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eBay buys Shopping.com - Boon or Bust to Online Merchants?
By: Scott Smigler, Sun Jan 1st, 2006
My first reaction: This could be big
The players:
eBay
Largest online auction site where buyers bid to buy products.
Arguably the most well-known e-commerce site with over 100
million registered users. Billions in sales are transacted here
worldwide.
Shopping.com
Shopping portal that helps shoppers find the least-expensive
merchant to buy their desired product from. Shopping.com is one
of the largest shopping portals on the Internet. They achieved
success by implementing a model that allows online merchants to
acquire targeted clicks from shoppers by paying a per-click fee.
eBay Sellers
Individuals, small businesses, and some larger businesses post
products for auction on eBay, and also maintain “stores” within
the eBay website where shoppers can make purchases without
bidding. eBay sellers must maintain a presence on eBay to
participate. This means that the shopper never leaves eBay to
make a purchase, and the sellers must coordinate a system to
process orders through eBay.
Online Merchants
Internet stores, large and small. Stores ranging from
independent specialty stores like Surray Luggage, to huge
mass-merchants like Amazon.com. Many online merchants do not do
business on eBay because it requires them to maintain a separate
store, which has both branding and logistical consequences.
What’s happening?
eBay is buying Shopping.com for $620 million. Shopping.com’s key
assets include its product comparison technology, large network
of product reviewers (formally EPinions.com), brand awareness,
and of course, its advertisers.
Background
eBay was originally founded as an online auction where
individuals offered used (and sometimes new) products to the
highest bidder. Over time, EBay has introduced services to allow
merchants to sell directly to buyers through eBay stores that
bypass the bidding process. Since everything is done through
eBay, merchants are required to have a presence on eBay that is
separate from their online store. In other words, the merchant
must have two stores: Their current store, and their eBay store.
Analysis
This could go one of two ways:
1) eBay could be buying Shopping.com to monetize its targeted
traffic by sending eBay shoppers outside of EBay to the
Shopping.com portal. In other words, they will funnel traffic
from eBay to Shopping.com, which will then be funneled to the
online merchants who currently advertise on Shopping.com.
- Upside to eBay: Increased advertising revenues.
- Upside to eBay Shoppers: Access to more products and increased
price competition.
- Upside to Online Merchants: Access to the lucrative community
of eBay shoppers.
- Downsides: eBay sellers will face increased competition.
2) eBay could be buying Shopping.com to simply enhance its value
to both eBay shoppers and eBay sellers. Shoppers would benefit
from the product reviews and price comparison technology that
Shopping.com owns. Sellers would benefit from the enhanced
shopping experience because demand for their products will
further increase.
- Upside to eBay: Increased customer loyalty and listing fees.
- Upside to Shoppers: Better version of the service they’re
already comfortable with.
- Upside to Online Merchants: None. Many online merchants have
been reluctant to establish an eBay presence because they’ll
have to maintain two separate stores.
- Downsides: Online merchants won’t have the streamlined access
they’re looking for to reach the eBay community, and the value
of advertising on Shopping.com would be diminished.
My Take
I can’t imagine that eBay would spend $620 million on
Shopping.com only to disband its network of online merchants who
pay a lot of money to be featured there. Accordingly, my
prediction is that eBay will maintain a version of
Shopping.com’s current advertising network where merchants
acquire clicks from buyers (contrary to eBay’s model where
buyers never click to leave the eBay website).
If I’m right, eBay’s acquisition of Shopping.com will be huge
for advertisers. Advertisers will be able to advertise on
Shopping.com like they always have. The only difference will be
a massive influx of quality traffic from eBay.
I am concerned because eBay’s press release only talks about
creating an enhanced shopping experience for current buyers, and
mentions the new opportunity for current eBay sellers. The press
release does not mention Shopping.com’s advertisers at all,
which makes me question eBay’s true motives. In other words, I
may very well be wrong.
Bottom line: Watch this closely. eBay’s acquisition could
be a tremendous boon to online advertisers, opening up a fertile
new market for online marketing. Or, eBay could be acquiring
Shopping.com purely for its technology and product review
network with the singular goal of enhancing eBay.com. If so,
online merchants will be missing out on a big opportunity.
Online merchants should watch this very closely.
GA-002
About the author:
Scott Smigler has been an evangelist for a serious, ROI-based
focus on the online channel since he founded Exclusive Concepts
in 1997. Exclusive Concepts provides integrated online marketing
strategies, Internet brand consulting, search engine marketing
campaigns and results-oriented web sites for hundreds of clients
that range in size from small ecommerce firms to public
companies.
