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Tuesday, January 28, 2003

Bricks Meet Clicks (Finally): Shopping Search Comes of Age

Few of us expected comparison shopping search engines to be the biggest search engine story this year, but that's just what seems to be happening. It doesn't hurt that Google stunned competitors with the soft launch of a new service called Froogle, but companies like Dealtime have been quietly gathering steam over the past year, too.

The hype surrounding clever price comparison tools like Priceline has subsided. But in the meantime, consumers are flocking to sites of this nature to help them compare prices. Often, it leads directly to a purchase. The scary thing is, the price aggregators have become powerful market makers, especially in industries like travel. The fact that retailers are forced to compete on price may have wide-ranging implications. Few companies can compete solely on price.

It appears that the use of shopping search is also responsible for increasing consumer satisfaction with the online experience. Companies that make their presence felt in these engines had better be e-commerce-enabled and user-friendly or they won't last long. The process of listing in a shopping search engine likely helps filter out second-rate sites, and the ability to glean information about different retailers offering similar products appears to be a hit with savvy consumers as a recent study shows.

Recall that big things were expected from this whole category. Deja.com built a whole business around it, but overinvested in personnel and office space too long before the growth took flight, as was so common in the dot com boom/bust. (What's left of Deja? Not much. It went bankrupt. But its version of the Usenet archive did get snapped up by Google, who seem to be doing a good job maintaining it.)

These days, comparison shopping services and rating services of various types -- epinions, Froogle, Bizrate, Dealtime, etc. -- are making a strong charge. Major growth, and some consolidation, is in store for the next couple of years. From boom to bust to boom. As the current growth is largely organic and not funded by VC's or public stock offerings, there is far less likelihood of another crash and burn scenario.

Posted by Andrew Goodman




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