Investing in Shopping Comparison Engines

January 30, 2006

The third most popular question I get is ‘are there any pure play stock picks for comparison engines?’

The answer is no, but here are some ways to play the comparison engine game. In most cases, revenue and profit contribution from the comparison engines are insignificant when looking at the whole picture.

Indirect investment opportunities:
EW Scripps (NYSE: SSP) – the company owns Shopzilla which is a strong contributor to EW Scripps’ profit

GSI Commerce (NASDAQ: GSIC) – Like ChannelAdvisor, Channel Intelligence, Performics, and Mercent, this company will benefit as more merchants realize the benefits of advertising on the shopping comparison engines. In case you missed it, GSI Commerce released a note last week about the company’s success in generating a higher ROI for clients who advertise on the engines.

CNET (NASDAQ: CNET) – the company owns MySimon and CNET Shopper. CNET doesn’t break out results for the shopping comparison engines.

Even more indirect investment opportunities:
eBay (NASDAQ: EBAY) – the company owns Shopping.com/Epinions, although Shopping.com’s revenue contribution is probably less significant than a rounding error.

Amazon (NASDAQ: AMZN) – technically not a shopping comparison engine, but with Amazon Marketplace, the company comes close. Also if you’re looking at online retailing, you have to consider Amazon.

GUS plc – the company owns PriceGrabber as well as a number of online marketing/lead gen businesses through its Experian Interactive unit.

Yahoo! and Google both own shopping comparison engines, but when you’re in the multi-billion dollar PPC game, the shopping units aren’t even a blip on the radar.

Private companies:
NexTag, ChannelAdvisor, Channel Intelligence, DoubleClick (which owns Performics)

Related Posts:
GSI Commerce Swings Back – February 17, 2006


SideStep Lands at Amazon

January 30, 2006

As reported back in November, SideStep has replaced Hotwire as Amazon’s travel partner. Well, the SideStep/Amazon co-brand site is now up and running.

Here’s the old Amazon travel page featuring Hotwire:

Hotwire on Amazon

Here’s the new Amazon travel page featuring SideStep:

SideStep on Amazon

At this point, the link to the above page is still pretty much burried at the bottom of Amazon’s busy home page and SideStep doesn’t show up on any of Amazon’s travel related pages: Books, Magazines, Luggage, etc, but I assume this will change over time.

I have not received any emails about the new travel section from Amazon, but I assume they will promote the service to people who have travel related products in their wish list.

Below the fold, Amazon has added some links promoting its various travel related content such as Romantic Travel Destinations, Where to Ski, Swimwear:

SideStep Travel section on Amazon

Once you click through to SideStep by performing a search, there’s a bit of Amazon branding at the top of the page. I assume SideStep’s logo will fill in the blank space currently showing:

Amazon on SideStep

So that’s it. When the deal was originally announced, neither company had any comments, but I will follow up and see if I can find out anything new. SideStep is a travel search engine, so I hope the company doesn’t clutter its site with a ton of travel content from Amazon, but Amazon definitely has the opportunity to elegantly push SideStep along side its own travel related content.

In other SideStep news today – SideStep launches in Ireland

Related Posts:
Rob Solomon books a trip on SideStep – January 16, 2006
Mobissimo $100 Offer – November 23, 2005
Travel search hitting tipping point – November 23, 2005


ChannelAdvisor Expanding in Seattle

January 26, 2006

ChannelAdvisor Seattle
ChannelAdvisor recently opened up a Seattle office and the company is looking for talent. Current openings include:

Enterprise Sales Manager – Retail Focus
Enterprise Sales Manager – Manufacturing Focus
Corporate Account Manager

See all the job openings.


Free Clicks at Become

January 25, 2006

Become is running a ‘free clicks for a month’ promotion. Smart idea, and I encourage merchants – especially in the hard goods categories (think consumer electronics) – to take advantage of the opportunity. Sign up with Become here.

As I said, I think this is a good move for the young company…but why not take it a step further? A couple people have told me that Pricewatch offers a free month of clicks to every merchant upon sign up. This deal isn’t part of a special limited time promotion, but rather a standing offer to all merchants.


What Happened at Shop.org FirstLook 2006?

January 25, 2006

Since I wasn’t able to attend…would love to know what everyone thought of the conference. Please comment below.

Thanks!
-b


Yahoo! Shopping Holiday Recap

January 25, 2006

This was released by Yahoo! at Shop.org:

2005 HOLIDAY RECAP PAGE

Back in December, I tried to compare apples to apples and highlight unique user data for all of the shopping comparison engines. Unfortunately, not all the engines were interested in releasing the information AND the audience measurement data from comScore, NetRatings, and Hitwise was a bit messy. I’ll try to figure out a workaround, but in the meantime, I wanted to at least push some of this information out there.

What’s interesting about Yahoo! Shopping’s traffic data is that Cyber Monday actually lived up to the hype. Most comparison engines I talked with leading up to the holidays said that traffic usually spikes around the second Monday in December.


Geoffrey Colvin – Angel Customers and Demon Customers

January 19, 2006

From the Future of Information Summit:

Angel Customers and Demon Customers by Geoffrey Colvin

Colvin’s book is about how a company can find future profitable growth…

“The growth will come from customers – customers are where the money comes from. So obvious that no one says it. We say Europe had a great year…yogurt was down 10%. That’s not completely accurate. It’s more that Europeans bought more profitable services…less people bought our yogurt.”

“You should think of your portfolio of customers and what each of them is worth. Just think about the concept, not lifetime value of a customer. Most customers don’t have the faintest idea. We ask a couple questions to clients: 1) Do you have any unprofitable customers? Most people say that we have some customers who are more profitable than others, but not that they have unprofitable customers. 2) Who are your best and worst customers? Most people can give us names, but when we do the analysis, most people are wrong.”

“Profitablility = economic profitability = total profit minus cost of all capital used in the business. Economic capital is the closest measure to what effects the stock price.”

“Royal Bank of Canada (a customer of Colvin) calculates the economic profit of each one of its 10m customers each month. You can do it too.”

“What do you find when you do this? The profitability of your customers is distributed in a fairly extreme way. Putting them into deciles (most profitable = decile 1, next most profitable = decile 2, least profitable in decile 10). Example was for a company worth $2500 of economic profit. The top decile had profitability equal to the profitability of the entire company. The last decile had economic profitability of -$2000. The average economic profit per customer = $250. Most people are surprised that some customers can be so profitable and others can be so unprofitable.”

“The questions: Do you know which decile which customers are in? Some companies spend money to bring in customers which are reducing the value of the firm (deciles 8, 9 & 10). But at the same time, it’s not necessarily smart to cut off the last couple deciles. While deciles 9 & 10 might include people who are losing you money, you want to turn them from negative to positive, not just get rid of all of them. Sure, there are customers who you want to get rid of – Fidelity Investments example – a customer who called his broker 3900 in one year…but you first want to understand why customers are profitable or unprofitable. You need to understand the needs of the unprofitable companies.”

“Example = Best Buy. They are competing against WalMart and Dell – obviously tough competition. But they are doing well. Why? Because they are dividing customers in terms of needs” (from CIO Magazine – link below):

* Affluent professionals who want the best technology and entertainment experience
* Active younger males who want the latest technology and entertainment
* Family men who want technology to improve their lives—practical adopters of technology and entertainment
* Busy suburban moms who want to enrich their children’s lives with technology and entertainment
* Small-business customers who can use Best Buy’s products and services to enhance the profitability of their businesses

“Best Buy looked at pilot stores and who lived around a particular store. They then change the stores to serve the particular customers living in the area. During the first year, Best Buy stores had same store sales increases on 9%. The pilot stores had same store sales increases of 30%. Why? Because the stores were designed to meet the needs of their customers and the employees (even the ‘Blue Shirts’ on the floor) were empowered to make changes. See this CIO article for more information.”

Colvin’s began his talk about a high network customer of a bank which had a trading account and depository account; both of which were extremely profitable for the bank. The customer then wanted a mortgage, but when he went to the mortgage department of the bank, they weren’t able to do anything special for the customer as the mortgage department and the other departments weren’t in sync. The customer eventually left for another bank to get his mortgage and later transfered some other money to the new bank.

Bringing this back to his talk, the point is that someone at the bank should have been looking out for that kind of customer – the one in the first decile who is already responsible for much of the profitability. As opposed to having people in charge of certain fiefdoms – in this case, mortgages, banking, trading, insurance, trusts, etc., the focus should be on customer segments.

“Treat different customers differently because they have different needs.”

Related Posts:
Future of Information Summit – January 19, 2006
Conferences/Travel – January 12, 2006


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