sMedia CEO Talks Taking AI to the Automotive Marketplace

Interview conducted by Georgia Williams; article text by Dorothy Neufeld.

Automotive-focused businesses like car dealerships and online vehicle marketplaces are largely untapped when it comes to artificial intelligence (AI). 

As a result, these businesses have been slow to adopt AI at scale, and adoption and deployment of AI has been even slower for smaller companies. According to a Capgemini survey of 500 automotive industry executives, in 2018, the rate at which automotive companies were integrating AI into their businesses at scale increased just 3 percent annually, growing to 10 percent of the automotive industry.

One company that is tapping into AI in the aumotive space is sMedia, which provides services that allow automotive dealerships to better understand their clients though AI insights and analytics.

The company has also recently developed Vroomance, an online marketplace that holds over 16 million new and used cars. It is almost 400 percent larger than Cars.com’s online auto inventory.

At last week’s Collision Conference in Toronto, the Investing News Network (INN) spoke with sMedia CEO Marshal Finch. He discussed the Vroomance marketplace, AI in the automotive industry and the company’s plans to extend predictive analytics to broader marketplaces. Below is a transcript of our interview. It has been edited for clarity and brevity.

INN: For those who aren’t familiar with sMedia, can you explain a little bit about the company and what it delivers?

MF: We’ve got two different sides to our business. One is the business-to-business side. What we do is we help car dealerships sell more cars with predictive analytics, AI and online advertising.

The second side of our business is our Vroomance product, which is our consumer-facing side. We noticed an issue in the market — that people couldn’t see all the cars that were currently for sale. You go to the stock market, and if you only saw a quarter of the stocks that were available you’d never make the best investment decision, right?

So with Vroomance we crawled the web with our AI and found every single car that was currently for sale in North America, which was a little over 16 million. The next biggest marketplace is Cars.com and they have 4.5 million cars. A majority of the cars that are for sale aren’t available, so when consumers are price shopping, looking for that car with an exact year, make, model, mileage or options and they can’t find it … (they) have to settle on a car. Or they can’t do a proper price comparison. They might go to a dealership in their town, find a car for $30,000, but down the street there’s the same car for $25,000 but it’s not listed on Autotrader or Cars.com.

We wanted to give more options to consumers to find what they want. Our goal is to help dealerships find customers and help customers find that right car and that right dealership to work with.

INN: SMedia was the first company and Vroomance was a natural progression of it. How did you come up with these ideas?

MF: It slowly evolved over time. When we first started the company, the big guys in the industry weren’t willing to play with us.

Everything in the automotive industry is feed based. When you work with Autotrader or Cars.com, you have to give a feed of your inventory to them, and they wouldn’t share those feeds with us. So we started building our own crawlers to get that information and slowly over time that evolved and we saw an opportunity to expand that technology into finding all the cars that are currently for sale in North America. But that’s just the first step for Vroomance. So what we did is we created an AI that took unstructured data and turned it into structured data, which is actually a very hard thing to do in AI and we’ve trained it to find the car dealerships and their cars.

Next is RVs, boats, motorcycles, heavy equipment, so we can get insight on the whole market of all these different things. And the cool thing about it too is that automotive is a predictor of the overall economy. We actually know how many cars Ford (NYSE:F) is selling, Chrysler (NYSE:FCAU) and all the original equipment manufacturers, before they do. So we have the insights into how the market, in different areas, in different places, is actually experiencing things.

INN: Is the process the same for electric vehicles and do consumers display the same behaviors?

MF: Right now they are doing the same behaviors. Those consumers are likely to purchase completely online, and do things like that with Tesla (NASDAQ:TSLA), for example. But there’s going to be massive changes in the automotive industry because of electric and autonomous cars over the next 10 to 15 years.

What’s happened is over the last five years, automotive has had record year-over-year sales for new cars, and that’s all dropping off because there’s an oversupply in used cars and that’s where we’re seeing the most growth in the dealership area.

INN: That’s really interesting. Now, sMedia is in 13 countries currently. Do you plan to expand, and which markets in particular are you interested in?

MF: We’re really interested in Mexico, the UK, Australia and New Zealand right now, just because of similar laws, similar demographics, different things like that.

The cool thing with Vroomance is that Cars.com is only in the US. Autotrader.ca and Autotrader.com are owned by different companies, so these companies don’t spread cross border because they have to deploy a field sales team go out there, get the dealership signed up and the inventory. They have to create a two sided marketplace, which is one of the hardest things to do.

With our crawler, we don’t have to create a two sided marketplace. We already have all of the inventory, so we can turn our crawler on in any country. So we’re just starting to get geared up here to get all the cars across the entire world.

INN: And it’s for used and new vehicles?

MF: Used and new vehicles. So you can search for year, make, model, price. One of the cool features is you can actually search by how many days the car has been on the dealership’s lot. The longer the car’s been on the dealership’s lot, the more they want to get it off of there, right, because all of the dealerships are financing their cars, so they have to pay money monthly. They’re already losing money on that car, so they want to move it as quickly as possible.

We’re giving that information to consumers. There’s going to be a tool for consumers to know the value of their trade in based off of the entire market. What we really want to do is give as much knowledge to the consumers so they’re making the best decisions while they’re making their purchases.

On the flipside, we also want to do that for dealers and finance companies. With the industry changing so much over the next little while, if a dealership buys the wrong cars and the industry shifts and they’re not able to get rid of those cars, the finance company loses money, the dealership loses money, everybody loses money. So we’re going to be building out tools for finance companies, like if all the cars in a certain grouping of cars that we’ve sold financing to on average sit in the dealership lot for 800 days, reselling those is going to be almost impossible. So we’re going to also see the risk in car loans for companies as well.

INN: What other areas can your technology be used in aside from automotive?

MF: The Vroomance technology can be used in almost anything. Our goal with it is to eventually become a product search engine where you can search for any product. We did automotive first because that’s where a lot of people do a lot of price shopping. People don’t do a lot of price shopping on their toothpaste. So we started at the high end of the market and (we’ll) work our way down to other verticals like telecommunications, like cellular phones, TVs furniture, boats, RVs, motorcycles, all those types of things we’re starting to test our crawling technology on to build into our system.

INN: So that’s where the company is going next. Are there any other plans that you have?

MF: That’s where the Vroomance side of the company is going. The other side of the company is also going in that same direction. What we’re really good at is the information gap between the online world and the brick and mortar world. People are doing all of their research online and then they’re walking into the store and purchasing. So now we’re in our fundraising mode to look for the proper financial partner to go after those other markets.

INN: That’s really fascinating. Are you looking for investors right now, and what should investors know about sMedia?

MF: Yeah, we are looking for investors right now. What they should know is that we are a bootstrap company. We have 77 team members right now. We’ve got awesome numbers. We’re doing very good for revenue. Our current run rate is $8.2 million and this year we’re going to grow about 120 percent.

INN: And you’re based in Saskatchewan, so it’s great that Saskatchewan is evolving with this tech side as well, especially since there is so much mining.

MF: Yeah, mining, farming, we’ve got some autonomous tractor companies, and that’s usually where all the investment goes in Saskatchewan. But we’ve got an awesome incubator in Saskatoon. Conexus Credit Union in Saskatchewan opened the first credit union incubator and venture fund in Canada. They have a $30 million venture fund, so there’s been three venture funds that have just opened up in Saskatchewan over the last few years, which is really exciting. Tons of great companies. 7shifts out of Saskatoon is doing really well. Skip the Dishes started in Saskatchewan. We’ve had a lot of really good companies come out of there and we’re starting to build that ecosystem. It’s getting really exciting.

INN: The province is ranked well by the Fraser Institute as a place to do business, so it makes sense.

MF: Yeah. Cost of living is very low as well. So we can offer better benefits to our employees. Office space (cost) has dropped by 40 percent over the last three years, so there are really great deals on office space. We were considering moving to Vancouver or Toronto, and we started looking at the cost difference between the three. In cost, the office space was just night and day different. So that’s one of the other advantages of starting a company in Saskatchewan — we were able to bootstrap. In Toronto, San Francisco and Vancouver, it’s a lot harder to bootstrap because of the costs of everything. We were able to keep very lean and just grow very efficiently.

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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.