable year last year, generating $40 million in revenue. It is preparing to expand services nationwide as well as open similar websites for car loans and car trade-ins. The company also plans to announce two acquisitions within the next couple of months.
“This is an opportunity to bring transparency and data to the table in a way that levels the playing field and helps the buyer,” said Painter. “(TrueCar) actually has a real opportunity to change the way people buy cars forever.”
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