At least from I what I have seen, there are slightly different economics.

Based on some hard spending data by a huge player in travel and some smaller players in shopping and their experience suggests that they pay about 50-60c on Google but they get 2.5 clicks on average per session.

That is conversion rate is essentially 250% .

However, they only get around 35-40c on the merchant clicks. So they are sending people to multiple merchants from the same session.

At least those were the economics at the beginning of last year (could
have totally changed since Google Quality Score etc.)

Then let’s up the conversion rate to 250% which means 250 clicks to the merchants. I also upped the PPC rate to $0.55 according to your numbers. But I lowered the conversion rate on the merchant’s site (I was being generous). Merchants get an average of 1-3%, so let�s now call it 2%. With these new numbers, Pepperjam is going to make a $1.25 profit on those 100 clicks. I guess that works. What a great business to be in.

I wonder what Shopping.com thinks of this new competitor�

Brian,

Thanks for noticing Shogging.com – I hope you purchased Ugg Boots through one of the links on the site! If so thanks for the roughly $20 in commission we get on average every time someone like you purchases Uggs from that page.

The idea behind Shogging.com is to integrate the shopping and review experience. The other comparison engines fail to do this. If you take a look at the UGG page that you mentioned in your post – http://www.shogging.com/Zappos-Com/m/00000EA7 you will see an interesting dialogue going on there between visitors about a range of topics related to Ugg Boots. The difference here is the fact that on Shogging versus other engines the user can read and write reviews (blogs) within the same user experience without leaving the page.

As for the compensation model I can tell you that the fact that Pepperjam manages affiliate programs doesn�t really have too much to do with the success of Shogging.com. While most of our e-commerce clients have products on Shogging.com we aren�t really treated as anything more than a super affiliate for commission purposes.

Anyway, Shogging.com is a profitable business because we have a combination of search-engine marketing professionals and technology that allows us to bid on profitable keywords. We do not bid on the types of keywords (head terms) that result in the kinds of returns you mention above. At the same time, we have a team of in-house SEO professionals who make sure we enjoy as much top organic ranking as possible.

Take the UGG example you mentioned as a case in point. Our click-through rates from Shogging to merchant are marginally higher on average than what you mentioned in your example (certainly over 50%) and the conversion rate once the user reaches the merchant Web site is significantly higher (8-15%, or higher, depending on the keyword).

For instance, last month the Shogging UGG campaign alone generated in excess of $25K profit (ad spend of about $45K with commissions in excess of $70K).

I’ve got to admit – the UGG campaign is an exceptional example – most campaigns do not convert as well as UGG’s do at this time of the year. However, what success / failure comes down to with this kind of arbitrage is expertise with selecting keywords, especially branded terms and long-tail terms, and technology – we have both.

Thanks for your opinions.

I look forward to reading about Shogzilla.

Great to see a post/reply from Pepperjam. Wonderful insight to have. Two things I wanted to comment on:

1) The Pepperjam/Shogging.com poster did something NONE of the other shopping engines would ever do: referred to their Shogging.com endeavour as an arbitrage play� The CSEs get accused of this a lot� of exploiting a PPC price differential and being an unnecessary middleman providing little, if any, added value. Arbitrage alone is not a long term business model and it also has a negative connotation in the CSE space� so of course none of the shopping engines advertise the fact that they are so dependent on it. They play up their added value (often hard to see) as much as possible. It�s true they do add value, but you have to question their intentions when they place AdSense above the fold or, heaven forbid, above their own product listings. Shogging.com does have an interesting approach and at least they are attempting to integrate some good content. For this reason, I�m surprised they would use the term �arbitrage.� Maybe I�m crazy.

2) The Pepperjam poster said: ‘The idea behind Shogging.com is to integrate the shopping and review experience. The other comparison engines fail to do this.’ I disagree. This is Become.com’s primary value proposition. Become provides an integrated comparison shopping and product research functionality. Moreover, they provide the best, most comprehensive type of research: web search. They actually started as a vertical shopping search engine and only expanded to comparison shopping later. Looking at this page (http://www.become.com/research?q=ugg+boots) will reveal a tight integration between research and product listings. Beyond the web search, if you mouse over a product, you can see that users can also write reviews/recommend products. I agree that a lot of the CSEs have not integrated this type of information in a useful manner, but Become is certainly trying.

I’m not sure if Shogzilla makes sense, although I just secured the domain name just in case!

BTW – when we secured the domain shogging.com it really didn’t have anything to do with a play on the shopping.com name. In fact, we originally purchased shog.com, but we had difficulty writing up an ‘About’ section without using the word shogging, so we went ahead and acquired that domain too!

Personally, I think the concept of shopping and blogging is pretty cool and it is working very well for Pepperjam!

Thanks Brian for the insight into the PPC/shopping relationship.

Adding the social aspect to comparison shopping has proved a bit difficult for many CSE but it appears that PepperJam has done this well. It appears as though this thing could actually become very popular. Especially as the blogging community grows.

I wish I had thought of this! Wanna sell me Shogzilla.com?

As always, I am skeptical of sites like this and claims of profitability. Quantcast and Compete both show about 60-70k visits per month. Is my math wrong or is that in excess of $1,000 RPM?

Nice stats if my math is correct. Someone check that for me, okay?

[...] company is willing to spend some money acquiring merchants through the PPC channels. Comments on my post about Pepperjam’s Shogging.com prove that there’s still room for new [...]