The Evolution of Online Car Auctions: Learning lessons from NFTs

Bring a Trailer (BaT) has become the dominant online platform for premium car auctions. Online car sales gained immense popularity as it grew from $490M sold in 2020 to $1B in 2021 for all platforms, to $1.4B sold just on Bring a Trailer in 2023. It represents a paradigm shift of what was once a real world dominated market to a digital one, with the number of online auctions greater than live ones for the first time ever in 2021.

Bring a Trailer commands a sizable premium for sales price compared to expected value, likely due to its reputation and penchant for top tier cars. The world took notice, with Bring a Trailer being acquired in 2020.

In comparison to the car auction world, the NFT world experimented at F1-level speed and gave a glimpse of what the future of social and commerce would be like. Household names like Opensea were able to build a formidable brand and demand the majority of volume ($5B in Jan 2022 alone) through its marketplace, much like Bring a Trailer. It successfully fended off competitors like LooksRare, X2Y2, and NFT.com, with an impression that Opensea was goning to be the longstanding winner. However, a failure to grasp the shift of the market trends and user activity created gaps in its armor which opened up the door to Blur and Magic Eden to overtake it.

Cars are not too different from NFTs. At best comparison, they are non-fungible items that are sometimes imperfectly valued as fungible. At a lesser comparison, they are owned by a tribal-like demographic that purchases these items either as investments, clout, or “for the art”.

I hypothesize that car auction marketplaces will continue to evolve and follow the consumer behavior trends exhibited by NFT marketplaces. Let’s look at three key notes from the NFT world that give hints to how these marketplaces will grow.

1. Premium Demands Premium

When I was working on NFT.com, I was quite surprised with the amount of recognizable consumer brands that were trying to get into NFTs: Fortune 100s, professional sport teams, soap companies, you name it. However, these companies were hesitant to launch NFTs due to the open nature of these marketplaces. Opensea and others allow the selling of nearly any NFT on the blockchain, ranging from blue chips worth millions to very amateur “art” worth less than pennies. The nature of these marketplaces served as a double edged sword for bringing on more conservative premium consumer brands. Why would a luxury consumer company want their product in the same storefront with inferior products? You don’t see Chanel purses sold at Walmart stores.

Specialty NFT marketplaces were able to initially succeed with offering curated marketplaces of their own, but could not scale to the success of the larger more general marketplaces.

Bring a Trailer executes this premium gatekeeping well, maintaining that only high-quality cars make it to auction on its site. You see a variety of listings with Porsche 911s, vintage Ferraris, and rare cars (sometimes the odd Dodge Avenger). As its brand reputation increased, Bring a Trailer’s inbound listings have increased as well, beneficial to its bottom line.

However, this business model forces them to increase volume of their listings to sustain consistent growth of the business. With only a finite number of top-tier listings, Bring a Trailer will need to expand its listing volume by increasing more of what it accepts, as we have seen with the addition of listings for parts and auto memorabilia.

To continue growth, Bring a Trailer will need to diversify into a premium BaT, a regular BaT, and BaT for specialty parts to improve discoverability of listings and grow net volume across the properties.

To increase success further, they will need to apply distinct branding to the different shards, so that the original core of their business, the premium BaT, doesn’t have its exclusivity diluted.

2. Creating a Rich Tool Ecosystem: Analytics, Aggregators, and Bots

Once the NFT marketplaces started getting traction and significant money was flowing in, users were looking for the right tools to help them gain a further advantage and turn more profit.

Analytical tools, like Traitsniper, which helped users find undervalued opportunities, became staples in the community for buyers. Sellers, who wanted to improve their performance as well, were able to gain insight with portfolio performance and market analysis tools to better price and time their listings.

Aggregators were another game-changing tool, a convenient method for users to scan multiple marketplaces at once to find the right listings to buy. This reduced the number of actions required for a user to act on an opportunity, resulting in more wins, but more importantly, allowed users to combine actions like bulk purchases or sells across marketplaces.

For the car auction market, the door is open for third-party products to aggregate active listings across Bring a Trailer and other competitors like Cars & Bids.

Bots were the force multiplier for these tools, allowing users to automate their work and scale their operations past themselves. Bots operate 24/7 and were much faster at closing opportunities than a human, but were only as effective as the strategies that enabled them.

These bots can expand past actively bidding on listings and help sellers interact with commenters or change reserve price on their listings automatically based on activity. They can also notify buyers of interesting opportunities that fit their preferences.

The online car marketplace has not evolved as quickly yet and is still nascent in the analytical tool field. Useful data points that I’ve been tracking for Bring a Trailer users include: Ideal listing times, sell-through rate, and competitive performance to help sellers understand their current performance and do better in the long run. While I do not expect advanced aggregators or bots soon like we saw in crypto, I expect these tools will allow buyers and sellers to scale their operations, especially for smaller outfits.

3. Social is the Lifeblood

The X-factor for NFT success is social. Discord groups, Twitter, and Telegram chats are channels for news and speculation, determining which NFTs are worth millions and others pennies. Users evaluate an NFT’s worth based on how active its community is, a consistent signal that can’t always be quantitatively measured by numbers.

Social is the lifeblood for digital marketplaces and platforms.

Social comes in different shapes and sizes: Social profiles for sellers build trust to encourage purchasing assets from them, the amount of Tweets and social commentary from a community of asset owners give signal on the value of those assets, and endorsements from popular individuals increase the legitimacy of assets or users. It is no question that social presence is essential in today’s world and needs to be considered in any online platform.

Bring a Trailer and other digital auction marketplaces have the seeds of these aspects today, especially with the existing commenting layer. These comments can legitimize listings and increase the bidding price, but vice versa can tank one as well. The ability to engage with these comments and more so analyze how to leverage it to better to increase the value of listings will become an essential skill. Currently, it is not easy for sellers to natively build their own profiles on these platforms, and building it externally on TikTok, Instagram, or Twitter does not appeal to their target demographic.

What is Next?

While it will take time and effort for these marketplaces to evolve, we at BATRANK have taken the next steps to expedite digital transformation of the car economy. We started with three core initiatives:

• Data accessibility. This is accessibility of information through our data tooling, which includes not only comprehensive historical listing data and seller performance data, but also market insights to make analytics actionable. We believe in data-driven decision making and providing access to all.
• Improving discoverability. We are aggregating listings and putting a better ranking layer on top so the consumer can passively find relevant listings, enhancing search so the user can actively find the right listing, and surfacing good opportunities so the user can get deals.
• Building the social layer for sellers. During discussions with top sellers, a consistent concern surfaced around their digital presence and how to showcase their legitimacy. A first step to address this comes with us offering seller pages to help sellers showcase important information about themselves and their listings. This naturally leads into helping sellers create a funnel for online interactions and ultimately start building their brand.

If are you are interested in learning more or are a Bring a Trailer user, please reach out at kent@batrank.com!

About the Author

Kent Makishima is a partner at Project88 and created BATRANK to surface unique data analytics and experiences for car marketplaces to improve value for buyers and sellers. Outside of the automotive space, he is an experienced builder in web3/blockchain, having built enterprise and consumer applications across different domains.