There is arguably little that is more fundamental to the e-commerce experience — and triply so with mobile shopping — than price comparisons. For products that lend themselves to precise comparisons (say, for example, a specific configuration of the same brand and the same model of a washing machine), there is little room for a merchant to hide padded margin and even less reason for a shopper to pay anything much beyond the lowest price.
That is what pushed such high interest and valuations in the top initial price comparison bots, including PriceGrabber and Shopzilla. But with no barrier to entry, price comparisons became a given, with every search engine, from Google to Apple's mobile Siri, offering it at a click.
This is important to remember when looking at the Wednesday (June 24) announcement of Connexity (the new name for Shopzilla) buying PriceGrabber (the new name for Company That Illustrates the Need for a Strong Barrier to Entry). The deal is for an undisclosed price, which makes sense given that there's little reason to subject anyone to that much public humiliation.
From a VC perspective, once high-riding companies fizzling out after a few years is not necessarily a bad thing. Although entrepreneurs like to think that they are creating lasting value (full disclosure: as someone who has launched and sold two companies, I probably sympathize with entrepreneurs more than I should), many investors are fine with quick turnovers. That's where a company is created, makes a chunk of change riding a popular wave, then shrinks as the fad wears off, morphing into the layoff and "sell it for scrap" phase.
But even with all of that history, some of the comments made this week from participants in this deal show how very much e-commerce has grown up. First, PriceGrabber's comparison database was treated as an afterthought, with Connexity referring to it as merely a lead-gen business.
A Connexity official was quoted in VentureBeat saying, "The consolidation (and lack of innovation in the websites for that matter) is more an indictment of the hugely negative impact that Google Search algorithm and search result page layout changes have had on price comparison websites versus an indictment of our inability to innovate." A bit defensive, are we?
That official added: "We have innovated a ton on syndication, programmatic display, managed search, and our Bizrate Insights survey platforms. We are innovating as a technology and data-driven marketing services company, not a consumer shopping company."
That last line is quite telling. Put another way: Price comparison was launched as a way to help shoppers get the best deal. That was wrong of us. We now are using the data the opposite way, to help merchants get away with charging more and someone finding customers to pay it. In the marketing to English dictionary, "charging more and someone finding customers to pay it" is the definition of "data-driven marketing services company."
Using the washing machine example, it's now about finding shoppers who want that washing machine and reaching out to them with an offer, before they have a chance to initiate a price-comparison search of their own.
But today's mobile apps make even that approach highly limited. Geolocation flags shoppers who are standing in the washing machine area of a local retailer, pushing online deals that better the store's. For those interested, a comparison search is now reflex. Being first doesn't help if the price isn't strong.
The pricebots were founded on the idea that an overly high price can't hide online. No marketing program today is going to change that.
This article is published as part of the IDG Contributor Network. Want to Join?