While the economy is improving and retailers are starting to report better year over year results, Shopzilla is not going in the right direction. Today Shopzilla, part of Scripps Networks Interactive, reported revenue of $37.6M, a 16.6% or $7.5M drop from $45.1M a year ago. Segment profit of $4.9M, down from $7M a year ago, was the lowest I’ve seen since I started tracking the numbers back in Q1 of 2006 (although I’ve never found Q3 2006 segment profit without uSwitch). Read the entire earnings release.
The press release says “Direct leads to Shopzilla merchant partners grew 11 percent year over year during the quarter.” But if direct leads to merchants grew by 11% and revenue dropped 16%, that means the value of those direct leads dropped, or put another way, Shopzilla is collecting less money per lead or per click. That’s not good. So what’s going on? Well, what’s not in the numbers is the traffic acquisition costs – revenue that is split with Shopzilla partners. So Shopzilla might be driving more direct leads to merchants, but it’s not necessarily doing so from Shopzilla or BizRate. I don’t have comScore numbers handy, but Compete shows that over the last year, unique users to Shopzilla and BizRate have dropped significantly.
Have to listen to the earnings call this weekend and see if any of the analysts brought up TAC.
In general, with Google promoting their own shopping engine more and more, Shopzilla, Shopping.com, NexTag, etc. are going to struggle. This is nothing new as people have been predicting the end of the comparison shopping engines since I started covering the industry. But if traffic for these guys completely crumbles, some of the predictions will come true. Maybe we’ll finally see some consolidation in the industry.
I don’t think we’re looking at the demise of a marketing channel here.
Obviously Google’s recent CSE ramp up is going to take a chunk out of the competition however Shopzilla is still one of the largest CSEs and is a long way from struggling.
Steven –
The question is whether the shopping engines – and I’m not talking about Shopzilla in particular – can grow or at least maintain traffic levels. Right now Shopzilla, NexTag, Shopping.com, Become, and PriceGrabber can drive significant amounts of valuable traffic (and some really crappy traffic). If they drive less and less traffic, marketers just aren’t going to depend on the CSEs as much. And considering they have such small mindshare right now compared to SEO and PPC, then they are in a precarious position.
SingleFeed merchants drive significant sales through the shopping engines. But in general, Google Merchant Center drives the majority of those sales AND other channels like Amazon or are becoming more important for merchants.
I don’t think the shopping engines disappear anytime soon, but as everyone has been saying for 5 years, they need to innovate and figure out how to grow. If not, we’ll at least see some consolidation as the small guys won’t be able to cut it.
Hey Brian,
I am in the eCommerce space and what you mentioned is definitely true.
One thing I keep thinking about is, the CSEs are typically buying tons of keywords from the search engines, and these days, keywords are not cheap anymore.
Google product search and Bing, are bringing in way more quality traffic than the CSEs for eCommerce websites, plus, they are free!
If CSEs are just price comparison, I don’t see a lot of value in them from a shopper’s perspective. I asked around lot of my friends, most use Google or google shopping, or bing. So, that just tells the story.
The CSEs are just not the major channels these days.
Hey Jian
If you see CSEs bidding on your keywords you need to give them an ultimatum.
Bidding on your keywords will drive up costs on your search campaigns and cannot be tolerated.
If you reach out to them they will generally agree to cease and desist. It will take them a few days to comply and then a few months later they will start again. It will give you at least some temporary relief.
Thanks Steven for the info.
Other than buying keywords, I can see the CSEs ranking still well on Google and Bing organic search result for product related keywords. But, I think that might change in the future though, as Google and Bing could revise their algorithm to direct more traffic to the shopping sites, rather than to these middle men.
It will be interesting to see what the search engines do in the next couple of years.
I have a strong hobby in search engine related technologies. One hobby project I was toiling with is to do a mini-shopping comparison engine. But, I keep wondering what value it will bring to the customers, other than searching for cheapest product.
If there is no value to the end user/customer, then, it will be difficult to get traffic. So, Brian’s post just confirms my suspicion and hesitancy to program a mini-shopping engine.
On the other hand, I can see product reviews and ecommerce websites reviews, could be some interesting project to work on as a hobby. Since they bring value to customers.
Anyway, just my 2 cents.
[...] ads all over Shopzilla). And they need to do something to stem the loss in traffic and counteract higher traffic acquisition costs [...]