Getting Off the Crack
Comparison shopping engines like shopping.com and Shopzilla have long been some of the largest buyers of search marketing. Doing so has been incredibly lucrative over the past few years. But now that seems to be changing.
Shopzilla, which had shot to the industry leadership position, and was an incredibly successful acquisition for the Scripps group, now seems to be faltering. There has been a big management reshuffle, and predictably bad news is announced soon after to set the bar lower for incoming management.
The reason is, by and large, they are being priced out of the search marketplace. I wonder if this had to do with Google’s quality score update?
Brian has a great breakdown of the earnings call a few weeks back. They said if keyword prices don’t come down for them then they would invest in ‘brand building’ to acquire traffic to the site (i.e. they are shitting their pants and pray to hell that the economics of search marketing are still there).
Comparison shopping stands at a crossroads and it will be interesting to see innovation over the next few years as the cash cow of buying cheap search traffic and converting it at higher prices disappears.
One site I love is Jellyfish.com, if not for their incredibly addictive (no pun intended) and innovative Smack Shopping event each day.
Niki,
Great post. You absolutely can’t rely on paid search for ever.
Cheers,
Rahul
[…] Kudos to Niki Scevak over at Bronte Media for a great post yesterday on the dilemma facing the big boys of Comparison Shopping.  Using Shopzilla’s recent struggles as an example, (thanks to Brian Smith’s coverage of Shopzilla here and here) Niki correctly points out that the gravy train of Search Marketing for big PPC-based Comparison Engines like Shopzilla and Shopping.com may be coming to an end as keyword competition becomes more intense. […]
Thanks for the tip of the hat Niki. We’ve stayed away from the keyword game because we don’t think we can win the arms race it is becoming.
More thoughts from the Jellyfish blog here:
http://www.jellyfish.com/blog/2007/03/01/comparison-engines-and-search-arbitrage/
[…] As we’ve been spending time getting to know the deals/shopping space, it’s become clear that sticking deals on a page is not sufficient. You need to provide users with a reason to come back to your site. If you have to keep acquiring customers for the first time, every time you want them to visit, you’re going to have a problem. Arbitrage margins are narrowing and that trend is unlikely to reverse itself anytime soon. There are some great posts on this topic at Bronte Media and Jellyfish’s blog. […]
Hey, took at me! I’m a tool!
No, seriously, though, the “big management shuffle” was some of the founders finishing easing themselves out (as had been planned for some time, the planning being something of common knowledge). Running a big shopping comparison site wasn’t what they wanted to do in life (it was a doctorate program project after all). One wanted to devote their time (and presumibly cash from the Scripps buyout) to environmental causes. The “new” management are all people who have been around the company for some time. Except for Scripps. That’s a whole ‘nother story. All I’ll say on that now is that now is that being integrated into the fold of a large public company has, in the past, in other cases, caused management to make comprimises in the balance between doing the right thing and ensuring short term profitability. Just taking the chance to clarify a bit (my views are my own, etc).
Yes, things have been changing in the market. Happily, Shopzilla has had essentially a symbiotic relationship with Google, Yahoo!, and other major players, and have grown as they’ve grown. Google passing out AdWords positions too easily to arbitrage brokers would hurt Google in the long run, which would, in the long run, hurt Shopzilla. So I view this as a resettling. I’ve seen a lot of resettling in my 16 years of hanging out on this Interweb thingie.
All of that out of the way, there are a lot of people doing interesting things besides trying to raise price comparisons to an art:
* http://mypicklist.com/
* http://usuggest.com
* http://browsegoods.com
* http://shopwiki.com (my personal favorite, though they’re still changing rapidly)
I think we’ll see a lot of interesting things with Yahoo! Pipes and Amazon’s feeds still, though.
Cheers,
-scott
I also agree search engine marketing alone as a method of acquiring traffic will not be sustainable / profitable long term. Some price comparison sites like http://www.cubalaya.com have developed new and innovative ways of attracting traffic such as shoppers and merchants blogs.
A.