How Many Online Car Auction Companies Do We Really Need?

If you said "zero", you might be correct

this bullshit is more of a quirk than a feature, if you ask me

The rumor goes something like this: Five years ago, Randy Nonnenberg attempted to sell the Bring-A-Trailer site to a hick insurance company automotive lifestyle brand for a staggering $25 million. The wise thought leaders of Michigan laughed him out of the room. Two years later, he sold it to Hearst for a reported $200 Million.

And that might have been too cheap.

Over the past half a year, “BaT” has been the subject of openly fawning articles in Forbes, the WSJ, CNBC, and elsewhere as the site racked up over $1 billion worth of sales on the way to its 100,000th completed auction. The “Hearst Autos” group, previously famous for running long-cherished car magazines into the ground at warp speed, looks in retrospect to have all the investment acumen of a young Warren Buffett.

The BaT mania is such that Doug DeMuro was able to sell a majority stake in his BaT wannabe site, “Cars and Bids”, for $37 Million. He promptly went out and bought a Carrera GT with the money, which is ironic because he rose to prominence making hysterical statements regarding the “CGT” to the media in the wake of Paul Walker’s tragic death in the passenger seat of one. Would be like Ralph Nader buying a Corvair. But Nader had integrity.

The industry perception, from what I heard during my time in said industry, is that BaT is operated and directed by complete idiots. Which perhaps explains why there are so many copycat sites out there, from the deservedly dead “RADforsale” to the rather, ah, sparsely populated Hagerty Marketplace. But none of them offer what BaT does, namely:

• An astounding selection of needle-in-a-haystack cars;

• The absolute top prices paid, in many cases well above “in real life” auction results for similar cars;

• A community in which you can be a known superstar simply by listing and bidding on vehicles.

If you really want the most money out of your car, BaT is the only game in town. So the rest of the online auction sites are reduced to trash-bird status, either picking through the stuff that BaT won’t touch or cutting special deals to get desirable listings. Had I not been able to make a very favorable real-world deal on my old 993, I wouldn’t have considered any online marketplace but BaT. Selling on “Cars and Bids?” Why not just put two hundred Benjamins in my fireplace and light ‘em up? Collecting Cars, featuring Chris Harris? Like I said, I want to sell the thing, not give it away. Hagerty Marketplace? Uh…

There are really just two reasons for anyone, be they investors, sellers, or buyers, to have any interest whatsoever in any online platform other than BaT. The first one is, to put it kindly, raw stupidity. In a past life it was my displeasure to eat many a dinner with many a brain-dead lizard person who would enthuse about the many great opportunities out there to compete with BaT or benefit from their success.

“Why, look at RM and Barrett-Jackson, for example!” they would babble, fondling the second or third $300 wine bottle of the evening. And you could kind of see where they were coming from. There are several thriving collector-car auction companies, each specializing in a certain corner of the business but usually overlapping a bit with a few of their competitors. Why couldn’t the same be true for online auto auctions?

The problem is that most lizards exist in The Forever Now, where the cruelties of history are not permitted to trouble their somnolent reverie, so they don’t bother to think about the days when eBay was just one of many online auction companies. Remember uBID? Yahoo Auctions? Any one of two dozen other highly-funded, critically-acclaimed companies? What’s that? You’ve forgotten about them?

Of course you have, because they no longer matter and most of them didn’t even matter when they were up and running. Having spent years as a consultant to a very nice estate auction firm in central Ohio, I can tell you that the biggest problem faced by the average real-world auction firm is too much stuff. There are only so many items you can auction off in a given day. Too many, and you lose buyer interest in a hurry.

The reason you have RM Sotheby’s, B-J, Mecum, and Gooding all at the same time is simple: there’s a limit to the size of a physical auction, and you will suffer greatly from exceeding it. A virtual auction, on the other hand? Those can scale to infinity. Or nearly so. eBay is currently listing over 1.7 BILLION items.

It gets better. Scaling, as an auction company, saves you money. You could pass those savings on to the customer, or you can keep them, as eBay is currently doing with their rapacious thirteen percent fees on many items, but either way it’s cash in hand. As BaT increases their number of listings, everything about the business becomes more profitable, both for them and for their sellers.

Hold on, it gets better still. You might think that you’d be better off putting your Porsche 993 on Cars and Bids, since BaT already has five 993s on the site, but you’d be wrong — because the presence of your car will increase interest in the others, and vice versa. Every time an auction closes on a car like yours, you basically inherit all the bidders but the top one.

This is not a Hertz-and-Avis situation. Nobody really wants too much competition between auction companies, as long as the buyer and seller premiums aren’t stratospheric. Everyone involved would prefer a single source. The sellers get more money; the buyers get better choices.

It befuddles me that we have 50-year-old executives who in no way understand the internet, but there are enough of them for Doug DeMuro to drive a Carrera GT, so there you go. Raw stupidity.

There’s a second reason to look at platforms outside BaT, however: raw cupidity, or greed, or corruption. The site has become notorious among insiders for shill bidding, failures-to-complete, and other breaches of trust in every area from the condition of the car to the validity of the title. I’ve been told that “Cars and Bids” executives like to mention this as often as they can to potential bidders, investors, and employees. Certainly situations like the Casey Putsch Lykan don’t inspire a lot of confidence in Bring-A-Trailer, and the 97.7% auction completion rate quoted by the site seems a bit optimistic. I’ve heard a lot of sob stories about BaT, and the site itself rarely comes off very well in these tales.

A properly run competitor site could exploit those fears. While there are very few reasons to auction off your car for $80,000 instead of $110,000, an assurance that the auction will complete in a timely and ethical fashion is probably one of them. Bird in the hand, and all that.

Let’s be real, however: if you were looking for a more ethical alternative to BaT, would you choose Doug DeMuro? Or The Chernin Group? Or the people who used to run Sadwood? Or the people who run it now? The image at the top of this article tends to suggest that there’s not a lot of buyer or seller protection going on at Cars and Bids. It wouldn’t surprise me. Customer protection is the only thing about online auctions that doesn’t scale well. Which is why buying cars or any other high-ticket item online should probably be limited, if only voluntarily, to people who can afford to make mistakes. If you’re shopping for a daily driver at BaT, you have more optimism than I have.

If my experiences bidding and observing at BaT are any guide, however, most people on the site are willing to throw caution to the wind for a bit of online clout. The site has a remarkable community of completely idle people who keep a close watch on who buys what and for how much. The “whales” are celebrated in oddly hagiographic fashion. Many of them are unable to resist the temptation of playing to an audience of proles. The irony here is that the very best cars, guitars, and other collectibles are often sold privately to disguise the owners or amounts involved — but at BaT, the nouveau riche are out in force, desperate to be loved for buying an LS-powered Volvo with a constellation of permanently glowing dash lights.

BaT probably needs to take more visible “Trust and Safety” actions to retain their supremacy, but until they have a genuinely ethical and respected major competitor, why bother? Well, there’s one reason: they could get dot-commed.

Bring-A-Trailer may have sold 100,000 cars in the past few years, but eBay has about 60,000 cars for sale right now. At any moment they could decide to polish up their act a bit, include some community comment features, and throw their experienced staff at guaranteeing buyer and seller satisfaction. One suspects that BaT only continues to exist because eBay isn’t really interested in the business. If they change their mind, they could make massive inroads immediately. Yes, BaT has a lot of bidders. eBay has a lot more.

Also worth considering: As Facebook continues its descent into a glorified Craigslist replacement, why not add auctions to the mix? Don’t forget that Facebook owns Instagram and WhatsApp as well. They have a lot of idle employees and a lot of accumulated social capital to spend. Hell, it might bring some people back to Facebook.

The alert reader will notice that I have yet to mention Amazon, the company most famous for making entire segments of the American economy simply vanish. They could do it as well. Again, if you think BaT has a lot of bidders, think of how many Amazon Prime members are out there.

(The number is 165 million, or thereabouts.)

I enjoy making predictions that don’t pan out, so I’ll make a couple incompetent ones to close out this article before handing it over to you.

Bring-A-Trailer will reach its peak level of activity in 2025 before yielding to an established dot-com, possibly partnering with an established “name” like Barrett-Jackson. Hearst will sell it at that point, and it will struggle on for years afterwards, the way Yahoo! Auctions still has a presence in Japan.

Cars and Bids will fold or merge before 2030.

Hagerty Marketplace will “sunset” in the next five years.

Collecting Cars will return to being UK-only, or possibly Euro-only before then.

About half of the existing real-world collector-car auction firms will close their doors in the next ten years. The ones that survive will have a strong link to some sort of online vendor. Right now the business runs on the backs of Boomers with free time. Their kids won’t have the same leisure, and their kids will have even less.

The concours gatherings that depend on real-world auctions to make ends meet will have to drastically scale back their operations.

eBay Motors will be stronger five years from now than they are today.

In the meantime, my advice to everyone who is trying to sell a classic or collector car remains the same: list it with BaT, work the hell out of the auction by taking 200 photos and interacting with every single commenter, but be prepared to list it twice, or even three times, before you get that pot of gold at the end of the online rainbow.

And if you have $40,000 burning a hole in your pocket and you want a 30th Anniversary Miata, I probably know about a better one than the ones on Cars and Bids. Call me!