Investors who bet on comparison-shopping search engines in the mid-1990s will be $1 billion richer in the third quarter once shareholders and regulators approve the sale of industry leaders Shopping.com and Shopzilla.com.
It took less than a week after eBay's decision to buy Shopping.com, Brisbane, CA, for media giant E.W. Scripps Co. to make a pitch for Shopzilla.com, Los Angeles. Their sale confirms that comparison shopping has joined auctions and fixed price as key e-commerce mechanisms.
“The comparison-shopping category is highly attractive to consumers,” said Chuck Davis, president/CEO of Shopzilla. “Just like in travel, where consumers go to mega-aggregators like Expedia and Orbitz, that same behavior is happening in the comparison-shopping product area.”
That the trend caught eBay's attention is understandable. The site is the world's No. 1 auction platform, attracting 147 million registered members who bid for items or pay a fixed price. The merchandise is esoteric and not necessarily in-season, a gap that will close with Shopping.com's purchase.
But Cincinnati-based Scripps' play for Shopzilla — which rebranded from BizRate.com in November — may not, at first look, reflect any synergy in strategy. Scripps has interests in print and broadcast media, owning newspapers like Denver's Rocky Mountain News and TV brands like Food Network and Home & Garden Television. The company also owns United Media, a licensing and syndication firm with clients like Dilbert and Peanuts.
One of Scripps' properties is Shop at Home, its direct response TV arm. Shop at Home reaches nearly 53 million full-time equivalent households nationwide. So, in a way, Shopzilla fits with Scripps' plans to expand its transactional presence from TV to e-commerce. Scripps is willing to pay $525 million in cash for Shopzilla, more than the $480 million in cash eBay has put up for Shopping.com.
That sale price differential is striking given that Shopping.com and its sister sites received 22.63 million unique visitors in April versus Shopzilla's 13.97 million. The estimates are based on comScore Media Metrix data.
However, eBay's acquisition of Shopping.com includes $140 million in cash balances and securities at the comparison-shopping service. Shopzilla, by contrast, is expected to have $35 million in net working capital at the close of the transaction with Scripps.
Like Shopping.com's relationship with eBay, Shopzilla will become a standalone operating subsidiary of Scripps after the acquisition closes. Management and staff will stay. The brand name will not change.
Shopzilla was founded in 1996. The privately held company draws revenue from referral fees paid by participating online retailers. Shopzilla gets a fee each time a consumer is directed to a retailer's online store through its site. Shopping.com has a similar model, as do PriceGrabber and NexTag.
Another revenue source for Shopzilla is powering shopping search for online services like Lycos and Time Warner Inc.'s AOL and RoadRunner brands. The company this year is expected to post $30 million to $33 million in segment income on revenue of $130 million to $140 million.
Davis, a former publisher, is confident that Scripps is the right suitor for Shopzilla.
“The Scripps assets, especially in the home and garden area, should propel the business to new heights,” he said.
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