Shopping That Really Sells

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By Leslie Walker
Thursday, June 9, 2005

Bye-bye, Shopping.com. So long, LowerMyBills.com. Hasta la vista, Shopzilla.com.

Your 15 minutes of Internet fame may be over.

All three comparison-shopping guides are being snapped up for big bucks by larger companies that regard these small fry as the future of Web commerce, even if past takeovers failed to live up to their promise.

The E.W. Scripps Co. said this week it will pay $525 million in cash for Shopzilla.com, a site that lets consumers search for products and compare details of 30 million items from merchants across the Web. Last week eBay announced it would fork over $620 million in cash for Shopping.com, a similar service that went public last October. Both are free to consumers and charge merchants referral fees each time a shopper clicks through to view an item on a merchant's site.

Also last month, information broker Experian said it would pay $330 million for LowerMyBills.com, a specialty guide that lets consumers compare interest rates on mortgages, credit cards and other loans.

Web shopping guides are hot properties these days because they are profitable and draw a lot of traffic. While their businesses remain small -- Shopping.com reported $99 million in revenue last year, and Shopzilla projects at least $130 million this year -- their traffic is huge. ComScore Media Metrix reports 22 million people visited Shopping.com in April and 14 million went to Shopzilla.com, which also owns a user product review site called BizRate.com.

That traffic is a magnet for companies trying to buy into Internet advertising and commerce. Building online audiences from scratch is getting much harder as the Internet grows bigger, sprouting more destinations for an audience whose growth is slowing. Moreover, shopping guides tap two of the Web's fastest growing revenue streams -- advertising and commerce -- and blend them in ways consumers find helpful.

But the main reason these start-ups have flourished seems to be their independence, which allowed them to serve Web shoppers first and foremost.

That will change after the mergers go through, and they will be serving new masters with different business agendas.

At least, that's what happened following a similar merger spree involving four Web comparison-shopping sites back in 1998, when Amazon.com bought Junglee, Excite bought Jango, Infoseek acquired Quando Inc., and Inktomi Corp. bought C2B Technologies Inc. Not only did we hear little about those shopping start-ups ever again, but the only purchaser that became a big Internet player was Amazon.com (though Inktomi was bought by Yahoo and now powers its search engine).

It's also worth noting the price tag for that 1998 spree was roughly $300 million, about one fourth the tally for this year's binge -- and we are only halfway through 2005.

What will be the impact?

It varies with each deal, but only Scripps has no obvious agenda besides participating in Internet advertising, that is, to diversify its traditional ad empire beyond TV and newspapers. Scripps publicly declared it will not redo Shopzilla or change its business model. Asked on a conference call if Scripps would exploit synergies between it and Scripps's other Web properties, such as ShopatHometv.com, Scripps chief executive Kenneth W. Lowe said they would be run as "two separate businesses, with two separate focuses." Moreover, Scripps signed employment agreements to retain Shopzilla's top managers. The only cross-promotion planned so far, Lowe added, is promoting Shopzilla on Scripps cable networks.

The eBay deal is more complex. Ebay executives said they bought Shopping.com to help eBay merchants by giving them a new sales channel or means of reaching new buyers, especially for in-season merchandise. To date, most eBay merchants have specialized in used or overstocked goods.

Without specifying how, eBay said it would integrate product listings from its sprawling auction site with those on Shopping.com. Sounds simple, but it's far from it -- and it could lead to a supply glut on Shopping.com that would make it harder for consumers to find stuff.

"It's probably good for smaller sellers on eBay . . ." said Jonathan Garriss, executive director of the Professional eBay Sellers Alliance, noting that many small sellers haven't started advertising yet on Shopping.com and similar Web guides. But Garriss, who also is chief executive of an online shoe retailer called Gotham City Online, said most big sellers already use both eBay and the comparison guides.

"For those who already do business on Shopping.com, like Gotham City Online, it may get tougher to stand out in a crowd since I believe eBay will propagate a lot of their listings onto the site," he said.

It remains to be seen what kind of company might gobble up the remaining shopping guides -- or whether some might go it alone and succeed at building long-term Internet companies.

PriceGrabber.com is among better known players and has been profitable for 14 quarters, according to its chief executive, Kamran Pourzanjani. The site powers more than 200 other comparison-shopping Web sites, including those offered by Comcast Corp. and Ask Jeeves Inc. Though it has received nibbles of interest from would-be suitors, Pourzanjani said PriceGrabber is not angling to be bought: "We feel we can be the stand-alone comparison-shopping company," he said.

Another takeover candidate is rival NexTag. Its chief financial officer, Stephen Imbler, said NexTag also is not looking to be bought and may benefit from the sale of the two traffic leaders. "It actually is good for us in the mid-term," he said, "because these other companies will be distracted with their mergers, and their focus will be subordinated to the larger company's vision."

Given the short, frenzied history of Web commerce, it's a safe bet there will plenty more innovation and takeovers among shopping guides. Already, a new breed has sprouted, meta-shopping guides that pull results from many different shopping and search sites into one place online.

Consumers may find these super-size guides confusing halls of mirrors, since they pull links from sites that in turn pull product listings from other sites. But any way you look at it, these meta-guides show the evolution of comparison-shopping is far from over.

Leslie Walker will be online at 2 p.m. today to host a discussion about Internet shopping with Kamran Pourzanjani, chief executive of PriceGrabber.com. To participate, go tohttp://washingtonpost.com. Send e-mail towalkerl@washpost.com.


© 2005 The Washington Post Company

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