That’s $360 million less than the $525 million it paid in 2005.
Scripps Networks Interactive Inc. says it is selling Shopzilla Inc., a comparison shopping site, for $165 million to private equity firm Symphony Technology Group LLC. That’s $360 million less than the $525 million Scripps paid for the site in 2005.
The deal, which includes Shopzilla, BizRate and the company’s international comparison shopping sites, is expected to close May 31.
Scripps, in its 2010 annual report, says 35 million unique visits are made each month to these sites.
“There’s a lot to like about the company,” says J.T. Treadwell, managing director at Symphony Technology Group. “It’s well run. They have a great network of retailers and merchant partners.”
Shopzilla merchants should not expect any change on June 1, Treadwell says. But, some changes may take place later this year and throughout the next few years, he says. For instance, Symphony Technology Group aims to give merchants greater controlover the content they submit to Shopzilla. However, he declined to detail the specific changes the company has in mind.
Among the consumer-facing changes Symphony Technology Group plans to make are improvements to the site’s search tool,says Treadwell. The company also plans to enable consumers to save preferences and share search results.
Symphony Technology Group’s interest in Shopzilla makes sense, says Rick Backus, CEO of CPC Strategy LLC, a firm that helps retailers feed data to online shopping portals. Comparison shopping engines still send huge volumes of consumers to e-commerce merchants, he says. Shopzilla led other sites, including Google Product Search and NexTag, as the top generator of traffic to CPC clients among comparison shopping engines in the first quarter, he says.
Even so, the Shopzilla divesture, and the valuation, is not surprising, he says. As with many of Shopzilla’s competitors, Scripps bought Shopzilla as an investment to generate revenue for the parent company. “What happened is the parent companies stagnated the innovation at the shopping engines,” says Backus. “That strategy has led them to where they are now.”
For example, Shopzilla became heavily reliant on paid search traffic coming from Google.com, Backus says. While that brought more traffic as Google ascended to become the dominant search engine, Shopzilla’s profits on that traffic eroded as it paid Google increasingly high fees per click, he says. For instance, out of a 35-cent fee a comparison site might charge a merchant, five years ago 10 cents per click may have gone to a Google paid search campaign. Today that fee might be 19 cents. That hurts profits at comparison shopping engines, Backus says.
On a larger scale, the evidence is contained in Scripps’ 2010 annual report. The company’s interactive services division generated $184 million in revenue and a profit of $39 million. The 2010 revenue total was 22.7% less than the 2008 revenue of $238 million, the peak for the division under Scripps ownership. Likewise, its 2010 net income was 38.1% less than the $63 million profit in 2008, the high point for the division.
In a statement, Joseph G. NeCastro, Scripps chief financial and administrative officer, praised Shopzilla’s “strong growth potential,” but says the brand’s “mission and future trajectory diverge from Scripps Networks Interactive’s focus on lifestyle media brands.” Scrippsowns cable channels such as HGTV, The Food Network and the Travel Channel.