The tragedy of TrueCar

Problem: how to determine the lowest possible purchase price for a new car. Problem solved -- emphatically -- by TrueCar’s reverse-auction process, where buyers, and competing dealers who couldn’t help themselves, watched as new-car prices plunged. That was in 2011. Then, within months, thousands of car dealers across the country suddenly stopped dealing with TrueCar. The dealers claim they arrived at this decision individually. The FTC, however, is currently investigating possible illegal collusion and price-fixing. In any case, TrueCar’s money came from fees charged dealers who “won” reverse-auction bids to sell cars for less than the other guy. So that model was abandoned in order to protect dealers from themselves. Now, only buyers are able to view bids. Car prices, and TrueCar’s profits, have moved back up. TrueCar’s original business model apparently contained a contradiction, asking those who stood to lose the most to also pay for the privilege. But instead of abandoning the efficiency of the reverse auction, perhaps all we need is another revenue model. With TrueCar having lost its nerve, why shouldn’t another company offer reverse-auction automobile pricing -- this time supported by advertising on web and mobile?