Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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Merchants can adjust their bids based on which products have the best return on a NexTag investment, says co-founder Rafael Ortiz. “If you see you’re getting great ROI on your plasma TVs, you can raise your bid. If you know you can’t compete as strongly in iPods, you can bid lower.”
In an attempt to bump its traffic and revenues, NexTag has recently broadened its offerings to include services: mortgages, insurance, even online degree programs. Ortiz acknowledges that the change will require intense marketing. “When people are searching for something like auto insurance, it’s not something they do often, and they may not know that NexTag can help them so we’ll have to do some advertising specific to that category,” he says. Getting the user interface right will also be a challenge. “Within each category, it’s important to offer information at the right level-it can be off-putting and too time-consuming, or not complete enough, “ he says.
Thinking about mom
Shopping.com spokeswoman Wendy Sept offers her mom as an example of the customer that the site wants to serve.
“Mom doesn’t realize that there are tools out there to help her shop online,” she says. “She’ll go into Google to search for something, and sometimes she’ll end up on a comparison site and sometimes not. She’ll put in a search for ‘stroller’ and get 20 million results.”
While Shopping.com, owned by eBay Inc., eschews most traditional marketing, it does concentrate heavily on optimizing search engine results, to capture the millions of shoppers who, like Sept’s mother, never think to visit a comparison site.
Once they’ve arrived, a newly redesigned home page lets shoppers browse the five hottest items, including lowest prices and customer reviews, in the ten hottest categories. That change alone has nearly doubled the number of page views per visit, Sept says.
The site has also added shop-by-brand, suggested searches, and automatic comparison grids for the top five items in categories that lend themselves to grid comparisons. And while shoppers can get the daunting full array of available product types by clicking on a tab, the home page navigation bar includes only the most popular categories.
Shopping.com is in the happy position of having a growing user base despite increasing competition. Founded in 1998 as DealTime (which remains in business as a sister site), it acquired the customer review site Epinions in 2003 and relaunched the main site as Shopping.com. After going public in 2004, the company was acquired by eBay in 2005, and now counts Half.com and PayPal among its corporate siblings. Shopping.com also powers comparison engines for hundreds of partners, such as MSN Shopping and social shopping site Kaboodle.
While Shopping.com’s revenue model is primarily cost-per-click, it’s also testing a commission-based shopping cart and single checkout for interested merchants.
Becoming a mall
Mondy Beller, senior vice president of marketing for Shop.com, doesn’t care for the word “mall,” but can’t think of a better one to describe the site’s strategy. “I like to think of us as a lifestyle solution,” she says. Brought in from a traditional retail background that includes tenures at Macy’s and Ralph Lauren as well as AOL Shopping and Shoes.com, Beller is pat of a team trying to make Shop.com a one-stop resource, with a single shopping cart and checkout, for more than 1,000 online merchants, including almost half of Internet Retailer’s top 500 web retailers. The site has been adding merchants at a furious pace, with 45 new participants in the third quarter of 2006 alone, including Petco, Eastern Mountain Sports, Sierra Trading Post, and PCMall.
Founded in 1998 as Catalog City, the site has had a single-cart strategy since being rechristened Shop.com in 2004, and it reaps revenue from a fee on each order, rather than from pay-per-click as most comparison sites do. The average commission per order, negotiated with each merchant, is 16%, says Drew Green, senior vice president of merchant and marketplace development, but it can go as high as 30% to 40% in some categories. In May, Shop.com hired Ken Goldstein, former head of Disney Online, to inject entertainment into the Shop.com experience.
Like NexTag, PriceGrabber also launched in 1999 and operates primarily on a cost-per-click basis. It has 11,000 merchants in its database, though 7,000 of those are in the form of storefronts, where merchants without online stores can offer products for sale through PriceGrabber itself, which takes a commission on each sale.
For the other 4,000, cost-per-click is the model, says Kamran Pourzanjani, president and co-founder. “Cost per acquisition doesn’t make sense for us from a business point of view,” Pourzanjani says. “Our job is to help consumers. Once that’s done, and we’ve qualified a referral, that consumer is well informed and should be ready to buy.” After the click, closing the sale is up to the merchant, and PriceGrabber prefers not to share in that particular risk.
PriceGrabber, part of Experian Interactive, also provides the comparison shopping engine for 300 other portal and enthusiast sites, including Ask.com, iVillage, and About.com.
PriceGrabber was an early entrant in providing comparison shopping information to mobile phones, through a service called Atpgw.com. The next logical step is to provide information on local product availability, and Pourzanjani is testing that capability now. “Only a handful of large retailers can give you that information right now, like Circuit City, Best Buy, and Sears,” he says. “Our initial step is to bring that information into the fold.” As other retailers become more sophisticated, PriceGrabber hopes to be ready to provide a near-real-time system for tracking local inventories. If it isn’t, it will be worse than useless. “What could be more frustrating than to drive to a store thinking your item is in stock and then find they don’t have it?” he says.
Nothing to lose
For merchants, the proliferation of comparison sites can be confusing, but JupiterResearch’s Freeman Evans suggests looking at it as an opportunity.