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May 10, 2009

Shopping.com Introduces Tiered CPC Pricing and Variable Logo Rates

Making good on their February promises, Shopping.com announced via email this evening price changes that will take effect this Friday, May 15. The announcement consists of three parts:

1. Tiered CPC Rates

  • What is it?  Shopping.com has broken down every category into at least two product price tiers (a handful will have three). For example, the clothing category has three tiers/rates: Products priced under $25 ($0.10 CPC), $25 - under $50 ($0.20 CPC), and $50+ ($0.35 CPC).
  • What does it mean?  Merchants with lower priced products who either decided against Shopping.com in the past or are currently filtering those products from their Shopping.com feed need to take another look. Lower CPCs equate to less risk. For a $20 clothing item, if your break even at the current $0.20 rate is at a 2% conversion rate, you can now tolerate a lower conversion rate of 1%, meaning you can incur twice as many clicks before an order is placed. This is a potential game changer for merchants who operate at the lower end of the price range.  The opposite is true for clothing sellers with an average order value all/most products priced above $50. Your rates just went up. The ultimate impact to those merchants will depend on their existing efficiency on Shopping.com (which in recent months has been at the high end of the efficiency scale). It will be interesting to see if this tiered approach creates a "selection vacuum" at the low end of each tier. If a $52 clothing item was successful at$0.20 CPC, it may very well not be at $0.35 (a 75% increase in CPC), so it's possible that products at the lower end of each tier will disappear quickly, especially in the highest tier of the three tiered categories. This reminds me a lot of what happens at the price break points in the eBay world. Since eBay (Shopping.com's parent company) tiers auction insertion fees by starting price, many merchants find it beneficial to drop the price of their items by a few dollars to get under the price break. Similarly, depending on other metrics associated with the item, it might make sense to drop the price of a $50 item to $49.99 on one's website to get the 15 cent lower CPC, even though effects all sales and not just those originating at Shopping.com.


2. Variable Logo Rates:

  • What is it?  Many engines charge a flat rate for merchant logos to appear. This simply changes that pricing structure, allowing the current CPC rate on the item to determine the logo charge. So if you are selling a $20 clothing item (CPC of $0.10), the logo charge is 2 cents per click, but for the $30 item (CPC of $0.20) the logo charge is 5 cents per click.
  • What does it mean?  Again, this favors those selling lower priced items, but there is no bad news for anyone. Since the CPC rate is now based not just on product type (category), but also on product price, the increased efficiency needed to justify the logo cost just got much more realistic at the low end. When considering displaying a CSE logo or any other add-on feature, the simplest way to understand the risk is to compare the cost of the add-on to your current CPC and understand that your conversion rate needs to increase by that same amount for you to break even, assuming your average order value does not change. So if your CPC is $0.30 and the add-on is $0.10 (a 33% increase in cost), your conversion rate needs to increase by 33% as well. Depending on the strength of your brand, this may or may not be realistic (it is possible the AOV could change as well but over time, this tends to stay fairly flat).  It's clear that the folks at Shopping.com thought this through and are trying to make the logo more attractive to merchants of lower CPC products/categories by significantly decreasing the ratio of logo cost to current CPC.

3. International Click Filtering:

  • What is it?  Shopping.com will no longer charge US based merchants for clicks coming from outside the US or Canada.
  • What does it mean? This one is great news for all merchants. Since many US merchants won't ship products to the places where these clicks originate, they represent nothing but bad traffic. Eliminating these clicks/cost from merchant invoices can only help. I'm sure some merchants who want to attract international buyers may question this, but note that this does not prevent international shoppers from clicking, it just stops you from having to pay for those clicks.

Overall, this is very exciting news from Shopping.com. It will likely increase the breadth of their product catalog, mostly at the lower end of the price spectrum, and will probably increase adoption of the logo feature. More than that, this significant change is a further indication that the often stagnant comparison shopping industry is progressing. 

Full announcement below:

Shopping.com is excited to announce 2 new pricing programs, beginning May 15th, that will enable you to add low priced inventory and advertise your brand to millions. This is another step to sustain your cost of sales and profitability.
1.    Introducing Tiered CPC Pricing

We are introducing a tiered pricing model where the CPC rates will be based on the product price in all categories.

This innovative pricing model enables you to advertise low priced items and match consumer demand, while maintaining profit. We recognize some tiers will see an increase nevertheless the methodology we used to develop the tiered pricing model is based on meeting a sustainable cost of sale.
 



Click here to view the new rate card.

2.    Launching Tiered Logo Pricing

Shopping.com is making brand advertising more affordable by changing the logo rate from a flat $0.10 CPC to a tiered cost structure based on the item price. The new rates allow you to economically advertise your brand in front of millions of consumers. These new rates should not exceed 25% of your overall spend.

CPC Rate

New Tiered Logo Rates

<$0.19

$0.02

$0.20-$0.39

$0.05

>$0.40

$0.10


Additionally, we recently completed the full roll-out of our international click filtering program. You will continue to receive international traffic but Shopping.com will not charge you for these clicks, ultimately improving your campaign's conversion to sale.

Learn more on how to take advantage of these new prices and features.

Thank you for your continued business,

Tomer Shoval
Managing Director, Shopping.com US




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