The acquisition will add more than 300 products to L’Oreal’s lineup.
Comparison engines pack the power of aggregators—but watch that ROI.
If Internet retailing were a board game, the goal would be labeled "ROI," and comparison shopping engines would be one way merchants could try to get there. Like any route to a game`s end, it`s a path with potential opportunity: It can attract highly targeted shoppers that produce what some say are higher conversion rates. And it`s got obstacles: the difficulty for some retailers of wrangling product feeds into the engines and the fact that costs per click, as in other web-based ad programs, are going up.
Among online retailers, comparison shopping engines have proponents like Jacob Hawkins, vice president of online marketing at Overstock.com, who says the price comparison feature is a good fit for Overstock`s value-pricing business model. "Some merchants don`t want to advertise on comparison shopping engines because they are not trying to compete on price. But we`re king of the CSEs," he says. "We love it when people go to these engines to compare prices because it increases our value proposition to customers." The closer a shopper is to making a buying decision, the more targeted the traffic, and the better the chance that the shopper will buy something once he`s reached a retailer`s site through comparison shopping engines, Hawkins figures.
But as an online advertising venue, comparison shopping engines are losing favor over rising click costs among some earlier adherents. Jay Katz, president of CosmeticMall.com, says comparison sites used to drive a significant portion of CosmeticMall`s business, but it`s recently scaled back on the product listings it sends to such sites due to higher click fees and diminished ROI.
Instead of sending comparison sites its full 19,000-product catalog, CosmeticMall now limits what it feeds to those sites to about 400 products whose price is high enough to produce an acceptable margin on higher cost-per-click rates. "Even at that, the program is slightly ROI negative and we have to write it off as an advertising expenditure," Katz says.
Comparison shopping engines have been a big win for some retailers and less so for others depending on a host of variables such as product type, marketing strategy, and resources, including IT resources at the merchant end to handle product feeds. But as the growth of search marketing revenue flattens, the operators of ad-driven online marketplaces are looking for new places to grow business. Consider eBay Inc.`s acquisition of Shopping.com for $620 million and media conglomerate E. W. Scripps Co.`s acquisition of Shopzilla for $525 million, both within the past six months. Online marketers, meanwhile, are always looking for sales, from as many sources as possible. Those factors could combine to position the comparison shopping engine industry, now a fraction of the size of the online search market, for significant growth if it can find its way around some barriers. If the industry soars, it will be because it`s producing results for marketers--but the extent to which any marketer benefits will be a function of paying very close attention to its comparison shopping program.
Shoppers who go online to look and eventually buy span a range of purchase-readiness, from the casual browser to the focused seeker of a specific product, perhaps even on specific terms. It`s that far end of the spectrum that constitutes the sweet spot for comparison shopping engines, and it`s the engines` ability to deliver those highly focused shoppers to marketers that keeps marketers willing to pay for that exposure.
Depending on spiders
Comparison shopping engines, whether dedicated destinations such as Shopping.com or attached to portals such as Yahoo, are a vertical search tool specific to retail. They differ from general search engines because they eliminate any search results that aren`t about products or merchants. They also provide content and features not attached to general search; for instance, the ability to see prices, product features and customer-generated product reviews and merchant ratings, in an easily comparable format.
According to August figures from comScore Networks Inc., Shopping.com gets the most traffic, with 21.6 million visitors; followed by Shopzilla at 16.7 million; Yahoo Shopping`s comparison section at 13.3 million, and NexTag at 10.1 million. ComScore also tracks at least six other comparison sites. Based on their tenure in the marketplace, how they have marketed themselves to shoppers and merchants, and where they`ve invested resources, different engines have acquired reputations for strength in different product areas.
Like paid search, they charge retailers a fee whenever a visitor clicks on the retailer`s listing in search results. Visitors have the freedom to search and sort results by price, product specifications and other features, depending on the functionality offered by the particular comparison site. The default order in which each site presents results, however, is based on a combination of relevancy and in some cases bid price that varies from engine to engine.
To populate their shopping-only indices, comparison shopping sites depend in part on their spiders to grab information from the web, but they also rely in large measure on direct feeds from merchant`s product databases. At Shopping.com, for example, about 75% of the merchant offers in the index come from product data feeds, according to Iggy Fanlo, president of worldwide field operations. The feeds get the products into the indexes faster than spiders do, which means they give the engine and the shopper using it a more current view of changing inventory status at merchants. In fact, Shopzilla re-builds its index to add data as often as six times a day, with plans to increase that to 10 soon, according to Farhad Mohit, co-founder and chief products officer of Shopzilla.
If a marketer`s products can be found quickly and easily through general search--where most Internet shoppers start anyway--not to mention affiliates and banners, what do marketers get by being on comparison shopping engines that they don`t get by being at the other ad venues? For one thing, though price comparisons are a popular draw at the shopping engines, the shoppers using the engines are among the web`s most well-heeled. ComScore`s August figures show that at three of the four-most visited shopping engines, the largest segment of the audience had annual household incomes exceeding $100,000.