The Financial Times has reported that the venerable purveyor of automotive values, Kelley Blue Book, is up for sale. According to the article posted September 1, 2010, the family-owned publication has retained the services of JP Morgan to assist in the sale process.
A second banker who wasn’t identified placed KBB’s value at somewhere between $500 million and $1 billion.
Uh, what the what?
Look, Kelley Blue Book is a strong brand, with a heritage that stretches all the way back to 1926 when Les Kelley published his first price guide.
But $1 billion? Come on.
Kelley’s print price guide is unsupported by advertising and sells in bookstores for $9.95 a pop, updated twice a year. Its circulation in its heyday was 300,000.
Kelley didn’t have a website until 1995, and it took a year to figure out that people wouldn’t pay $3.95 for a price report, after the company I worked for (Automotive Information Center) was offering information in infinitely greater detail and accuracy on its website, AutoSite.com, for free.
Kelley went on to be one of the two most recognized providers of new and used car pricing data. Its website (KBB.com) is supported by advertising and with somewhere around 9 million page views a month, it was able to attract an awful lot of advertising business over the years.
But in the last three years, the entire economy has changed. Car sales are in the tank and in the process, Kelley’s web traffic has diminished to somewhere around 7 million page views a month, a huge drop in traffic that can’t look good to any advertiser. And according to the Financial Times story, there’s additional time pressure to sell the company because the Kelley family will face an additional 5% hike in capital gains tax if it doesn’t sell before 2011.
I’ve worked for two companies that share similarities with Kelley Blue Book. The first was Automotive Information Center that beat both Kelley and Edmunds to the electronic punch with a comprehensive new car price guide online for free. The second was Hemmings Motor News, which was a similarly old-line publishing company with a brand name that reached household status.
Automotive Information Center (which published AutoSite.com) sold to Autoweb.com when venture capital money ran out of the tap like cheap beer. Hemmings Motor News sold right at the time when Hemi ‘Cuda convertibles were trading hands for $2 million and it looked like the vintage car industry was poised to be a never-ending source of cash. Neither company sold remotely close to $1 billion, even with those economic factors to its advantage.
AutoTrader appears to be the lead bidder, but even with its 25 percent equity money from Providence Equity Partners, there’s no way it’s going to spend a billion dollars. AutoTrader was one of the suitors attempting to buy Hemmings, too, but they couldn’t get the deal done.
Others in the running are reported to be eBay and Google. eBay lost its shirt on now-disgraced Kruse Auctions years ago, so it’s probably a little gun-shy about purchasing another old-school name for lots of money. And what’s Google going to do with Kelley? Its reports are already free, and the days of making money from the manufacturers for competitive comparison tools on their own websites died out when Autoweb ran AIC and AutoSite.com into the ground.
What’s Kelley got that’s worth a billion besides its name and its diminishing web traffic?