Vroom Acquires AI-Enabled Vehicle Information Provider CarStory

Vroom, an innovative online used-vehicle retailer, has entered into a definitive agreement to acquire CarStory, a leader in artificial intelligence-powered analytics and digital services for car dealers and associated clients. The transaction includes the acquisition of CarStory's parent, Vast Holdings, Inc. The new deal demonstrates how important data science has become to used-car retailing, an area of commerce that has often been described as the last bastion of old-school horse-trading.

Vroom made the acquisition to enable it to continue to leverage the machine learning provided by CarStory. The info provider scours more than 7 million car-for-sale listings per day and more than 18 million consumer sessions per month to assemble its predictive market data. And it is the predictive nature of the information that is most useful to Vroom.

After crunching mounds of data, CarStory shows how price changes can affect how long a vehicle stays in inventory. In the pressure-packed world of used-car retailing where every day counts because every car represents both a big investment and an opportunity cost, having this insight is key to maximizing inventory turn and thus profits.

"Combined with their AI-powered analytics, this level of automotive data and insights is not available anywhere else," Paul Hennessy, chief executive officer at Vroom, told Forbes.com. "Vroom uses CarStory's data to help us buy, sell, and merchandise inventory accurately and effectively."

While Vroom will get the benefit of CarStory's expanding level of auto transaction-related information, CarStory will continue to serve other clients that include other dealers, automotive lenders, and third-party car-buying sources.

"CarStory's core business is aggregating, optimizing, and distributing current market data from thousands of automotive sources," Hennessy said. "In addition, they offer digital retailing services like instant cash offer appraisals, inventory aggregation and syndication, and white-label marketplace to dealers, top automotive financial services companies, and household names in automotive industry research and retailing."

But while Vroom is willing to allow CarStory to share some of this data, it is making the acquisition in part to guarantee that it continues to get the benefits of the artificial intelligence-derived information.

"CarStory brings the industry's most complete and accurate view of predictive market data to Vroom's national ecommerce and vehicle operations platform," Hennessy said. "We utilize their pricing algorithms to inform our appraisal values for the cars we purchase from consumers and the pricing we use to sell vehicles to consumers, allowing us to offer competitive pricing based on real-time market data. The data also allows us to more accurately describe what features are in a car which enables consumers to find exactly what they are looking for and provides the consumer with more confidence the car they are buying is as represented."

Although the relationship between Vast/CarStory and Vroom is only two years old, the integration of the two companies is very significant.

"Vroom uses CarStory's data to help us buy, sell and merchandise inventory accurately and effectively," Hennessy told us. "The scale and real-time nature of their data is constantly informing our decision-making. For instance, our instant pricing capability for consumer retail acquisitions is powered by CarStory's data and algorithms."

In other words, Vroom can offer a consumer who wants to sell her used car a firm price for that vehicle with the strong belief that the company will make money from the transaction. Prior to the use of data science, used car dealers typically relied on their experience and "gut."

Vroom says it will pay an aggregate purchase price of approximately $120 million for Vast Holdings, Inc., comprised of approximately 60% in cash and 40% in shares of Vroom common stock. The final cash/stock split is subject to adjustment and will be determined at closing. The transaction is anticipated to close in January 2021, subject to customary closing conditions. The acquisition of CarStory is expected to be neutral to Vroom's operating results in 2021.

"At Vroom, we've built a platform made for scale and driven by data. As car buyers and sellers across the country increasingly turn to ecommerce solutions, CarStory will strengthen and extend the reach of our digital retailing platform, and together we will accelerate the transformation of the massive used auto industry," Hennessy said.