There’s always big news happening in the online retailing industry. But not often is there news as big as the big news at the beginning of the summer. In rapid fire order, two comparison-shopping sites were snapped up in big-bucks deals. On June 2, Shopping.com, the largest comparison-shopping site, was acquired by eBay Inc. for $620 million. On June 6, Shopzilla was acquired by The E. W. Scripps Co. for $525 million.
The acquisitions are validations of the importance of comparison-shopping sites, say the principals of the acquired companies. “Comparison shopping is accelerating and not slowing down, so it stands to reason that investments should be following this growth trajectory,” says Chuck Davis, CEO of Shopzilla.
While coming from different approaches, both acquisitions make sense, the acquiring companies say. “Shopzilla is a significant Internet play for Scripps,” said Kenneth W. Lowe, president and CEO of Scripps. “In many ways, like our other media businesses, Shopzilla is a content company.” EBay says the Shopping.com acquisition will support eBay’s sellers by exposing them to a broader audience of shoppers while providing Shopping.com’s shoppers with direct access to eBay’s product listings.
Founded in 1996, Shopzilla, formerly BizRate, is expected to generate $30 million to $33 million in EBITDA profit, also excluding investment results and unusual items, on revenue of $130 million to $140 million for the full year 2005. The majority of Shopzilla’s revenue is derived from referral fees paid by participating online retailers. The $620 million cash-for-stock Shopping.com deal is more than 50 times Shopping.com’s 2004 earnings of $12.2 million.
The heads of other comparison shopping sites took the news of the acquisitions in stride. “It doesn’t change the landscape, but re-emphasizes the importance of comparison shopping,” says Kamran Pourzanjani, CEO of comparison shopping site PriceGrabber.com.
Stephen Imbler, CFO of NexTag.com, says NexTag’s strength is in remaining an independent company that differentiates from other comparison-shopping sites by offering travel and other services as well as consumer products. He notes that 2005 will mark NexTag’s fourth consecutive year of more than 100% growth.