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Web pioneer Edmunds continues to set the pace for all things online about cars

It's 8:40 a.m., and the staff of Edmunds is already rowdy. Chief Executive Jeremy Anwyl is calling new hires to the center of the room, a vast, loft-like space that forms the core of the company's Santa Monica (Calif.) headquarters. Each new employee in turn, from every level and every department, is met with applause and raucous hoots from a crowd of several hundred, as well as by digitally transmitted cheers from a satellite office in suburban Detroit, connected via videoconference.

The weekly welcoming ceremony is emblematic of the open culture and rapid growth of the automotive Web publisher. Edmunds started in 1966 as a publisher of booklets packed with automotive specifications intended to help car shoppers make buying decisions. In 1995 its Web site was launched as a trial balloon by a skunk works team of employees. Since then, Edmunds has developed into the go-to online resource for car buyers and enthusiasts. "It's become the iconic name for car research and pricing," says Wes Brown, a partner in the Los Angeles consumer marketing-research firm Iceology, who has worked with Edmunds in the past.

The cornerstone of the business is the data-driven Edmonds.com, which helps shoppers compare and price new vehicles. In a little over a decade the Web site so overshadowed the print operations that Edmunds last year got out of the print business altogether. "It was difficult for us emotionally, but not financially," says Avi Steinlauf, president, chief operating officer, and son of Peter Steinlauf, the entrepreneur who is the private company's largest investor. At the time, the print publication was contributing less than 1% of sales.

Edmunds generates revenue by selling advertising and sales leads to local car dealers. It won't break down its finances, but executives say it is profitable and revenues have grown at a compound annual rate of 43% over the past seven years. The staff has ballooned to some 370 employees from just 20 in 1998. And a profit-sharing program is on track to give every worker a 20% salary bonus in 2007, up from 9% last year.

Many media outfits have tried to reformulate around narrow topics to give advertisers more targeted audiences. Earlier this month, for instance, Barry Diller said that he was breaking up IAC/InterActiveCorp (IACI) into four "pure play" Web companies. Edmunds faced the opposite challenge: Its shopping data already drew highly motivated one-time visitors. The key to much of its recent growth, company executives say, was the ability to create a car-themed microcosm to keep consumers returning to the site even after they bought a vehicle. "We're all headed toward the same place," says Mike Dushane, executive editor of rival Car and Driver magazine's Web site. "While we're building data and tools to complement our editorial, they're at the same time trying to build editorial brands."

Edmunds executives fostered the rapid development and launch of a host of other projects to create an online environment for every auto enthusiast. One such project is Inside Line, a Web car magazine that Edmunds unveiled in January, 2005. Inside Line's monthly readership has grown to 3.5 million. In February, 2006, executives launched CarSpace, an auto-themed social networking site based on the fevered debates on Edmunds.com's forums over such topics as the environmental merits of hybrid vs. diesel technology. More recently, they initiated several blogs--some in just a matter of weeks--to cover green technology and car industry news.

Says Erich Merkle, vice-president for forecasting at the Grand Rapids (Mich.) research firm IRN: "They've managed to thoroughly broaden their audience. It's one thing to be used by the 16 million potential auto buyers every year, but quite another to be able to draw in the enthusiast crowd of readers which is intensely loyal."

Matt Vella is a writer for BusinessWeek.com in New York.

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