What's Behind All These Comparison-Shopping Buyouts?

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So what's with the interest in the online comparison-shopping search engine category?

Corporations like Yahoo Inc., eBay Inc. and E.W. Scripps Co. collectively have spent $1.6 billion since last year buying the pan-European Kelkoo, Shopping.com and Shopzilla, respectively. And now marketing services giant Experian bought PriceGrabber.com for $485 million.

"I think the reason why there's such fascination for the comparison-shopping search business is that we operate in the sweet spot area: commercial search," said Harry Tsao, co-founder of Smarter.com, Monrovia, CA, one of the few major independent comparison-shopping services left.

Experian's Dec. 12 acquisition of PriceGrabber is part of its goal to become a go-to provider of online customer acquisition services. It also gives Experian access to an online database of products, services and retailers that PriceGrabber visitors can compare and shop before a transaction.

PriceGrabber will be part of Experian Interactive, whose components include other online marketing services like LowerMyBills.com, MetaRewards, Affiliate Fuel, ClassesUSA.com and Experian Consumer Direct.

Last year, the U.S. comparison-shopping services category was valued at $400 million, with annual growth projections of 40 percent. A consumer trend to research online before buying there or offline, as well as increased broadband penetration, is fueling this growth. So PriceGrabber's purchase fits Experian's strategy.

"It complements our core marketing services business," said Don Robert, CEO of Experian Group, Costa Mesa, CA. "It allows us to offer our retail clients another customer acquisition channel. The other [reason for the purchase] has to do with our consumer interactive business, and it gives us the ability to offer a tool that helps consumers make product decisions online."

A smaller engine compared with Shopzilla and Shopping.com, PriceGrabber is expected to close this year with sales of $60 million and pre-tax and interest earnings of $25 million, up 50 percent from 2004. Listing fees from retailers and third-party support to other sites generate sales.

According to internal data, PriceGrabber exceeded 17 million unique visitors last month. Visitors shopped and compared products in a database across 20 categories like consumer electronics, apparel, photography, computer hardware and software, office products, toys, video games and home and garden. The engine's specialty is auto and travel.

Founded in 1999, PriceGrabber lists 9,000 small and big retailers. The brand also powers comparison shopping on 300 Web sites, including those belonging to IAC Corp.'s Ask Jeeves, New York Times Co.'s About.com, Comcast and BellSouth.

Experian will retain all 140 of PriceGrabber's employees in the Los Angeles head office as well as the London branch. This includes the founders and senior management. The sale to Experian was ideal because both companies have a customer acquisition focus, said PriceGrabber president Kamran Pourzanjani in Los Angeles. It also was an easy route to achieve scale.

"It makes sense for us to be part of an organization that can accelerate our growth," he said.

NexTag.com and Smarter.com, which operates in 10 countries, are the few standalone comparison-shopping services available for acquisition. Google Inc.'s Froogle is another major player, but it hasn't dented the appeal of the larger shopping services.

Of those companies taken off the table, it is worth noting how similarly they were valued. Earlier this year, eBay stumped more than $480 million in cash for Brisbane, CA-based Shopping.com and Scripps $525 million, also cash, for Shopzilla, Los Angeles. Yahoo paid $575 million for Paris-based Kelkoo last year.

Though PriceGrabber's sticker price matches Shopping.com's, Smarter.com's Tsao said there's a difference with the Shopping.com and Shopzilla acquisitions that preceded it.

"Both Shopzilla and Shopping.com were heavily funded," he said. "They burned through tens of millions, if not hundreds of millions, of dollars. So I think, in part, the investors were looking for an exit or that both companies did not want to deal with Sarbanes-Oxley [accounting requirements] or deal with the complexity that comes with a public company. On the other hand, PriceGrabber was not VC-funded, probably raised low single digits in the millions and their investors are extraordinarily happy with the outcome."

Mickey Alam Khan covers Internet marketing campaigns and e-commerce, agency news as well as circulation for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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