Autohome was founded in June 2005 by Li Xiang, the founder of Pcpop.com, an online platform for digital and consumer electronics. In a very short time, Autohome, which was backed by Australian telecom and media firm Telstra, became the leading website for comparison buying of vehicles in China.
Qin Zhi joined Autohome in 2007 and has grown the company from one million yuan in the firsthalf of 2007 to 1.2 billion yuan of total revenue in 2013 — 900 million from advertising and 300 million from tailored services for car dealers. Qin has also led Autohome to a successful IPO on the New York Stock Exchange. The company now has a market cap of around $5 billion.
Qin, who is a graduate of Harvard Business School and a former consultant with McKinsey, aims to grow the company further. “I believe it’s very possible for us to become a leading player in the auto e-commerce market,” he says in this interview with Knowledge at Wharton.
An edited transcript of the conversation appears below.
Knowledge at Wharton: What was Autohome like when you joined in 2007?
Qin Zhi: Autohome was founded in June 2005. It was the auto channel of Pcpop.com, started by Li Xiang. His team had built up a database for auto products. They had a content production model: build a systematic database for every auto brand, recruit an editor to write articles and develop online forums for users to interact. The fundamental function of the site is to help users choose the right car.
When I first came to Autohome, it had just been separated from Pcpop. There were 20 people on the team. The management style was rough. There were no sales and marketing plans and the revenue was only one million yuan for the first half of 2007. After I came, I built up an independent sales and marketing center. That was in August 2007. In six months, the team achieved revenues of 7.9 million yuan. At that time, we realized that web portals would become popular as browser homepages. We became the first auto site working with the portals. This helped us gain a lot of traffic in a short time.
Put simply, Autohome was like white paper when I joined. It is easy to write on white paper. I was not the person to change the rules; I made the rules. Everyone in the team had a different personal and educational background. But we had to reach consensus on the right way of working. New people who joined got used to the rules quickly as they could see the benefits.
Knowledge at Wharton: There are many auto websites. How is Autohome different?
“Normally, the media hires editors as intellectuals. We employ editors as workers and we ask them to have the mindset of a product manager.”
Qin: Before Autohome was founded, there were several auto sites. Most of them were automakers’ sites providing information. We focused on independent content and user experience. Users can get what they want — the car brand, model, price and the discussion forum — in two clicks.
That’s our purpose. We put the auto product database, prices and the forum on our homepage. This has attracted 80% of user traffic.
In the early days, we did very little promotion. We relied on word-of-mouth marketing. The visitors who came to our site were potential customers. Many are now repeat visitors and they always create a traffic peak every Spring Festival [Lunar New Year.]
Knowledge at Wharton: Most of your revenue comes from advertising by automakers. How do you keep the content objective?
Qin: We care about this issue. Objective and neutral content is the basis for user experience. When we attracted auto ads in 2007, some automakers required that their ads must match content. But we insisted on content independence. At that time, there were not so many auto websites and they finally agreed. The editorial independence has continued.
Right now, our content is from three categories — editors, carmakers and users. Among them, the carmaker content does not have bylines. All content is put in the same area; an article moves up if there are more clicks. The result [is] good-quality articles have a better position. Normally, automobile manufacturers’ articles die out first. By rough estimates, we have contributed more than 80% of the original online content for auto sites in China.
Knowledge at Wharton: Media people are knowledge workers. How do you manage your staff?
Qin: Normally, the media hires editors as intellectuals. We employ editors as workers and we ask them to have the mindset of a product manager. Most of the daily work can be standardized and we have a standard work process. What should editors contribute? Innovation. They should spend their time and energy innovating on content and improve user experience.
We especially stress converting best practice to conscious behavior. I always ask my staff to share their best performance and write down the most useful. We pick the best for future practice. It will gradually become a guidebook for work.
In my view, management is about standardizing the verified best practices for daily work. If we can start from very small things, change staff habits, it can be a great achievement in terms of management.
Knowledge at Wharton: Have you met any challenge in promoting standardization at work?
Qin: The biggest challenge is the clock-in system. Editors don’t like it and it was painful to implement. We lost some talent in mid-2007; many capable colleagues left us. I wanted to persuade a mid-level manager to stay. I told him that our craft was going to take off soon and it would be a real loss if he left. But my efforts failed.
Why did I insist on the clock-in system? I believe that the competition between companies like us will not be in article quality. The most important advantage will be the content-production method and efficiency. We have editors come in at 8.30 a.m., so readers can get the test-driving article before anywhere else. Other websites may spend one morning to write the article and publish it in the afternoon. That article might have better quality. But readers have already got the point on our site.
Knowledge at Wharton: Apart from ads, what are your other revenue channels?
Qin: I gradually realized that the scope of our business should not be limited to content. It is certainly crucial, but our advantage also lies in the ability to build a platform to attract carmakers and auto users. Carmakers need us because they want one more channel to sell their products.
Our business model for carmakers and dealers is easy to understand. We offer online marketing services. For example, we provide sales leads for dealers and bring them potential customers. We conduct regular sampling surveys to gauge the impact of their ads on sales. Right now, Autohome has covered 23,000 car dealers across the country. Of that, nearly 10,000 are paying us to become members of Autohome, who can enjoy our services on customer relations management and data analysis.
In recent years, paid-member revenue from car dealers has grown rapidly. It was only 6.9% of total revenue in 2010, but grew to 321.6 million yuan ($53 million) or 26.4% of total revenue in 2013. We have the potential to transform free members to paid members and we can also offer more value-added services to them. For example: online reservation for maintenance, transaction information on secondhand cars and online auto insurance. It’s not only possible, but also very necessary to extend our value chain on auto deals with car dealers.
Knowledge at Wharton: Autohome launched car-purchasing services last October. How did you move the business from online to offline?
“Our mobile platform has just taken off; it’s a long journey ahead. In future, we will develop customer-oriented apps for mobile users.”
Qin: We consider this a very important strategic move. The idea came in 2012, when we launched several offline “urban auto exhibitions.” For example, we would ask some four “S” stores [The four “S” store offers vehicles (Sale), parts (Spare parts), service (Service) and feedback (Survey)] to give a special discount price for the one-month exhibition and we would promote the event online. These exhibitions were marketing events in the beginning but we found that many deals were struck during them. Last November, our Double 11 Auto Sales Festival actually moved offline car exhibition online.
In our November event last year, we took one step forward. We offered certain car models at a fixed price and collected customer deposits. During the festival, customers reserved 17,776 cars valued at 2.6 billion yuan.
This year, we will launch similar events and we plan to have customers make complete payments to us and receive delivery of the vehicle from Autohome. Some carmakers have suggested they will make a special model for Autohome and the four “S” stores will take care of delivery, insurance and maintenance.
Knowledge at Wharton: How do you define your relationship with offline channels such as the four “S” stores?
Qin: Four “S” stores have to reconsider their positioning. Two major functions — the shopping guide and test driving — have weakened. Can a consultant really explain the difference between different brands? Test driving doesn’t work in urban areas when the customer wants to experience accelerating from 0 kmph to 100 kmph. Haggling over the price also costs the buyer time and energy.
On the other hand, the stores have high rental costs. However, online auto sales will not be realized without the stores. Autohome will cooperate with the stores closely, especially on our sales and marketing events.
So how should we work with each other? Stores offer commission to staff based on sales. I suggest that, in future, we can be a sales channel for them. We will get some commissions and the stores will take care of the after-sales service. Customers will save time on price negotiations.
Knowledge at Wharton: In terms of online sales for cars, are you concerned about giant e-commerce players like Alibaba?
Qin: We have been in the auto vertical for many years and have gained the trust of customers, manufacturers and dealers. Online sales have to get support from both carmakers and dealers. And even within a one-car-brand company, the sales and marketing department may have different concerns on online sales. So you have to talk to them one by one.
In China, 30 big car companies account for 80% of total auto sales. These companies have on the average seven sales regions. This means 210 branches. There are more than 20,000 four “S” stores across the country. It’s not easy to establish commercial contact with all of them and push for close cooperation. Big e-commerce companies will find it difficult to establish these relationships in short term.
Only when you have real sales will car dealers pay you. At the moment, traditional e-commerce companies cannot offer car model comparison. Our biggest advantage is that we can offer a one-stop solution for customers who want to choose a model online first and then buy. We are confident that we can be the leading player in online auto sales.
Knowledge at Wharton: What are your core values?
Qin: We offer transparent information to customers. We try to shorten the decision and transaction time for them. These are the core values of our service.
We have to be on the side of the customers. Where are the deals? How do people spend their money? Why would customers spend money with us and what do they want to achieve? To find these answers can also help clients to manage these things in a more cost-effective and efficient way.
Knowledge at Wharton: How are you adapting to mobile Internet?
Qin: Our mobile traffic vs. PC traffic is 4:6. We have separate teams to provide mobile content. We may consider content consolidation in the future. But right now, we have a new team to operate the mobile platform.
Our mobile platform has just taken off; it’s a long journey ahead. In future, we will develop customer-oriented Apps for mobile users.