In its second-largest acquisition, Amazon buys the company for $970 million.
Can Priceline apply its pressure to the pumps, allowing consumers to roll back gasoline prices that broke records in recent months and touched off protests? The name-your-price Web site intends to try, adding petrol to a product mix that already includes hotel rooms, airline tickets, rental cars and groceries.
“This is the perfect time for consumers to do something about the high cost of gas,” says Priceline founder Jay S. Walker. “It’s the battle of the titans-the global Internet vs. global gas prices. OPEC was the force increasing the cost of gas. The Internet is the new counterforce to lower it.”
Priceline, based in Stamford, Conn., has announced a May launch date for the gasoline service, which will allow customers to scout for bargain gasoline without driving all over town. If a service station accepts their offer, motorists can lock in the price for up to 50 gallons per month. Priceline predicts customers will save 10 to 20 cents per gallon by logging on before gassing up.
The gasoline service works much like Priceline’s other categories. Consumers will key in their preferred per-gallon price and ask the database to query three local gas stations participating in Priceline’s program. If a station accepts the offer, the price will be locked in, and the consumer’s credit or debit card charged for the number of gallons requested. Priceline then will issue a gas card that the customer will use to to fill up at the special price.
Yet some analysts think Priceline stands to gain more publicity than profits from its latest expansion. Ken Cassar, senior analyst at Jupiter Communications, New York, contends the company will end up subsidizing discounts on gas in the name of driving traffic to its site. “I really don’t think there’s much money to be made here,” Cassar says. “But because it’s a purchase made so often-like groceries-it’s a good traffic driver for Priceline.”
A commodity good such as gasoline already produces thin margins for service stations, so Priceline is essentially creating a loss-leader business, similar to its grocery market. That’s a risky move for Priceline, Cassar warns, “if the profitable markets, like travel, do not develop as anticipated.”
Yet the buzz Priceline creates may be better than advertising. Robert Labatt, principal analyst the Gartner Group, Cambridge, Mass., applauds Priceline’s timing. “With the rising gas prices, this is a handy time to launch this,” he says. “This will benefit consumers and oil companies. Priceline has leveraged this beautifully.”
Labatt also admires the shifting power of consumers using the Web to tap discounts in new markets. “The Internet is changing things,” he says. “Priceline is answering a valid need.”