eBay buys Shopping.com – Boon or Bust to Online Merchants?

By Scott

My first reaction: This could be big

The players:

eBay

eBay is the 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.com is a 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 (press release). 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.

Article by Scott Smigler, President of Exclusive Concepts, Inc.
http://www.exclusiveconcepts.com

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