Scott Painter Finally Dries Up At TrueCar

Scott Painter dries up...pun intended

By Marc J. Rauch
Exec. Vice President/Co-Publisher
THE AUTO CHANNEL

AUTO CENTRAL - August 7, 2015: Scott Painter, founder and CEO of the online car buying service TrueCar, Inc., has resigned from his position as company CEO. He will reportedly remain chairman of the board but have no involvement with day-to-day operations.

TrueCar's history claims the company was established in 2005, and the company went public about one year ago with the stock selling as high as $25 per share. Share prices today are in the mid $5 range. TrueCar has made claims that it could help consumers save thousands of dollars on new vehicle purchases by using the company's exclusive process.

The Auto Channel has long challenged the company's claims and has maintained that TrueCar's growth was merely a result of excessive, over hyped television and radio advertising that was paid for with hundreds of millions of dollars in investment capital - not because the company established any breakthrough car-buying process or advantageous proposition.

Even TrueCar's claim to have been established in 2005 seems to be exaggerated. In September 2008, we received a press release from Edge Communications announcing a new car buying service, TrueCar. If the company was established three years earlier, why did we get the press release so late? My guess is that the date change was meant to cover up Mr. Painter's other online failure, BoatsDirect.com, which no longer shows up on his Wikipedia page. (Read general comments about Scott Painter and my reply to the press release below.)

In the early dotcom boom days we often saw this kind of wild freewheel spending to promote questionable online companies. The online automotive sector had more than it's fair share of ponzi-scheme style operations in which company revenues were simply "bought" by wasting investors' hard earned money. Time and again these companies failed to prosper past the point of their excessive marketing expenditures. As soon as advertising budgets fell the companies' revenue deflated or outright collapsed. Among these auto-related entities were AutoWeb, iMotors, Auto-By-Tel, and Scott Painter's first online car effort CarsDirect.

In December 2011, WardsAuto.com published a story about TrueCar in which they talked about TrueCar customers being hoodwinked.

In the past couple of years TrueCar has been the subject of several industry investigations and lawsuits

Background

Who is Scott Painter
The Auto Channel became aware of Scott Painter via his first auto-related Internet company, CarsDirect.com, sometime in the late 1990's as the company attempted to enter the retail new car business with a "unique business plan." The uniqueness of the business plan was that CarsDirect would pretty much guarantee to sell a consumer any car they wanted at whatever price the consumer felt was reasonable. Since CarsDirect was not a franchised car dealership, to accomplish the goal CarsDirect would purchase the car from an existing franchised dealership and then re-sell the car to the consumer at the consumer's price. This meant that CarsDirect often, if not consistently, would purchase the vehicle at a price higher than it then re-sold the vehicle for. In other words, they lost money on every or at least many transactions.

Scott Painter's underlying concept in losing money on the deals, as we understood it, was that it would make CarsDirect a player in the retail automobile business by driving franchised dealers out of business, thereby leaving CarsDirect as the source for new passenger cars and trucks. CarsDirect was just one of many "Dot.Com" companies that later became known as "Dot.Bomb" companies. Painter's CarsDirect business plan was the same basic business model attempted by such other monumental failures as Furniture.com, eToys.com, WebVan.com, Pets.com, and Garden.com. Management of these companies shared one great characteristic: they had little or no experience in the industries that they were trying to conquer. Their belief was that the ".com" suffix was sufficient to secure success. (Note: some domain names of the various infamous dot-bomb companies have been acquired by other companies or individuals who were already in the same space. Their business models using the domain names share none of the negative aspects of the originators).

The Auto Channel laughingly believed these dot bomb companies to be scams and we often warned people away from them. We felt that it was okay for an individual to use his or her own money to fund such preposterous enterprises, but that it was irresponsible and fraudulent for the companies to seek and accept investment from outside persons. As we listened to or read statements issued by these companies we recall being shocked by what we felt were common business-sense blunders, lies, distortions, and/or incorrect information designed to mislead investors. While there were dot.bomb era executives prosecuted and convicted of illegal activites related to their respective scams, we always felt that there weren't enough and that some of the most egregious offenders got away, hmmm, "scott-free."

In September 2008, we were contacted by a public relations company that had been retained by a new entity called "TrueCar.com." The PR firm issued a press release and was hoping that we would publish it on TheAutoChannel.com. The following is our response to the individual who sent us the press release and his successors whenever they would seek coverage on TheAutoChannel.com:

Date: Thu, 11 Sep 2008

"Hi Ken-

I received your press release a short while ago regarding the new venture TrueCar.com. I presume you hoped that I would okay its publishing.

I read over the material and did a bit of research on those items that I was either unsure of, or that I wanted to see if others' memories jived with my own.

I can tell you that after doing the above, I have some very serious problems with the claims made by your clients, even taking into account what might be deemed as harmless marketing puffery. If your clients were not in the same industry as me, I might choose to let it slide, but considering that I might have to deal, yet again, with the harm created by IPO con-artists, I'm not going to sit idly by and let them get away with fleecing investors and fooling consumers and auto industry members, again.

Scott Painter was not a pioneer in online automotive websites, unless you want to include the experience of selling vehicles to consumers for less money than his company paid for the vehicles: Historic maybe, but not the kind of heroic information that your press release suggests. In fact, it was just this kind of idiotic business model that caused millions of investors worldwide to lose hundreds of billions of dollars, culminating with the DotCom bubble bust, which caused the worst economic depression in world history.

As for the notion that Painter brought upfront car pricing to the Internet, or that TrueCar.com is the first to utilize actual prices paid for vehicles to help determine a fair (or market) price, or that TrueCar.com is “The authority on new car pricing,” these statements are all false.

To deal with the last point first, how can TrueCar.com be “The Authority…” when the company has no track record or business experience? Is this just marketing puffery? I think not, since investors and industry members are being asked to buy into it and spend money on it. Legitimate business operators would wait for some actual business experience before they float this boat. I think it’s a fraudulent statement.

Regarding being “the first to introduce upfront pricing on the Internet,” unless you guys have some obtuse Bill Clinton-esque explanation to what that statement means, I think I can safely say that several other entities would have beaten CarsDirect to this claim, including my own company, which predated CarsDirect on the Internet by at least two and a half years. We tore down "...the curtain of secrecy around new-car pricing" in January 1996.

Moreover, my company has been using “actual prices paid by buyers” along with other traditional pricing sources to arrive at vehicle prices for several years. And while my company may have been the first to use a combined hybrid approach to vehicle pricing, I don’t believe we are the only ones doing so now. Therefore, by the time your client’s website effectively launches, the best that TrueCar could really claim is that they are the second, or third, or twentieth, or two-hundredth to use a combined-prices formula.

You also paint (the pun is intentional) Scott Painter’s other efforts with Build-to-Order and Zag as being something important to the car business. They’re not, and never were, except as a source of amusement. They were, and still are, inconsequential.

It’s interesting to note that IdeaLabs, er…I mean Internet Brands, has completely removed from its website any hint that Scott Painter was ever involved with the company. Considering IdeaLabs highly questionable business history, I think it’s incredibly revealing that even they would completely distance themselves from such an innovative industry pioneer.

By the way, why did you leave out Painter’s experience with BoatsDirect.com? Surely some pearl of marketing genius must have come out of that experience that would be useful in developing TrueCar.com.

In about 1998, I was in attendance at the Robertson & Stevens investor meeting when Farhang Zamani and Payam Zamani presented their vision of how AutoWeb.com was going to change the way that consumers buy vehicles. They talked about how their own unpleasant experience in trying to buy a car led them to develop the AutoWeb business plan. I noted, even then, that they never talked about issues that are really germane in establishing a business: issues that seasoned investors should have queried the brothers about had they not been all wrapped up in DotCom hysteria. When I read Scott Painter’s words on how and why he developed CarsDirect, I wondered if he was also in the audience that day and wrote down everything that Farhang and Payam said. It certainly sounds like it, and the end result for the companies and the respective individual investors was the same.

The world doesn’t need another round of worthless companies seeking investors, and the auto industry doesn’t need more goniffs. If I had any prior knowledge that TrueCar was presenting at the TechCrunch50 conference I would have been there to set the attendees straight. We work very hard to make a living in the automotive business. Please tell your clients to find some other industry to fuck up.

Incidentally, if I’m all wrong and Scott Painter and his TrueCar management associates are really responsible for a string of highly successful business ventures in which the investors have profited generously, please let me know. I would be very willing to make apologies and stay out of their way while working with new potential investors.

Most respectfully,

Marc J. Rauch

NO RESPONSE
The Auto Channel never received a reply to the above email.