Here are some points from my ChannelAdvisor Summit presentation:
What’s the Fuss all About? (Why are shopping comparison engines a hot topic?)
Three perspectives on this:
First, from the consumer perspective, shopping comparison engines are all about convenience. As opposed to having to click from merchant to merchant on Google or Yahoo!, the shopping comparison engines have organized their data in such a way that in a couple clicks, consumers can make an informed buying decision.
Second, from the retailer perspective, the shopping comparison engines are more targeted than general search which should lead to a higher conversion rate. This targeting comes in two ways: 1) Yahoo! and Google don’t know what question you’re asking while shopping comparison engines do. If you do a search for refridgerator on Yahoo!, you could be looking for information on a manufacturer recall, a manual, a price, a service center, a replacement part, etc. If you do a search for refridgerator on a shopping comparison engine, though, there are only a couple specific questions you could be asking (Where can I buy this product? Is this a good product to buy? Is the merchant reputable? How much should I pay for this product). 2) The shopping comparison engines have categorized/normalized the world…while placement under a specific feature set of refridgerators might not bring you a ton of clicks, it will increase your conversion rate).
Third, from the investor perspective, shopping comparison engines are at the nexus (Grrr. I think I spelled it ‘nexis’ in my presentation) of a lot of ‘hot’ areas, namely: eCommerce, PPC, vertical search, and international expansion.
Brief History…
Explained how BargainFinder (developed by Bruce Krulwich from Arthur Andersen) was the first shopping comparison engine back in ’95. Found this quote from Jason Olim (CDNow) which talked about the merchants’ reactions: “Predictably, though, merchants aren’t enthusiastic. Three of the eight services, including CDnow, have configured their software so that BargainFinder can’t get in. The merchants told Andersen they did it because the agent overloads their servers, but they are also angry at the idea of having to compete solely on price and return policies, which BargainFinder also lists. “BargainFinder is a one-dimensional criterion,” says CDnow co-founder Jason Olim. He concedes, though, that agents will prevail in the end, adding, “I would use one.” – WSJ Article August ’95
After 10 years, we’re still dealing with the same issues: Expedia and Travelocity site ‘overloaded servers’ or ‘costs of crawling’ as reasons why they don’t give SideStep or Mobissimo access to their sites, many large retailers still think that they have to compete on price to win the comparison engine game, and Jason was right, that these engines prevailed in the end – they are incredibly popular – although, feeds, not ‘agents’ or ‘crawlers’ are the main way merchants submit products.
I went on to explain that every venture backed shopping comparison engine had a successful exit:
Jango acquired by Excite ($35m)
Junglee acquired by Amazon ($250m)
C2b acquired by Inktomi Product Search ($90m)
MySimon acquired by CNET ($350m)
Dealtime/Epinions formed SDC acquired by eBay ($500m)
Bizrate renamed Shopzilla acquired by EW Scripps ($500m)
Are NexTag & PriceGrabber next?
Current Landscape…
I’m a firm believer in the benefits of community, content, commerce and local/mobile coming together…yes, personalization is also up there on the list, but I didn’t want to copy Yahoo!. In the following list, the owner of the shopping comparison engine is to the left of the arrow, the shopping comparison engine is to the right of the arrow, and other related services are in parenthesis:
Yahoo! –> Y! Shopping (Y! Auctions, Y! 360, MyYahoo, Local, etc.)
eBay –> SDC (PayPal, Skype, Kijiji, etc.)
EW Scripps –> Shopzilla (DIY Network, Fine Living, Food Network, etc.)
Google –> Froogle (Google Maps, web APIs, Local, Mobile)
Time Warner –> AOL inStore
Microsoft –> MSN Shopping (start.com, MSN spaces, Vitrual Earth, etc.)
ValueClick –> PriceRunner (CJ, VC Media, etc.)
PriceGrabber
NexTag
Become.com
Smarter.com
IAC –> ‘RedCarpet/Gifts.com’ (Ask, etc.)
FIM?
Features/Things to Think About
Feeds: Everyone asks why shopping comparison engines aren’t that popular (compared to PPC engines) and I think it’s partly because of the feed. This is the merchant’s opportunity to tell the world about his business. It’s not brain surgery, but most people still mess it up. I then showed an example of the requirements for the Y! Product Submit feed and the work that goes into creating a good feed.
Free v. Paid: Most all of the major comparison engines charge a per click fee for all products and then merchants can enhance a listing (get into the top 3-5 listings) through bidding. However, Google shook things up with the launch of Froogle, which allows merchants to list products for free. Because of this, some of the shopping comparison engines might have to rethink their strategy. PriceGrabber, for instance, charges merchants up to a $1000 set-up fee. I don’t think merchants will stand for this much longer.
Ratings: You can’t ignore ratings. It allows the small guys to compete. If the large guys don’t pay attention, they will lose business to the scrappy little players.
Merchandising: Take a look at AOL inStore and MSN Shopping and compare those sites to Shopping.com and Nextag.
Feeds v. Scraping: A feed implies that someone involved with the business spent the time and effort to present his products correctly. All the major engines take feeds as it’s the most effective and efficient way to collect product data. However, only a small percentage of all merchants have product feeds. I don’t have exact numbers, but companies like SDC and PriceGrabber have 6-10k merchants submitting feeds. In the grand scheme of things, that’s not a lot of stores. What happens to the ski shop in vermont that has a basic website? What happens to the high end boutique in SOHO that doesn’t have a tech person on staff? So while feeds are great, they also limit the comparison engines. Using only feeds, the engines miss out on the long tail, they just aren’t comprehensive.
Volume (Traffic)/Conversion: Every presenter at the conference mentioned the strong traffic that the shopping comparison engines get. I told the audience to ignore that data and test out all the comparison engines regardless of volume. Every engine will perform differently in every category. You have to move beyond the hype of 28m unique users and worry about conversion rate, too.
SKU Level Bidding: I truthfully think that all the shopping comparison engine (besides Froogle) need to offer this ability.
I’ll finish this up in another post a bit later…
