Examples of companies with different business models
In order to understand how the internet has affected the automobile industry and it's business model, it would be best to individually examine the different examples of internet auto retailing:
Informational Sites
Informational sites often do not have direct relationships with the actual automotive dealerships, but instead offer a for-profit wealth of information to the consumer (i.e. edmunds.com), including extremely in-depth coverage of car performance and reviews/testimonials/tests for consumer benefit. Revenues for these sites stream from advertising, commissions and relationships with other internet-automotive sites (i.e. car insurance or referral sites) and the selling of detailed reports on vehicles.
Automotive-Purchase Referral Sites
These are the sites that first developed a relationship with actual car dealerships - feeling that they would be profitable because they could gain from the discontent of a car-buying consumer. Similar to the Informational sites, these websites offer detailed information featuring reports and side-by-side comparisons for the benefit of the customer, although they differ by offering a purchase-request that may be submitted with the consumers specifications (including color, features, options etc..); which they in turn give to the dealership. The customer is then contacted by the dealership with a price where they can then opt to buy the car; the automobile is purchased without ever setting foot in a dealership.
These referrals are sent to dealerships with whom the site has contracted, they are generally geographically selected, then assigned territories of where they may receive purchase-requests. This is done in an attempt to draw potential sales from other geographic competitors that would have otherwise sold to a consumer. The success of this method is monitored by dealerships by means of conversion rates, in other words "how many internet-referrals turn into acutal sales" and it just so happens that the average conversion rate of a dealership is 8 potential-leads to 1 final sale. These types of contracts are then monitored by the referral website, using these conversion rates and 'customer satisfaction surveys', if a dealership tends to have low customer satisfaction or conversion rates, often the contract will be terminated.
sources: Lehman Brothers "autobytel.com" 5/12/99 and J.D. Power and Associates [2000a] conversion rates and dealer turnover