Expanding its scope to hawking automobiles, online megastore Amazon.com Inc. plans to branch into online car-buying services with Greenlight.com Inc., the two firms announced today.
Seattle-based Amazon.com will feature Greenlight.com's auto-retailing Web site as a tab on its home page at www.amazon.com. The tab, due to launch later this week, will link to www.greenlight.com, where consumers can configure and purchase a wide variety of vehicles online, officials said.
In addition to its core book business, Amazon.com began selling lawn furniture, pharmaceuticals and beauty aids online over the past year. Although the average age of those new businesses is nine months, Amazon.com CEO Jeff Bezos said the combined total revenue of those divisions was more than $500 million.
In January, Amazon.com bought a 5% stake, plus the rights to purchase up to 30% of Greenlight, an online car-shopping service in Livermore, Calif. In February, the two dot-coms struck a five-year deal, which required Greenlight.com to pay Amazon.com $82.5 million in fees for marketing and promotional services.
This week, the two firms restructured that deal to a payment of $15.25 million by Greenlight.com to Amazon.com over two years.
"The primary difference is that this is a two-year instead of a five-year [deal]," Bezos explained. "We gave up some things and got some things that we did not have previously." The new deal reflects tougher market conditions for dot-coms, Bezos said, and gives Amazon.com a lower strike price on warrants in Greenlight.com.
Jim Hall, an analyst at AutoPacific Inc. in Tustin, Calif., voiced doubts about the survival of online car brokers given newly launched initiatives by automakers, such as General Motors Corp., which launched a joint initiative with its dealers to sell vehicles over the Web last week, and the close of CarOrder.com last week.
"[Online car brokers] are competing with manufacturers and a lot of other people out there, and just because you hop into the market doesn't mean that you are fit," he said. "They are going sideways against state franchise laws.
There aren't any state laws regulating book sales, but there are plenty when it comes to cars." Greenlight.com partners with more than 1,500 dealers who fulfill orders that customers place online. The company also has a flexible business model, which Joel Manby, CEO of Greenlight.com, said will keep his company from running afoul of local franchise laws and the ire of automakers, many of which prohibit their dealers from working with online car brokers.
"This is an industry where there are 50 different ways of doing things in 50 different states," said Manby. "Our business model will vary state by state." Founded last August, Greenlight.com sells cars in 27 markets and plans to expand into the 100 top national markets by year's end. The new online retailing initiative comes on the heels of Greenlight's close of $39 million in third-round funding. Amazon contributed less than $5 million to the round.
Techno-Venture and Kleiner Perkins Caufield & Byers also contributed in the round.