Here’s an “analogy quiz” to test your knowledge of Internet history: Marty Rood “is” to Seattle E-commerce “as” (a.) Henry Yesler is to pre-Gold Rush Seattle, (b.) George Vancouver is to the Puget Sound, or (c.) Bill Boeing is to airplane automation. The answer is all three.
Seattle’s “Mr. Internet,” Marty today presides over half a dozen companies who have coveted his keen business acumen and pioneering vision for e-commerce development, management and operations. His current roles include board chairmanship of InstantService, co-founder of NetStock, and Chief Development Officer of IP Sciences, among other posts. But the Seattle native and UW graduate who holds a BA in Business Administration and BS in Psychology, and is the proud owner of Lynnwood’s Rood Nissan-Volvo, will be forever revered as the Seattlelite who brought the automotive industry online. It’s a tale writ large about Seattle’s on-ramp to the Information Superhighway. Right now, we’re navigating along the timeline on this very road. Our first stop is 1993. By the time we exit, it will be close to 2010.
Seattle24x7: Marty, you’ve managed to experience the best of the Internet and E-commerce. You started out before the word “Web” was even recognizable and yet you managed to avoid the IPO hysteria and meltdown mess when the heyday bubble burst. Did the traditional rules of business apply to the way you approached the Internet?
Marty: I think the traditional rules of business have to apply. When I started the company, I did so with the clear intention that we would make money. The way the revenue model [for DealerNet] was designed has actually been duplicated many times since. The point was not simply to get big fast, but to do it in a profitable way. Today DealerNet is owned by Cobalt. At last count there were over 12,000 auto dealerships on the system.
Seattle24x7: What motivated you to envision a car selling system online?
Marty: I remember seeing a cartoony drawing of a Chrysler Neon online and some artwork of a BMW. This was back in the days of the very first online services: the Prodigy’s, the Compuserve’s, the Genie’s.
If you visited these sites, you would see these cartoony graphics of cars. I had to laugh. I called them and asked, “What does it cost if you want to advertise on your site?” It was something like $25,000 a month that BMW was paying Prodigy to be there. I said “Where are the rest of the cars?” They simply weren’t there. DealerNet was the very first to ever put an actual graphical picture of an automobile on the Internet.
Seattle24x7: How did you first get introduced to hypermedia and the Web?
Marty: Do you remember a company called Spry in Seattle, (they eventually were bought by CompuServe), Dave Poole and Andrew Frye and Mike Samsel had a company called Free Range Media which was an arm of Spry. There was also an equipment side and a software side, the makers of Internet-in-a-Box. Remember those? (laughing). They explained to me how the Internet worked, how you connected, and that there was going to be a graphic user interface coming along called Mosaic. Up until then it was all text. It was Gopher, and Archie and Veronica. The sirens went off in my head. We scanned in a photo of a silver Volvo 850. That was the first picture of a car on the Internet ever. They had their super fast Pentium 60 at the time so it loaded a lot faster than my 25 Mhz machine. (laughing).
Our car dealership became the first dealership that ever had a Website globally. Next, we needed to upload all of the models of the cars. I called it ‘Building the Arc.’ I said, I need one, not two, of every model automobile represented by a dealer on our site. A Honda dealer, a Subaru dealer, a Ford dealer. One by one, I got those dealers to sign up.
Seattle24x7: When did the historic first sale occur?
Marty: The first transaction occurred in Spring of ’95. The first car that was sold “off the Internet” via email transactions was done in May of ’95. It was a Volvo 760. It was a gold car.
I remember some email from Iceland: “Hey I need a water pump for my Nissan Pathfinder.” We took the credit card over the Internet, verified it, got it approved and sent back an email saying “We have the part, we have your address, we’re shipping it!” Once it arrived in in Iceland the customer wrote back to say he was very happy! Today, people just shrug their shoulders. But back then, it was as if we had just talked to the planet Pluto. I walked around all day with a funny grin on my face thinking what in the world have we done here.
Seattle24x7: How were you able to attract dealers to the concept? Were there any hesitations?
Marty: I was getting calls from dealers all over the country asking what is this all about, what is this Internet, how do I get on, how do I sign up? We had taken something obscure for the auto dealer and made it very obvious. Some of them didn’t like it, since they felt their prices could now be shopped. We had to work hard to win over dealers.
Seattle24x7: How did DealerNet manage to enter a market with some fairly entrenched, albeit old school, competitors?
Marty: There are two companies that control the automobile business as far as the operating systems that run car dealerships. 98% of them will either have an ADP system or a Reynolds & Reynolds system. It’s a duopoly. The two basically split the market right down the middle.
In February of 95 we went down to the National Automobile Dealers Convention in Dallas. Reynolds & Reynolds and ADP always have the largest display in the entire show. DealerNet had a little ten foot booth. We were wearing red turtlenecks with our logo on it. We looked like the band Devo. All of the dealers were in ties. Well, we had a line of people 40 to 50 feet deep waiting to see a demonstration of what we were doing. The Reynolds people were aghast. The ADP guys came by to take a look at us and figure out what in the world we were doing. These are experienced computer companies who had no idea what was going on.
Within two weeks after that show, I heard from another dealer that Reynolds was interested in us. He said, “Marty, these guys want to buy your company.” Reynolds eventually sent me a letter stating that. We closed the deal on June 15 of 1995.
Seattle24x7: What happened next?
Marty: Well, Reynolds & Reynolds was trying to sell the service but they weren’t promoting the site itself. They weren’t marketing it the way I wanted it to be marketed. So, I told them, look, you guys are great as far as car content and computer systems, but what we need to do is we need to get somebody like Microsoft who has literally zero automotive experience but is a great marketing company and they make, in my opinion, great software. Why don’t we partner with them?
It took me another six months for Reynolds to agree to a meeting. They didn’t understand the marketing power that Microsoft has. Eventually, we set up the meeting with Microsoft. Their program was called CarSource at the time. Their interactive media division was actually building a CD-ROM.
I walked into the meeting, the first time I ever met these guys, and I said, “You might as well totally trash everything that you’re doing.” And they said, “Who are you to come in here and tell us that?” And I said, “If you guys are not embracing the Internet, you’re just wasting your time. The second one piece of data changes on that CD-ROM you’re going to have to spend another million of them and redistribute them. It’s an inefficient way to disseminate information to people. ”
I wanted us to partner with Microsoft, 50-50, right down the middle. We’ve got the automative connections, we’ve got the automotive data, you [Microsoft] have got the marketing and you’ve got the software. Let’s put them together. The Microsoft guys said, “Great, let’s do it!” From that point, they started working on a letter of intent and put together a 2-year agreement. The arrangement ended up being a great deal for Reynolds and Reynolds. They got a return on investment of over 35%. I don’t think Microsoft faired quite as well. They ended up taking a disproportionate amount of the expenses.
Seattle24x7: Where did Cobalt come into the picture?
Marty: Microsoft put a clause in our contract saying that Reynolds had to disassociate itself with the name DealerNet so Reynolds sold DealerNet to Cobalt. That included the dealer Websites as well. I said to them, you’re making a big mistake because there’s a lot of money to be made in maintaining Web sites for car dealerships. Cobalt came in a year later and they started dealer Websites, as did others.
Microsoft had this consumer-centric focus for CarPoint. People don’t like going to dealers, they felt. Well, you’ve still got to have a dealer, you still have to have a Website. Microsoft positioned itself as the middleman between the customer and the dealer. They didn’t want the customer to see or know anything else about that dealer. But I said, “What about after the sale? What about service? What about parts? What about questions? They should be able to know where that dealer is, and find it.” They disagreed. They could’ve doubled their revenue easily, maybe even more if they had done it the right way.
In 2001, CarPoint negated the deal with Reynolds. Reynolds had to start all over again with a domain name. They called it RRAuto.com. It has absolutely no household value. Microsoft has changed Car Point to MSNAutos.com and if you go to Car Point it will refer you there. People still have CarPoint in their minds. people still have DealerNet in their mind. They don’t have RRAuto in their mind. It was a huge marketing mistake.
Seattle24x7: DealerNet also was an early innovator in merchandising cars?
Marty: We did the first 360 degree VR view of the car’s interior. It’s really nice to be able to get a glimpse at the dashboard and the interior styling before you even go look at the car. I like to say that, if nothing else, we have saved consumers countless hours of searching for, looking for, going to dealerships, putting up with pushy salesman.
Seattle24x7: How will automotive sales and marketing continue to evolve on the Internet over the next 5, 10 or 20 years?
Marty: I think the way things will start to unfold in the future will change the way used cars are bought and sold. Today, you buy a car, you work 3-4 years to pay it off or maybe pay cash, but you have that car and you know darn well that it’s depreciating every day. What if through the Internet you could get somebody who would agree to buy that car on the day that you want to release it? They would know the exact condition, the exact value, so you can literally transition from one car to another, just sign some simple paper work online, and swap that car over or send it to some sort of central refurbishing area where it can be cleaned prior to a change of ownership. You can buy a new car online. But the used car side of the equation has still not been solved. I think the entire resale process has got be accelerated. It’s still very, very inefficient.
I still believe that every car in the world will have its own URL. So you can track the car, know its condition, know exactly how many times the oil has been changed, how many times the transmission’s been serviced. I think there’ll be contracts written in the future that will incentivize people enough to say ‘Okay, I’ll take Larry’s car in six months. I know that car. I know Larry. I know how he takes care of his cars.’
The car would be wired to the Internet. We’ve already gone through the first generation of OBD (On Board Diagnostics) one, we’ve gone through OBD two. In the future, automative diagnostics will also tell you that the previous owner drove the car over 75 mph for 30% of the time.
Seattle24x7: Thanks for the ride, Marty, into the Internet’s automotive past and future. [24×7]
Larry Sivitz is the Managing Editor of Seattle24x7.
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