OMPARISON shopping Web sites like Yahoo Shopping, Google's Froogle and Shopping.com are about to face some new competition from an old online player.
Next Monday, America Online, the Internet division of Time Warner,
will introduce a shopping Web site called In-Store.com to go along with
the company's revamped shopping section. It will be AOL's first
offering to consumers who want to research products side by side before
buying.
An AOL spokesman would not comment on the impending
announcement, but AOL executives who spoke on condition of anonymity
said the new service had been in development for 18 months and would be
accompanied by considerable promotion to AOL members, starting next
week. "We've done a lot of heavy work to get back in the game," one
executive said.
Analysts said it was too early to say whether
AOL's new offering would have a meaningful financial impact this year.
Other portals with shopping comparison features do not break out
separate revenue figures for those features, but Shopping.com, which
this spring registered with the Securities and Exchange Commission to
offer shares to the public, said in its filing documents that it had
earned $7 million last year on revenues of $67 million.
Consumers
have yet to fully embrace comparison shopping. Only about 10 percent of
online consumers visited a comparison site during last year's holiday
season, and most of those people were shopping for consumer
electronics, according to Patti Freeman Evans, an analyst with Jupiter
Research. But the sites have enjoyed fairly strong momentum in the last
year. The number of visits increased 13 percent over the previous year,
according to comScore MediaMetrix, an Internet statistics firm.
The
new shopping category also represents a shift in how AOL operates with
advertisers, company executives and analysts said. Instead of charging
advertisers on the basis of how many thousands of people view an ad, as
it has in the past, AOL will collect a fee each time someone clicks on
an ad.
In-Store will include elements of both a traditional
online shopping mall, with an array of products and featured merchants,
and a comparison shopping engine, which allows users to select
attributes of, say, digital cameras, then choose from a short list of
products that fit the bill.
Shoppers also can click to select a
product category. On each page, a drop-down box called "Pinpoint
Shopping" will help shoppers narrow a universe of more than 45,000
online sellers with combined inventories of 25 million items.
For
instance, digital camera shoppers can narrow the field of 1,407
products by selecting the camera's resolution, zoom settings and price,
among other attributes. Thus, when searching for a camera below $340
with resolution of at least 3.0 megapixels and zoom capabilities up to
3x, the search narrows to three cameras. For consumers who are
unfamiliar with a particular merchant, the site will display customer
ratings.
Shoppers can test a version of Pinpoint Shopping now, at
PinpointShopping.com. The site also allows AOL members to save products
to a single Web page, so they can compare them side by side or simply
build a wish list - a feature that will be available to non-AOL users
when In-Store rolls out.
In-Store.com will also automatically
show repeat visitors a list of their most frequently visited stores,
and users of AOL's instant messenger will be able to view products
together and chat about them. Shoppers will also have the option of
requesting e-mail alerts when prices on specified products reach a
certain threshold.
According to Ms. Freeman Evans, who previewed an early version of In-Store, the new service "is a good first step."
"It's become the standard among portals," she said, "to have comparison shopping features, so they're catching up in the game."
Indeed,
last year Yahoo started an aggressive counterattack against specialty
shopping sites like Shopping.com, BizRate.com, PriceGrabber.com and
NexTag, which were threatening to steal momentum from Yahoo Shopping.
Google's entrance into the shopping category last year, with its
Froogle service, also signaled its intention of competing with Yahoo on
several fronts.
In the face of that competition, Yahoo introduced
a handful of new features intended to help customers simplify their
online shopping tasks, including a price-alert function, along with a
service allowing users to save products they are considering.
Shopping.com,
meanwhile, is quietly introducing a promotion in which it offers a 10%
discount for purchases from certain merchants. According to Sarah
Leary, Shopping.com's vice president for product marketing, the company
is offering the rebate with about a dozen merchants, and will expand it
to include "hundreds of merchants" later this month.
Sites like
BizRate.com, Shopping.com and PriceGrabber.com have expanded the roster
of merchants that they can search on behalf of buyers, in hopes that
apparel shoppers, car buyers and others will also look to them for
help. More shoppers means more revenue for the shopping sites from
merchants, who typically pay a fee ranging from a few pennies to 50
cents or more every time someone clicks on their product.
Although
AOL's entry could mean fewer customers for other sites, at least one
company, BizRate.com, stands to benefit. According to Chuck Davis,
chief executive, his company largely developed the Pinpoint Shopping
function for AOL in exchange for a share of revenue when customers
click on a merchant's product. He declined to say what that share was.
"This
category is still in the second inning," Mr. Davis said. "So this
partnership, I think, will help grow the category, and grow BizRate."
The
new service will also turn from the cost-per-click approach that has
dominated in recent years, thanks to the growth of Google's search
advertisement program and that of Yahoo's Overture unit. Now, retailers
can avoid committing to, say, a banner ad on the home page or in the
apparel category for a year, and can instead negotiate for the right to
have their ad appear for limited time during peak shopping seasons.
With enough merchants, AOL claims that its overall revenue will not
suffer. Those advertisers will also be given the chance to swap out
their ads on short notice if they are not performing well, AOL
executives said.
To attract more merchant revenue, both from
featured advertisers and from smaller merchants who appear in the
shopping search results, AOL is making the service available to non-AOL
members.
Ms. Freeman Evans, the Jupiter analyst, said: "This is a
much more reasonable approach for AOL. It's basically brings them in
line with the industry standard, so I can see them getting good
traction with advertisers - especially because retailers want access to
the AOL customer."
Indeed, while AOL has seen its subscriber base
erode from a peak of 26.7 million in September 2002 to to 23.4 million
last June as more users gravitate toward high-speed Internet services,
retailers still covet the service's customers, because they tend to be
more avid online shoppers than non-AOL users.
According to a
March report by comScore, AOL members spent more than $15 billion
online in the previous year - roughly 25 percent of overall online
spending. And Ms. Freeman Evans said that more than two-thirds of AOL's
members shopped online.
"That's a pretty high penetration," she
said. "So it means a lot for AOL to enhance its shopping environment,
which in the past was really not so great."
OMPARISON shopping Web sites like 
