The recession took a bite out of revenue at Shopzilla Inc. in 2009, but that wasn’t the only problem for the e-commerce company. Google demanded tougher terms in a contract renegotiation for placing ads.
Instead of digging in and waiting for the storm to clear, Bill Glass, the company’s president, increased spending to develop another web product and expand inventory for existing sites.
Those investments are beginning to pay off. Revenue at the West L.A. company, which runs comparison shopping websites, steadily climbed last year and is expected to continue growing this year. The company also has hired more employees.
“We weren’t going to be telling a growth story in 2009, so we decided to take that year to think about what we would do strategically to put the company in a better position,” Glass said. “At the time, it was hard to make those decisions, but it worked out.”
Shopzilla’s primary business is comparison shopping websites Shopzilla.com and BizRate.com. Both act like search engines, letting people compare prices on retail items from 10,000 different partner websites. BizRate also displays customer reviews.
The company’s annual revenue hit $238 million in 2008, but plummeted to $174 million in 2009.
The recession was a factor in 2009’s revenue drop, but not the only cause, Glass said. Shopzilla, which makes money from an advertising partnership with Google, had to renegotiate its contract with the Silicon Valley search giant.
“The terms of our monetization agreement changed dramatically,” Glass said. “We had pretty preferred terms and they changed. We weren’t in a position of leverage.”
Shopzilla, which is owned by Cincinnati media company Scripps Networks Interactive, had to lay off employees that year. But the company increased spending at a time when most businesses were cutting back.
Gross and his team boosted the amount of inventory on Shopzilla.com and BizRate from 20 million products in 2008 to 80 million in 2009 by forming partnerships with more online retailers. In many cases, the company had to cut deals with new retail partners over its pay-per-click price. The company also pushed money into a new website, Beso.com, which launched in July 2009.
Comparison sites such as Beso, called fashion discovery sites, are becoming more popular among consumers because they allow people to browse by looking at pictures instead of prices, said Jeffrey Grau, a principal analyst at New York research firm eMarketer.
“These are some of the fastest growing comparison shopping sites,” Grau said.
The company hasn’t returned to prerecession revenue, but it’s making some gains. Revenue was $184 million last year, up 6 percent from 2009’s $174 million. Net income rose nearly 26 percent to $38.7 million last year.
Glass estimates that Beso will be a $50 million business this year, and attributes the revenue growth from Shopzilla and BizRate to the websites’ wider inventory. Both got facelifts last year to better direct consumers to the new products.
“The reason we’re doing better now is mostly because of a ton of diversification,” he said. “And we’ve done a better job of taking advantage of that new inventory on our websites.”
Shopzilla also operates six comparison sites in Europe, which make up about 25 percent of the business. Revenue at those sites also took a hit in 2009, in part because the exchange rate favored the euro. But Glass said the company’s European operations have rebounded as well.
Today, Shopzilla’s primary business is threefold: helping consumers find the best price for products, generating leads for online retail partners and offering retailers its customer feedback surveys.
The 321-person company operates from the third floor of a West L.A. corporate office building that it has turned into a lively space, complete with a library corner and themed decorations for every division.
The company was founded in 1996, and started by conducting postpurchase customer surveys for retailers. It added the BizRate comparison shopping site in 1999 and changed its name to Shopzilla in 2004. The company sold to Scripps in 2005 for $525 million.
Retailers often sign up for a variety of different Shopzilla services.
ShoeBuy.com Inc., a Boston online shoe retailer owned by IAC/InterActiveCorp., has been listing products on Shopzilla and BizRate for the last eight years. The company also receives daily, weekly and monthly customer feedback reports from the BizRate survey business.
Jim Keller, ShoeBuy’s chief marketing officer, said listing the company’s products on Shopzilla’s sites helps generate business.
“We don’t do a lot of big brand advertising,” he said. “Shopzilla is one of a number of things that we do in terms of getting our catalog out there to customers.”
But ShoeBuy also works with Shopzilla competitors PriceGrabber.com and Shopping.com. Google also has its own comparison shopping search engine.
EMarketer’s Grau said Shopzilla could face additional competition from social networking and other shopping sites that encourage consumers to suggest products to their friends.
Shopzilla also has struggled to find a way to better connect with consumers, Glass said, because the company only makes money when visitors click to go to another site.
“Building real relationships with consumers has been challenging,” he said. “It’s not fundamental to the success of the business, but it makes the business five-times stronger when you really know who your customers are.”
To find a new way to connect with consumers and keep up with e-commerce trends, Shopzilla launched TaDa.com in October. The website combines daily deals and flash sales to offer steep discounts to customers.
What makes TaDa different from Shopzilla’s comparison sites is consumers stay on TaDa to enter their credit card information and complete transactions instead of being directed off-site to a retailer.
Glass said TaDa, which already has 14 million visitors a month, helps Shopzilla form a stronger connection with consumers than Shopzilla’s comparison websites.
“Now they’re giving us significant intimate details, including their credit card information,” he said. “That’s super important for us. Customers cross a different trust threshold when they do that.”
YEAR FOUNDED: 1996
HEADQUARTERS: West Los Angeles
CORE BUSINESS: Operates comparison shopping and online retail websites.
EMPLOYEES: 321, up from 307 last year.
GOALS: To become the second largest source of leads in online retail behind Google.
THE NUMBERS: $184 million in revenue last year, up 6 percent from $174 million in 2009.
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