Shopping guides on Web attractive as takeover targets

By Leslie Walker
Washington Post

Bye-bye, Shopping.com.

Hasta la vista, Shopzilla.

Your 15 minutes of Internet fame may be over.

The comparison-shopping guides are being snapped up by larger companies that regard these small fry as the future of Web commerce, even if past takeovers failed to live up to their promise.

The E.W. Scripps Co. will pay $525 million in cash for Shopzilla.com, a site that lets consumers search for products and compare details of 30 million items from merchants across the Web. EBay announced it will pay $620 million in cash for Shopping.com, a similar service that went public in October. Both are free to consumers and charge merchants referral fees each time a shopper clicks through to view an item.

Information broker Experian will pay $330 million for LowerMyBills.com, a specialty guide that lets consumers compare interest rates on mortgages, credit cards and other loans.

Web shopping guides are hot properties not only because they are profitable. While their businesses remain small — Shopping.com reported $99 million in revenue last year; Shopzilla projects at least $130 million this year — their traffic is huge. That's a magnet for companies trying to buy into Internet advertising and commerce.

Building online audiences from scratch is getting much harder as the Internet grows bigger and audience growth slows. Moreover, shopping guides tap two of the Web's fastest growing revenue streams — advertising and commerce — and blend them in ways consumers find helpful.

But the main reason these startups have flourished seems to be their independence, which allowed them to serve Web shoppers first and foremost.

That will change after the mergers go through, and they will be serving new masters with different business agendas.

At least, that's what happened since a similar merger spree involving four Web comparison-shopping sites back in 1998, when Amazon.com bought Junglee, Excite bought Jango, Infoseek acquired Quando Inc., and Inktomi Corp. bought C2B Technologies Inc. Not only did we hear little about those startups ever again, but the only purchaser that became a big Internet player was Amazon.com (though Inktomi was bought by Yahoo and now powers its search engine).

It's also worth noting that the price tag for that 1998 spree was roughly $300 million, about one-fourth the tally for this year's binge.

What will be the impact?

It varies with each deal, but only Scripps has no obvious agenda — besides participating in Internet advertising, that is, to diversify its traditional ad empire beyond TV and newspapers. Scripps declared it will not redo Shopzilla or change its business model. Asked if Scripps would exploit synergies between it and Scripps' other Web properties, such as ShopatHometv.com, Scripps chief executive Kenneth Lowe said they would be run as "two separate businesses" with "separate focuses." Moreover, Scripps signed agreements to retain Shopzilla's top managers. The only cross-promotion planned, Lowe added, is promoting Shopzilla on Scripps cable networks.

The eBay deal is more complex. Ebay executives said they bought Shopping.com to help eBay merchants by giving them a new sales channel or means of reaching new buyers, especially for in-season merchandise. To date, most eBay merchants have specialized in used or overstocked goods.