Comparison Shopping Engine Strategies

Jellyfish: social shopping turns one

Light the candles and break out the pointy pastel-colored party hats.

Jellyfish turns one today, and they're turning over the reins to Jellyfish users, allowing them to run their own Smack Shopping shows.

We like Jellyfish not only because of the reverse-auction concept (price continues to drop until all products are sold), but because of their community-building efforts (partnership with Slashdot) and the cashback model (read about it here).

So happy birthday -- let's hope there are many more to come. 

Congratulations! 

Previous coverage of JF on this blog below:

• http://www.csestrategies.com/cse/2006/11/smack_a_jellyfi.html
• http://www.csestrategies.com/cse/2006/12/next_wave_of_cs.html

Written by Scott Hurff.  scott.hurff at channeladvisor (that's dot com).

Will CSEs move into the AdWords gap left by eBay?

eBay will be shifting ad dollars away from AdWords (AW) and spreading it across other advertising channels like Y!, MSN and possibly banner ads after the big eBay Live showdown blackout.

It's known that eBay is the largest advertiser for US AW spend -- at least for the past quarter -- generating 3.8 percent of sponsored impressions. 

Over on the eBay Strategies blog, Scot noted that some ChannelAdvisor merchants saw a material 20% drop in sales as a result of the AdWords blackout.  If this trend continues, merchants will have even more of an incentive to "break out of the eBay cage" and deploy products across CSEs.

This is an opportunity for CSEs to start buying up more AdWords -- driving more traffic to their properties and driving up the value of their properties. 

So will CSEs move into the AW gap?  Will this have any material effect on CPC?

It remains to be seen whether eBay's AW spend slowdown will actually affect CPC.   I predict that certain terms will temporarily be bid down, while competitors notice and swoop in -- driving CPC back up as it approaches equilibrium again.

Talk to me -- what do you think?

Written by Scott Hurff.  scott.hurff at channeladvisor (that's dot com).

O Canada, o Canada...

" Our home and native land!
True patriot love in all thy sons command..."

I'm not Canadian but there are a number of CSEs out there in the big North that you may have never heard of -- which means your products aren't being seen, either.

So if you're an internationally-shipping merchant, take a second or two to read up on this lovely list.

Link: Canadian Comparison Shopping Roundup

Written by Scott Hurff -- scott.hurff (at) channeladvisor (that's dot com).

More NexTag speculation from become.com

Michael Yang (pictured) was the founder of MySimon and now Become.com.  If you ever get a chance to chat with him - do it!  Michael is one smart guy and he's been in the CSE space for the last 10 years and knows where all the skeletons are buried.  Blogging stocks has a good interview with Michael here where he covers what they are up to at Become and also speculations on NexTag.

Snippet:

How are things with Become.com?

Things are going very well. We have grown at over 400% from last year Q1 to this year Q1 in terms of traffic and revenue. Our joint venture in Japan (Become Japan KK) is also going very well with similar growth in that market. We are now gearing up to launch major new features for the holiday shopping season.

Bear Stearns wrap-up...

Earlier this week I had the honor to be on a CSE panel moderated by Bob Peck with some great panelists:

• Talmadge O'neill (disclaimer, Talm and I go way back to OVER days)  from Mezimedia/smarter.com
• Michael Yang (founder of mysimon!) from Become.com
• Glenn Meyers from mytriggers.com/shopbig.com

We covered lots of topics and Bob Peck did a great job catching the gist of the conversation in his summary (follows).  One behind the scenes topic was lots of speculation around the NexTag exit.

There are enough ex-NexTag people around that some data is starting to come out:

• NexTag revs: $150m
• 30% EBIT margins
• $45m/y profits

So they were taken out for 8x revs, 26x EBIT.  Looking back, I'm pretty sure this is a record for the CSE space, not only on the total value of the deal but on the valuation metrics!

You'll see in Bob's notes, Mezi is closing in on $70m in revenues with a similar margin picture as NexTag.  I've got to give a big tip of the hat to those guys - it's always cool to see folks you worked with previously that took the entrepreneurial path do well - KUDOS!

Peck notes follow->

Become.com

• Operating from U.S. and Japan; raised 11.7M in capital, two patents pending
• The site currently features 5000+ retailers and attracts 3M UV.
• The speaker strongly believes in social shopping.
• Currently, most of Become.com’s merchants are CPC based expect for one, which is CPA based. Retailers get 60-70% of traffic from search engine or CSEs.

myTriggers.com

• 3 year plan: targeting $150 million in revenues (150% YoY growth) and 30% net operating margins
• Low capital requirements for the business model: <15 million raised
• Differentiation from other CSEs:

• myTriggers is a CPA based model (WalMart just removed CPC feeds from many CPC based CSEs);
• Eliminates risks for merchants;
• Deliver deterministic ROI;
• Limited maintenance and management resources from retailer point of view.

MeziMedia / Smarter.com

• Global shopping sites started as online coupon site. Properties include Smarter.com.
• Market leadership in both U.S and Asia (properties in aggregate are the #4 largest site in the U.S; #4 in Japan; #3 in
• China) and is now moving to Europe.
• Currently has 160+ employees with offices in Los Angeles, Shanghai and Tokyo
• Not capital intensive: <$2.5 million raised
• Project $65.6 million in revenues in 2007 and operating cost is about 10% of revenues aided by China infrastructure.

ChannelAdvisor

• Scot Wingo believes that the comparison shopping industry is going through transition from Comparison Shopping 1.0 to Comparison Shopping 2.0 as the industry addresses challenges such as acquisition of traffic and start to embrace niche products.
• He observes that dollars accelerate to comparison shopping and the vertical-specific comparison shopping strategy is very successful.
• CSE can ultimately become part of search – just like Google is incorporating Froogle into universal search.
• ChannelAdvisor clients marketing spend on CSE was about 5% two years ago and is now 15% and could likely to increase to 20-25% in steady state.

TheFind and PayPal team up

TheFind and PayPal made an interesting move today at midnight -- a co-branded shopping search engine that uncovers products from merchants who use PayPal.

As with TheFind's basic engine, merchants (automatically included) in the co-branded engine don't pay to be listed on the CSE, don't pay CPA fees and don't require a revenue share of any kind.  PayPal takes its cut solely from processing fees and TheFind draws revenue from ads. 

Why is this interesting? 

• TheFind just added 50 million products from 200 million stores, in addition to its existing catalog of 175 million products from half a million stores
• It reveals a new monetization / traffic driver angle for TheFind: partnering to offer unique engine results -- imagine an engine that searched solely for Louis Vuitton handbags or American Express merchants or FedEx shippers...
• It's a much better alternative for discovering PayPal-enabled merchants than PayPal's own directory, and is really the only engine I know of that searches exclusively PayPal retailers
• Google Checkout dominates Google search results and this is one strategy for PayPal to drive more traffic through its payment processing gateways; TheFind benefits by associating with a trusted brand and listing more products

In a related post, Scot wrote back this March that TheFind may be the fastest-growing "second-gen" CSE. 

BTW I will be at eBay Live Thursday - Friday.  Drop me a line.  We can hang out.

Written by Scott Hurff.  scott.hurff at channeladvisor dot com

Pricegrabber continues to build new verticals

Pricegrabber launched two new internal verticals last week: an auto parts category and a "green" shopping area called ShopGreen.  Both verticals are visible on the index page of the site, with the eco-friendly products being promoted via a "popular category" image.

PG is certainly promoting the green category and it's lined up a nice grouping of merchants: Patagonia, Sephora, etc. -- and also groups products into buying guides (for him, office, for fun, you get the picture).

The auto parts category, according to Rick, is getting some good traction and existing merchants on PG can simply remap their categories to the new structure.

Written by Scott Hurff; scott.hurff (at) channeladvisor (dot) com

Preview: Bear Stearns Internet Roundtable CSE Panel

ChannelAdvisor was invited to attend Bear Stearns, Internet roundtable next week by good friend Bob Peck and participate in a CSE discussion.

On the panel, we have Become.com, MeziMedia/Smarter.com, and MyTriggers.com (all part of what I think of as CSE 2.0).  As the only non-CSE on the panel, I'm already feeling compelled to take the side of the retailer so this should be fun.  I'll be blogging some notes from the conference after the panel on what went down.  Talmadge@Smarter and I go way back to the Goto.com/Overture days, so I'll probably pick on him first as I know he has thick skin.  I just hope that big robot (his name is Smarty BTW) doesn't serve as his bodyguard when not finding the lowest prices on the web.

If you're in NYC and want to swing by, feel free to shoot me an email (scot at channeladvisor.com). 

BTW, does NextTag's exit, finally mark the official end of CSE 1.0?

NexTag sells majority stake for $830MM

It's confirmed: We just got word that NexTag sold a 2/3 stake to Providence Equity Partners, a private equity firm for $830MM.

This values the company at $1.2 billion.

Om had a good writeup four days ago:

Nextag is said to be doing about $200 million in revenues, with a lucrative mortgage and other lead generation business being the rocket that is driving the company. Internet giants for example – have taken out its peers – MySimon, PriceGrabber, Shopping.com and Shopzilla.

CONGRATULATIONS  to NexTag!  Lots of hard work went into building this business, and we're proud at ChannelAdvisor to be a partner.

Written by Scott Hurff. scott.hurff (at) channeladvisor (dot) com

Widget Attack, Episode II: Wize Forays into New Territory

Contextual shopping widgets --  mostly targeted at bloggers or people with social network profiles (see my previous write-up on Facebook Apps) -- will quickly become a commodity, but I believe the early movers will gain an advantage both in mind share and insight into what works and what doesn't.  Wize has made this early move.

Wize is the CSE that pulls together product reviews and calculates a standard rating -- their offering is a TypePad-only widget aimed at bloggers who want to make some money.  I think TypePad-only is a mistake, but I also bet that this is an early experiment and more options will come down the road.  The widget installation page says this much, albeit somewhat vaguely. 

It's an affiliate model widget that will match products up to content on your blog, the rev split being 50/50.

To me, Wize is compelling because it engenders a certain level of trust by scraping reviews from across the Web, drawing you into a purchase. 

This same idea applies to the widgets, which applies the review technology -- displaying a  ranking on the products that Wize determines are most relevant to the post.

Check it out. 

It's a bit buried and I put into the Wize grapevine that the widget should be strongly promoted on the front page -- I think it's essential to traction.  We shall see!

Overall, I think it's a good foray and I'm excited to see how it grows + generates revenue.