1:27 am, March 25, 2011
AUTOQUAKE CEO Dermot Halpin has spoken out about how the online retailer went into administration last week.
Speaking at a Google conference yesterday, Halpin said that the cause of Autoquake’s demise was not due ‘to the Internet or the business model, Autoquake went under simply due to a financing issue.’
Halpin praised his team and the business model Autoquake initially set out on, but expensive paid for searches, low acquisition costs and a lost deal resulted in the company calling in the administrators.
‘We came into the market and punched totally above our weight online,’ explained Halpin. ‘That’s because of the way we approached customer acquisition – it was entirely online, we bought demand inline with inventory, we had acquisition costs of around £90 per vehicle which compared to around £300 per vehicle from our competitors.
‘This caught us out as we grew very quickly from this – growing very quickly in September 2010 – and the economics of paid search are that if you want incremental traffic, you don’t pay incrementally, you pay on all of your traffic. So very quickly it became a very expensive exercise to get more reach in a hurry.
‘The advice I would give,’ added Halpin, ‘is that you should make sure you diversify how you access different pools of demand. So you still need TV, off-line media, and you definitely need online integrated into your marketing campaign.’
What ultimately caught Autoquake out though was a deal that did not go through. ‘We were in two deals – one buying something and the other was that we were merging with something. We were hedging our bets and that can fall apart very quickly. One of the deals fell apart and the financier said that the risk of giving us the bridging loan was too high and so we didn’t get it. Game over.’
Halpin joked that Autoquake obviously did something right before it went bust. ‘Just as we were sending out the administration notice, we were notified by Hitwise that we had won an award – we were in the top five for online in 2010.’
