Nirav Tolia loves online shoppers. The chief operating officer of price-comparison site Shopping.com, Tolia waxes poetic on the virtues of being able to hunt down bargains and product ratings of 149 kinds of goat cheese from the seven online merchants that feed their price and product info to his site. Every goat-cheese lover who clicks through from the listing to a seller’s site earns 5 cents for Tolia’s company.
Gourmet foods are just one of many categories that surfers can browse at Shopping.com. Higher-value categories, such as computers, earn it 30 cents per click. This year, the site will send more than $1 billion worth of business to online merchants — about $3.6 million per day. Shopping.com’s own take from such referrals will exceed $70 million, about double its 2002 revenues.
Traffic to Tolia’s site actually exceeds visitor numbers at MSN Shops (MSFT ) and AOL’s shopping section, he claims. And by the measurements of some Web-analysis firms, Tolia says, it even tops Yahoo!’s (YHOO ) formidable shopping site.
PROFIT POINTS. Tolia also claims that the surfers he sends to retailers’ Web sites are more likely to buy than those who arrive from Google’s vaunted AdWords links. All of which feeds Tolia’s ambition to become the Expedia (IACI ) of online shopping — a dominant middleman between sellers and consumers.
“Why do most people use Expedia when they book travel?” he asks. “Because it’s a better way to do things, and they can do it online. That’s what we’re offering in the world of products.”
Shopping.com has plenty of competition from BizRate, NexTag, and PriceGrabber, which rank second, third, and fourth, respectively, among comparison-shopping sites, according to Nielsen/NetRatings. With little fanfare, each of these closely held companies has become solidly profitable. Shopping.com has been in the black for several years, Tolia says.
PriceGrabber CEO Tamim Mourad estimates that the big four shopping-comparison sites should turn $150 million to $200 million in combined revenue in 2003. Tolia and others believe that tally could double in 2004 and continue to grow for years.
STRONG PROSPECTS. E-commerce experts agree. According to Nielsen/Net Ratings, about 21 million U.S. Internet visitors surfed through one or more comparison-shopping sites last August, the most recent month for which figures are available. That was up 34% from a year earlier.
PriceGrabber grew 81% over that period. A year ago, 9% of people who bought online used shopping-comparison engines. Today, it’s 15%, says Mourad. Says Robert Leathern, Nielsen’s director of commerce analytics: “They have grown tremendously over the past year. Their prospects for the holiday season are strong. We’re seeing shopping search coming into its own.”
Indeed, Jupiter Research analyst Patti Freeman Evans says a significant portion of the 21% growth in online-shopping revenues she expects this holiday season — to $16.8 billion — should result from broader use of shopping-comparison sites.
SECOND GO-ROUND. If you need to buy a coffee maker, you can look at all the coffee makers in one store, or you can go from store to store. Or you could go from Web site to Web site. “That’s the old way,” says Freeman Evans. “With shopping comparison engines, you type in coffee maker, come up with 1,000 coffee makers, all of which have all the specs listed, including the price. You take a shopping cycle from a day in the bricks-and-mortar world down to 10 minutes online.”
This is really the second coming of online comparison shopping. When the Internet rose to prominence in the late 1990s, prognosticators said everyone would have an automated personal shopping agent that scanned the Web for bargains. Price-comparison sites such as MySimon sprang up but fared poorly.
It turned out that collecting prices in real time from Web pages resulted in lots of errors. And slow dial-up connections meant surfers often had to wait eons for graphics-heavy pages to load. Plus, few merchants had viable Web sites back then, and fewer consumers were willing to submit their credit-card numbers online.
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