Understanding the Influence ofComparison Shopping Engines

Internet World, 30th April 2008

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Agenda

• Why should you care about CSEs?

• How do CSE’s work?

• The CSE landscape

• CSE 1.0

• CSE 2.0

• Understanding the True Influence

• Common CSE pitfalls

• Key Takeaways

• Q+A

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ChannelAdvisor and CSEs…

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Why Should You Care About CSEs?

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E-Commerce – Large and Growing 20% Year over Year

• Jupiter Research Data US Retail Forecast 11/07 and European Retail Forecast 8/07

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Online E-Commerce Channels Growing in Importance

• FBR Research based on publicly available Gross Merchandise Volume (GMV) Information. Also corroborated by ChannelAdvisor’s real-world data.

• More consumers shopping online via search, comparison shopping engines, marketplaces.

• Today up to 75% of sales for an internet retailer is driven by online channels.

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E-commerce Everywhere

0% 20% 40% 60% 80%

Search engines

Retailer/seller Web sites

Brand Web sites

Customer reviews

Expert reviews

CSEs

Specialty sites

Online images/picture search

Blogs

2005 2007

Which of the following types of online tools/services, if any, do you usually use when you conduct online research before making a purchase?

Source: iCrossing

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Acquisition, Retention, and CLV

Average cost-, value-, and profit-per-order, by marketing tactic:

Source: Forrester Research, Cantor Fitzgerald

  Avg per order metrics

Marketing Tactic Cost Value "Profit"

E-Mail to house list £3.29 £56.06 £52.77

SEO £5.39 £49.37 £43.98

Paid Search £13.48 £57.30 £43.83

Affiliate Programs £8.80 £46.53 £37.73

Blogs/Message Boards £2.02 £35.27 £33.25

CSEs £15.47 £45.96 £30.49

Traditional portal deals £22.27 £49.41 £27.14

New portal Deals £6.25 £20.00 £13.75

Banner Ad £36.22 £45.46 £9.24

E-Mail to prospecting list £26.48 £33.21 £6.73

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Other important CSE datapoints

• Forrester – 75% of online shoppers influenced by CSE

• ChannelAdvisor – some customers see CSE as large as 40% of GMV

• Comscore: January 08 UK:

• 33m unique internet users

• 17m visited CSEs

• 51% reach

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0%

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% CSEs

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How do CSE’s Work?

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Comparison Shopping Engines

• How it works

• You pay for traffic on a per-click basis (called CPC in the industry)

• Per-click determined by category and merchant auction

• Traffic driven to your e-commerce site for potential conversion

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£X/click

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How do CSEs get traffic?

• Direct navigation

• This is a relatively small amount of traffic

• CSEs are, in general, not sticky

• SEO

• Generally strong results in natural search results, strong Page Rank

• Portal/Search Partner

• AOL, eBay, MSN Shopping, etc.

• Paid Search

• A huge driver of traffic for these sites

• Often not high placement on very broad terms

• Effectively reselling traffic to merchants

• Sometimes sell it back to Google and Yahoo via AdSense / Yahoo Publisher Network

• Network Partner sites (super-affiliates)

• Shopping.com ads also appear on eBay, Dealtime,

• PriceGrabber powers AOL and CNET

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The CSE Landscape

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Understanding CSE 1.0 and CSE 2.0

• CSE 1.0

• Vintage <2000

• Product catalog driven

• Usually heavily electronics oriented

• CPC

• Stagnant, little to no changes since 2006 timeframe

• Primarily acquire traffic from paid-search

• CSE 2.0

• Vintage >2006

• Variety of models to enhance experience/business

• Reviews (Ciao)

• Social (Crowdstorm/Facebook)

• Traffic/fun (Jellyfish)

• BizModel (CPA – Jellyfish)

• Comprehensive

• Vertical orientation (Mobile-phones)

• Local (Abcaz)

• Integrated checkout (shop.com)

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Comparison Shopping Engine Share Data

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Rank Comparison Shopping Aug-2007 Sep-2007 Oct-2007 Nov-2007 Dec-2007 Jan-2008 Jan Share

1 Shopping.com Sites 7,133 7,146 8,112 7,442 6,867 6,235 36%

2 Ciao Sites 3,073 3,111 3,371 3,770 3,435 3,685 22%

3 Shopzilla.com Sites 3,412 3,382 3,619 3,770 3,711 3,576 21%

4 ValueClick Sites 1,209 1,045 1,928 2,532 3,489 3,436 20%

5 Kelkoo Sites 3,903 3,304 3,200 3,592 3,751 2,858 17%

6 Shopping.net Ltd 2,130 1,927 2,115 2,046 1,942 2,197 13%

7 Nextag.com Sites 1,811 1,731 1,912 2,262 2,408 2,075 12%

8 MSN Shopping 1,251 1,185 1,491 1,867 1,659 1,349 8%

9 Shop.com Sites 1,414 1,189 1,591 1,486 1,560 1,333 8%

10 PriceGrabber 1,230 1,315 1,361 1,602 1,527 1,301 8%

11 COMPARESTOREPRICES.CO.UK 1,347 1,206 1,190 1,521 1,298 1,259 7%

12 Dooyoo Group 1,281 1,083 1,168 1,097 1,023 1,113 7%

13 Google Product Search 757 778 637 710 1,170 1,110 6%

14 GOCOMPARE.COM 530 586 593 622 465 979 6%

15 Twenga N/A N/A N/A N/A N/A 760 4%

16 DoorOne Sites 177 159 281 477 546 741 4%

17 Kelkoo Shopping on Yahoo! 494 551 621 729 626 678 4%

18 SHOP-FOCUS.COM 1,344 1,143 970 887 606 668 4%

19 Yahoo! Shopping 645 596 636 823 786 633 4%

20 MOBILE-PHONES.CO.UK N/A 240 439 525 456 512 3%

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• Jan 07: CSE 1.0:76%, CSE 2.0:24%

• Jan 08: CSE 1.0:71%, CSE 2.0:29%

  Jul-2007 Aug-2007 Sep-2007 Oct-2007 Nov-2007 Dec-2007 Jan-2008 Jan Share

Total Internet : Total Audience 180,078 181,257 181,858 182,206 182,362 183,619 184,239 100%Rank Comparison Shopping Engine 62,654 64,166 64,146 67,856 72,318 77,127 71,543 38.83%

1 Yahoo! Shopping 18,027 17,844 19,700 22,664 27,625 30,615 26,927 37.64%2 Shopzilla.com Sites 21,983 21,644 22,272 23,569 25,023 26,524 24,210 33.84%3 Shopping.com Sites 19,358 19,694 18,475 20,081 21,080 21,612 20,249 28.30%4 ValueClick Sites 13,771 14,699 14,966 14,295 12,514 13,013 13,835 19.34%5 Google Product Search 4,663 4,314 3,476 1,041 1,337 11,933 10,409 14.55%6 Nextag.com Sites 7,415 7,796 7,572 8,030 8,791 9,071 8,510 11.90%7 Pronto.com 2,307 3,156 3,180 5,220 5,489 7,505 8,406 11.75%8 MSN Shopping 7,558 7,833 7,238 8,320 10,628 9,980 7,932 11.09%9 ShopLocal.com 8,731 9,686 10,856 10,564 14,323 11,766 7,217 10.09%

10 Become.com 1,958 2,281 2,356 4,385 4,215 5,110 5,641 7.89%11 Shop.com Sites 4,390 4,133 3,329 4,239 4,295 5,514 5,154 7.20%12 PriceGrabber 3,863 4,691 4,590 4,942 5,804 6,020 4,775 6.68%13 AOL Shopping N/A N/A N/A N/A N/A N/A 4,229 5.91%14 MySimon.com* 1,503 1,373 1,633 1,885 2,043 2,272 2,015 2.82%15 MonsterMarketplace.com 2,124 2,139 1,648 1,531 995 1,082 1,240 1.73%16 Buzzillions.com 231 280 388 428 710 734 703 0.98%17 Best-Price.com 1,584 1,378 1,571 1,692 1,629 1,198 682 0.95%18 dealnews.com Sites 424 467 405 504 922 912 681 0.95%19 SmartShopper.com 594 599 668 481 368 301 484 0.68%20 Ciao Sites 674 610 632 743 750 718 470 0.66%

CSE Share Data (US)

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CSE UK Market Status

• The CSE 1.0 sites either were developed by large companiesor have been bought

• Shopping.com/DealTime – eBay

• Shopzilla/BizRate – EW Scripps (rumored to be for sale)

• PriceGrabber - Experian (a subsidiary of GUS Plc) (rumored to be for sale)

• NexTag – Providence Equity Partners Inc.

• Kelkoo – Yahoo! (rumored to be for sale)

• CSE 2.0 activity: • Pronto (IAC), Smarter (MeziMedia) – acquired by ValueClick (pricerunner)

• Jellyfish acquired by Microsoft

• Recent trend toward “social shopping”• These sites currently generate a relatively small amount of traffic

• Potentially high conversion rate

• Low barrier to entry• ChannelAdvisor gets constant requests for new sites, both from clients

and the sites themselves

• Increase in niche sites over time

• Result: expect more to come!

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Understanding the True Influence

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Common CSE Pitfalls

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Datafeeds for Beginners

• Each CSE has a ‘feed specification’

• Usually a CSV or XML file that includes required, recommended and optional information about your products

• Title, price, shipping info, tax info, EAN, model number, destination URL, image URL, etc..

• You have to FTP the information on a daily basis (or when you want updates sent to the engine)

• Datafeeds are tricky because:

• The specs change constantly

• If you get it wrong you can pay dearly

• It’s impossible to know what’s “really” required vs. optional vs. recommended

• Every engine is VERY different so you can spend a lot of time managing this as it goes up linearly with the number of engines you support

• E.g. 7 engines is 7 times the work of 1.

• The datafeed is typically how you manage ROI so that causes more complexity

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Common CSE Pitfalls

• Operational Complexities

• Feed changes

• Removal of non-performing products

• Updating of price information

• Updating of inventory (out of stocks/in stocks) information

• Site differences

• Surveys/reviews

• Lack of transparency

• Data: Impressions/CTR

• Behavior: Search versus browse

• Success factors: Which tactics are effective?

• Conversion rates

• Making sure your items are optimized/matched correctly

• Don’t underestimate the time or complexity

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Key Takeaways

• Opportunities

• Forrester – 75% of online shoppers influenced by CSE

• ChannelAdvisor – some customers see CSE as large as 40% of GMV

• Economics still ‘work’, niche sites highly effective

• Next wave of innovation coming with CSE 2.0 – are you ready?

• Google Product Search! Did I mention that it’s FREE?

• 50% of UK internet audience uses a CSE each month – they are strategic to getting mindshare

• Challenges

• Increased fragmentation

• Brand recognition

• Retailers “put off” by CPC model and increasing rate-cards

• ROI management is complex due to most engines not sharing cost data/allowing bidding

• Positional/landscape awareness non-existent

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Thank You!

james.scott@channeladvisor.comfor a copy of this presentation