About every other week, I come across an example of an Industry in the Cloud (IC) provider that I had not known about at all or whose business I did not fully understand. An example this week is DealerTrack (TRAK). I was turned on to this company by Peter Goldmacher, who is a managing director and senior research analyst at Cowen Group. Peter is the best stock analyst I have met (and I don’t mean that in the “tallest midget” sense you might be thinking given the industry). Peter really understands software, network businesses and IC businesses and follows the industry closely. He likes DealerTrack and after studying them I understand why.
DealerTrack has built a great network in what most of us think is a “god-awful” market during a terrible period. They have managed to build a great business that connects, auto manufacturers, dealers, financial services providers, and even consumers onto one platform that integrates the buying experience for all the parties involved. They have 17,000 dealers connected, 1,000 lenders, credit bureaus, aftermarket providers, used car valuation companies, and others integrated into their network.
When I look back at their history, I see that they have taken many of the actions that I highlighted in the post on key success factors for ICs here. They have been especially aggressive in acquiring and tucking in acquisitions to become a one-stop shop in auto retailing. I have not studied the competition fully, but I understand how difficult it is to compete with a company that has created an ecosystem that adds value to all of the players involved in the industry. This is one I’m going to watch carefully and add to my list of successful ICs in unusual places. I’ll probably even buy the stock–sooner or later car-buying will return!
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