Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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Retailers pay a one-time licensing fee of $30,000 for a site performing 50,000 searches a month and more for busier sites. They also pay an annual maintenance fee based on the number of searches. “That gives us a price low enough for small sites but it doesn’t leave a lot of money on the table when we get large sites buying,” Larry Harris says. If a retail site exceeds the contracted number of searches, EasyAsk will re-negotiate the price; the software will not disable searches when the number exceeds the contracted amount.
Payback could occur within six months, David Harris says. For instance, a retailer with a 1.5% conversion rate and whose site performs 100,000 searches a month would have 1,500 sales a month. At $100 a transaction, sales equal $150,000 a month. Such a site would have paid $50,000 in licensing fees. “If we improve that by only 10%, we are increasing monthly sales by $15,000 a month,” David Harris says. “If you assume all those are incremental sales and the margin is 50%, the payback comes in six months, using the most conservative assumptions.”
Mercado charges a one-time implementation fee of $40,000 to $100,000.
The free barrier
Another feature that EasyAsk offers is the ability to display results based on criteria that the retailer sets. Search engines generally display results based on relevancy to the search-usually a calculation of how often the item appears in the text of the document being displayed. EasyAsk can display results by profit margin, by quantity available, by vendor or by other criteria. For instance, Coldwater Creek shows first the products most recently added to the site.
While EasyAsk can make compelling arguments about the payback rate, the company still faces significant barriers in the marketplace. “The biggest barrier,” David Harris says, “is that most e-commerce applications already come with some kind of search built in. We hear from many retailers, ‘I know it doesn’t perform the way I’d like it to, but it’s free.’”
To address that obstacle, EasyAsk urges retailers to perform click-stream analysis to learn which are the most visited areas of a site. After the home page, the second most visited site at most retailers is the search page, says Larry Harris. Third: “no results found.”
Nonetheless, online retailers often have so many pressing needs that improving the search function falls low on the priority list. “Companies with web sites have more things to do than they have time and resources to do them,” says Schatsky of Jupiter Research. “And many are really understaffed in the area of analyzing data. They don’t have the manpower to look at the search results the way they should.”
In addition, Easy Ask faces Mercado, which has a track record that dates back to mid 1999 with such retailers as Towerrecords.com, Sears.com, Webvan.com and Blockbuster.com. “We have been selling our search solution since 1998,” says Yaron Dycian, Mercado’s director of product marketing. “We were evangelizing the concept.” He says it took Mercado 18 months to break through retailers’ disbelief that there was a problem. Eventually retailers began recognizing the problem: “There was a large complex catalog being accessed by search users who had no technology knowledge. They just wanted to find what they were looking for.”
By most measures, there is a market today. Easy Ask has other retailers in the pipeline and Mercado continues to sell. And some retailers are beginning to sees the strategic advantage of a search that returns highly targeted results. “A lot of our customers will not let us talk about their implementation,” Dycian says. “They see it as a competitive advantage.” l