Attention, comparison-engine Web shoppers: There’s a blue-light special on you and your ilk, and some big names in Internet retailing are reaching for their wallets.
The first deal came on June 1, when online auction marketer eBay announced it will pay $620 million for Shopping.com, the most widely used of the online comparison-shopping search engines and the only publicly owned one. According to comScore Media Metrix, Shopping.com had 22.6 million unique visitors in April, making it the third busiest retail site for the month.
Then on June 7, privately-held Shopzilla revealed that it will be acquired by E.W. Scripps for $525 million. Cincinnati-based Scripps is a mixed media company that owns local newspapers, TV stations and the Home & Garden and Food Network cable channels. Shopzilla is number two in traffic among comparison shopping engines; its14 million unique visitors in April made it the ninth online retail site, as per comScore.
Both deals are expected to close in the third quarter of this year. And parties to both have been fairly close-mouthed about future integration plans, leaving room for speculation about what impact these new shopping-engine buys may have on their buyers.
While eBay is most widely known for its auction business, a growing proportion of the company’s total revenue actually comes from fixed-price sales, much of that from established retailers looking to liquidate overstock or back inventory. Shopping.com began attracting eBay’s eye when the company noticed that many of its retail members were also being listed on the comparison shopping engine.
“I think our sellers are looking at multiple channels,” eBay North America president Bill Cobb said in announcing the purchase. “We started to think about how Shopping.com could be a complementary channel for our sellers. We think our sellers can benefit from getting exposure to a new set of shoppers.”
Cobb pointed to the user review functions on both eBay and shopping.com as one point in which the two companies work together “in spirit”. Shopping.com began life as a merger of Dealtime with Epinions, a site featuring 2 million reviews of products, manufacturers and marketers generated by about 400,000 consumers. One of eBay’s most widely used community features has been the section where buyers rate and provide feedback on sellers. Analysts believe that the two companies also attract buyers with essentially the same deal-hunting mindset.
But eBay says it plans to operate Shopping.com as an independent business, retaining its Brisbane, CA, headquarters. How closely listing on the two engines will be integrated remains to be seen, but it’s conceivable that neither eBay’s small auction sellers nor Shopping.com’s full-price retailers will be pleased by being placed in each other’s company—although both would probably appreciate the added reach.
The two companies also operate on different business models. Shopping.com earns its revenue from pay-per-click (PPC) fees for directing visitors to merchant Web sites, while eBay charges merchants for listing their goods and then pockets a portion of the transaction. With this deal, eBay becomes more involved in the PPC market and more directly competitive with its dominant players, Yahoo! and Google.
Still, most observers agree that if it can be integrated cleanly, Shopping.com will help fill some widening holes in eBay’s business model. One is in inventory; eBay is restricted to offering visitors only those products and merchants who have signed up for listings, while Shopping.com goes out and spiders the Web for product information. Forrester research online retail analyst Carrie Johnson pointed out in a research note that shopping.com also brings a product search platform that should supply a “superior, almost unmatched product search experience for eBay.”
“With a primary mission and focus to match buyers to products, Shopping.com has cracked the nut on managing and normalizing disparate product catalogs from thousands of sellers—a huge headache for eBay and other marketplaces,” she wrote. That platform could eventually be boosting eBay’s product search functions.
The other solution might involve eBay’s growth, which has slackened in recent quarters as the company’s North American and European markets have matured and before efforts in Asia have had a chance to catch on. But while eBay’s unique visits in April were up 6% over the same month in 2004, Shopping.com saw a 15% increase for the same period.
The outcome of the Shopzilla deal seems harder to predict, because Scripps is so much more a traditional media company than eBay, with newspapers like the Cincinnati Post and the Rocky Mountain News in its portfolio. But Scripps CEO Kenneth Lowe downplayed the differences. “In many ways, like our other media businesses, Shopzilla is a content company,” he said in a release at the announcement. Scripps does operate the much-visited Web sites for its cable properties, which may make it easier to incorporate Shopzilla, which Lowe called another “significant Internet play” for the company.
Like Shopping.com, Shopzilla gets its revenue from PPC listings that send qualified buyers to merchant sites. It also operates the BizRate.com site, which resembles Epinions in offering ratings on products and merchants. Shopzilla’s platform also powers the Pinpoint shopping channel on America Online and online malls for Internet portals including Lycos and Time Warner’s Road Runner.
And like eBay, Scripps is expected to keep its comparison shopping engine basically separate while looking for tactical ways to integrate some of its functions. Observers say one possibility might be to give local merchants who advertise in its newspapers access to Shopzilla’s search listings.
Taken together, the two acquisitions suggest the prospect of further consolidation among comparison shopping engines, including smaller competitors PriceGrabber, Nextag and Shop.com. Speculators didn’t have to wait long after the Shopzilla announcement for further developments. On Tuesday June 14, PriceGrabber announced that MSN will incorporate its product offers to the MSN Shopping channel.
Forrester analyst Johnson says the deals signal a trend in the online shopping industry toward larger destination sites that handle non-marketing functions such as search and payment clearance for merchants. She points out that Amazon’s A9 search function could eventually transform the site from a retailer to a full-fledged online mall. And Yahoo! Shopping is beta testing Mindset, a program that will offers different searches depending on whether a user wants to shop or find information.