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How Does CarGurus Make Money (Business and Revenue Model)

The CarGurus business model

How Does CarGurus Make Money?
Here’s what you should know:
  • What is CarGurus, and how does CarGurus work?
  • How does CarGurus make money?
  • Dealer Subscription Reveune
  • Advertising Revenue
  • Other Revenue
  • CarGurus’ Subsidiaries, Acquisitions, and Exits
  • CarGurus’ profit and revenue
  • What is the CarGurus business and revenue model?
  • CarGurus’ funding and market cap

How does CarGurus make money? Here is a full, in-depth, breakdown of their three (3) revenue streams and the different products and services they offer, as well as the CarGurus business model, their profit and revenue, and how CarGurus works.

What is CarGurus, and how does CarGurus work?

CarGurus is an online automotive marketplace connecting buyers and sellers to new and used cars.

Founded in 2006 by the co-founder of TripAdvisor, Langley Steinert, CarGurus began trading on the NASDAQ on October 12, 2017, under the ticker symbol “CARG”.

Now, CarGurus has over 30 thousand paying dealers on the marketplace reaching 40.6 million users per month.

How CarGurus works is: Buyers can browse vehicles by filtering through what they are looking for from both private sellers and dealerships on the marketplace. Once they find a vehicle(s) they are interested in, they can message the owner(s) through the listing to express interest and arrange to see the car.

Some of CarGurus’ competitors include Carvana, CarMax, Cars.com, TrueCar, Vroom, Autotrader, and other online automotive marketplaces for buying and selling used cars.

CarGurus App in Apple App Store | CarGurus Business Model | How Does CarGurus Make Money?
Source: Apple App Store | CarGurus

How does CarGurus make money?

According to page 24 of CarGurus’ 2021 Q2 Form 10-Q, the company has over 30 thousand paying dealers with an active, paid marketplace subscription. To add to that, the site pulls an average of 40.6 million Monthly Unique Users and 99.1 million Average Monthly Sessions.

So how does CarGurus make money off of all those active dealers and site traffic?

Below is a breakdown of how much money CarGurus makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 3 ways of how CarGurus makes money (in 2021):

CarGurus has a revenue model that makes money in three (3) ways – dealer subscriptions, advertising, and other revenues.

#1. Dealer Subscription Reveune

CarGurus makes the majority of its money from the subscription fees they charge car dealers on the platform. In fact, $484.9 million or 88% of CarGurus’ total revenue came from dealer subscription revenue in 2020.

The company offers four (4) paid dealer subscription plans, they are: Standard, Enhanced, Featured, and Featured Priority. Each of which comes with its own set of perks like a dealer Branding Page, branded listings in the #1 spot in search results, and more.

One thing to note is, CarGurus does not have set prices for their dealer subscriptions. According to CarGurus’ Resource Center, subscription prices for dealers are set “based in part on the number and quality of connections [CarGurus] delivers to each dealer, and the projected ROI from those connections.”

But, from the numbers we have, we can estimate that each paying dealer paid an average of roughly ~$20,259 in FY2020. This is based on the 23,934 paying dealers as of December 31, 2020, that generated $484.9 million in revenue in 2020.

Note: 88% of CarGurus’ total revenue came from dealer subscription revenue in 2020.

#2. Advertising Revenue

In addition to subscription revenue, CarGurus also makes money from advertising through both direct partnerships and third party advertisers.

The company partners directly with strategic advertisers such as auto manufacturers and other auto‑related brands. CarGurus also enables third party ad networks to display third party advertising on their site.

CarGurus Advertising Cost | CarGurus Business Model | How Does CarGurus Make Money?
Source: CarGurus

Note: Cargurus generates ad revenue from both direct partnerships and third party advertisers.

#3. Other Revenue

CarGurus makes the remaining portion of its money from “Other Revenue,” as the company describes it.

Other revenue, according to page 4 of CarGurus’ 2020 Form 10-K, is defined as “revenue from non-dealer products such as through [Groupon’s] consumer financing partnerships and [Groupon’s] peer-to-peer marketplace.”

CarGurus’ Subsidiaries, Acquisitions, and Exits

To date, CarGurus, Inc. has made a total of 3 acquisitions.

CarGurus Acquisitions
Source: Crunchbase

CarGurus’ profit and revenue

In 2020, CarGurus reported $551.45 million in revenue.

Note: Because CarGurus, Inc. is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of CarGurus’ publicly released financial reports, including annual reports, through CarGurus’ investor section on their website.

What is the CarGurus business and revenue model?

CarGurus makes money through a few revenue models that they combine within their company, they are:

  • Subscription based business model
  • Advertising based business model
  • Fee-for-service (FFS) business model
  • B2B2C (partnerships) business model
  • Mergers & acquisitions (M&A) business model

CarGurus’ funding and market cap

According to CarGurus’ Crunchbase profile, CarGurus has raised $1.8 million over 1 round and has a market cap of $3.65 billion as of October 2021.