Amazon Has Greenlight in Online Marketing Deal

With new funding in hand, online car-buying service in San Mateo, Calif., this week unveiled a marketing deal with But analysts voiced doubts as to whether online vehicle brokers can bypass recent Web endeavors and obstacles set up by the automakers themselves.

Greenlight recently closed $US39 million in third-round funding -- money it hopes will fuel an expansion from 27 to 100 regional markets by year's end. Founded in August last year, Greenlight lets shoppers configure and price vehicles online and then connects customers to dealers to fulfill orders.

But automakers such as General Motors Corp. in Detroit want to reclaim their role as the top liaison to consumers. Two weeks ago, GM formed a Web firm with its dealers to build a multibrand car-shopping site. In an earlier bid to protect their turf, GM and Dearborn, Mich.-based Ford Motor Co. sent out letters last spring warning more than 12,000 dealers that they would lose rebates and incentives if they worked with Internet brokers.

Jim Hall, an analyst at AutoPacific Inc. in Tustin, Calif., said Web initiatives, legal hurdles and the recent closure of rival broker in Austin, Texas, puts the success of online vehicle brokers in doubt.

"[Online car brokers] are competing with manufacturers and a lot of other people out there," Hall said. "They are going sideways against state franchise laws. There aren't any state laws regulating book sales, but there are plenty when it comes to cars."

But Joel Manby, CEO of Greenlight, said the company continues to grow its dealer-fulfillment channel, which includes more than 1,500 dealers.

Greenlight also has a flexible business model that can adapt to local franchise laws, he said. "There are 50 different ways of doing things in 50 different states," said Manby. "Our business model will vary state by state."

Greenlight also hopes marketing ties with Seattle-based Amazon will spur sales.

Amazon began linking to this week. In February, the companies struck a five-year deal that required Greenlight to pay Amazon $US82.5 million for marketing and promotional services. This week, the firms restructured the deal to a payment of $US15.25 million by Greenlight to Amazon over two years.

The deal reflects tougher market conditions for dot-coms and gives Amazon a lower strike price on warrants to purchase up to 30% of Greenlight. Amazon purchased 5% of the car broker in January and contributed less than $US5 million to the latest round of funding.

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