Shopzilla Buy Shows Online Shopping Market Sizzling

With two major deals in the past week, the online shopping-search market remains primed for additional consolidation as major players continue to jockey for the lead position in the e-commerce race.

On the heels of eBay’s US$620 million buy of Shopping.com last week, media conglomerate E.W. Scripps said it would shell out $525 million in cash to buy Shopzilla.com, another search site closely focused on the shopping vertical. Shopzilla also operates the Bizrate.com site and is profitable, Scripps said.

Scripps CEO Kenneth W. Lowe called the buy “a significant Internet play” for the media company.

Content Company

“In many ways, like our other media businesses, Shopzilla is a content company,” Lowe said. “As more consumers become aware of this service, we’re betting that Shopzilla will become the way that people shop online.”

Investors appeared uneasy about the Scripps move, with its shares down 3 percent on the news. That might be because the purchase seems an unusual fit for a company that specializes in traditional media, owning newspapers such as the Cincinnati Post and local TV stations.

However, Scripps is also active online, with the Web counterparts for some of its cable networks, including the Food Network, the DIY (Do-It-Yourself) Network and HGTV, drawing heavy traffic each month.

Scripps said it would invest in marketing to boost the awareness of the Shopzilla brand. The search site will continue to operate as an independent unit within Scripps and keep its Los Angeles headquarters.

“Shopzilla sits at the intersection of two of the fastest growing sectors online: paid search and e-commerce,” Shopzilla CEO Chuck Davis said. “Online shopping already is a $100 billion-plus industry in the U.S. alone, and it’s still the early innings.”

Optimism About E-Commerce

The chips might not have seen their last move around the chess board yet, analysts say, as companies look for ways to compete with the portals, notably Yahoo, that have a strong advantage in being able to drive traffic to the shopping search sites.

The buys also reflect the strength of optimism that e-commerce will continue to grow and that its expansion can be aided by search technology that helps shoppers rapidly find what they’re seeking. Shortening shopping time, analysts say, usually leads to more purchases being finalized and higher customer satisfaction.

Like Shopping.com, Shopzilla — which also operates the Bizrate.com site — makes money by charging merchants for referring potential buyers to their sites. It operates shopping channels on America Online and on the Lycos portal as well as its own standalone comparison-shopping site.

Scripps said Shopzilla attracts about 14 million unique visitors monthly and will generate up to $33 million a year in profit going forward.

More To Come?

Analysts have been calling for some time for consolidation in the shopping search vertical. Kinsey Group managing editor Greg Sterling said several independent players remain. Become.com recently landed some $7 million in venture funding for its product-review search engine and PriceGrabber and Nextag both have a significant presence as well.

Sterling said Shopzilla is “certainly a prize” for Scripps and that the recent purchases underscore that search is now seen as a necessary element for a strong e-commerce presence.

Scripps could add its own wrinkles to the shopping search game, as well, Sterling added, notably giving local merchants access to the search technology in conjunction with advertising in other media properties, such as local newspapers.

Sterling also noted that the latest purchase also underscores the arrival of newspaper conglomerates as players in the online field. Last year saw Dow Jones buy MarketWatch and the New York Times Co. purchase About.com, he noted. “It appears newspapers as a category are starting to make much more aggressive moves online,” he added.