Few details in eBay's Shopping.com plans

EBay's planned acquisition of comparison shopping site Shopping.com is a good move in theory, but its ultimate success will depend on how effectively and to what extent the two organizations are integrated, an issue eBay isn't addressing in much detail just yet.

Although each organization could gain by integrating services from the other, so far eBay is only committing to one area of integration: Once the deal is finalized, some eBay listings will begin appearing on Shopping.com.

This, according to eBay, will be good for its merchants because it will give them access to a new sales channel, and it will be good for Shopping.com users because the variety and number of products in the comparison shopping index will grow with eBay listings.

However, even on this point, eBay is keeping mum on which type of eBay listings will get featured on Shopping.com and what will be the terms for eBay merchants that want to do this.

"The vision we have is to give our sellers who are evolving in that direction access to that new channel for selling and for possibly including eBay listings within the product selection already available on Shopping.com. How we're going to do that... we haven't announced," said Hani Durzy, an eBay spokesman, in an interview. "Nothing like that has been decided."

More details can be expected to emerge after the acquisition closes, which is expected to happen at some point in the third quarter, subject to the approval of regulators and Shopping.com shareholders, Durzy said.

For example, eBay isn't saying anything about how its PayPal online payment service might fit into the Shopping.com integration. "We haven't discussed PayPal as part of this at all," Durzy said. With 70 million PayPal accounts, it's safe to imagine that PayPal is already being used by Shopping.com merchants and buyers, he said.

Without speculating on how or even if PayPal will be part of the integration, Durzy added: "We expect that the natural benefits PayPal brings to both buyers and sellers on and off eBay will continue and grow as the two platforms work together."

No word either on whether comparison shopping capabilities from Shopping.com will be offered at eBay, Durzy said.

Another open question is Shopping.com's Epinions unit, which has 2 million product reviews generated by about a community of about 400,000 users. It would be logical to assume that those evaluations will become available on eBay as well, but eBay is noncommittal about that also, at this point.

"We have not detailed any plans to integrate Epinions into eBay listings," Durzy said in a subsequent e-mail message, adding that there are parallels between the way in which Shopping.com users generate Epinions reviews and the way eBay users post evaluations of buyers and sellers.

Shopping.com didn't return calls seeking comment.

The deal with Shopping.com and its potential benefits comes a bit late to some proactive eBay merchants who have already listed their products on the comparison shopping search engine. That is the case with Gotham City Online, a shoes and accessories seller on eBay.

"It's not going to give us anything new, but the deal is probably pretty good for eBay," said Jonathan Garriss, who is Gotham City's chief executive officer as well as the executive director of the Professional eBay Sellers Alliance (PESA). PESA is a group of about 600 large eBay sellers that collectively generate more than 70 million eBay transactions and US$1 billion in eBay gross merchandise volume annually.

Still, the acquisition, which was announced Wednesday, opens the door for eBay to make it easier for more of its merchants to list their products on Shopping.com, said Patti Freeman Evans, a Jupiter Research analyst. "This provides an opportunity to many more sellers who would either not understand that's an option or not be able to put it together themselves," she said.

The combination of eBay and Shopping.com is certainly significant in the e-commerce space. In April, eBay was the fifth most visited site by U.S. users overall, and the most visited among online retailers, with 63.8 million unique visitors, according to comScore Networks. Meanwhile, Shopping.com was the 20th most visited site overall and the most visited comparison shopping site, with 22.6 million unique visitors in April, according to comScore.

"Shopping.com's consumer-friendly comparison shopping functions are compelling additions to eBay's portfolio," said James Lamberti, vice president of comScore Networks, in a commentary e-mailed to reporters. "This acquisition brings together two of the largest properties in an increasingly competitive e-commerce landscape."

Despite its popularity, eBay still has room to grow in terms of traffic, and this acquisition should help in that area, said Jupiter's Freeman Evans. "Even though eBay has an enormous amount of customers coming on a regular basis to the site, there are people who don't visit eBay. To able to effectively reach them on a regular basis through other concentrated channels is a good thing," she said.

EBay, a titan in the consumer-to-consumer and business-to-consumer e-commerce space, is an online marketplace in which sellers market their products via either fixed-price listings or auctions. Shopping.com, on the other hand, is a free comparison shopping search engine that lets consumers compare the prices and features of millions of products from thousands of merchants. It makes money by charging merchants for inclusion and placement in its search index.

Considering that the Shopping.com business model is different from eBay's, PESA's Garriss trusts eBay executives will be wise enough to integrate the comparison shopping business properly into the eBay fold. "It is a new type of marketplace for eBay. I'm believing eBay will rely on some of the knowledge Shopping.com has developed to execute properly" the integration, Garriss said.

EBay should try to replicate the approach it has taken toward integration of PayPal into its overall service, said Jupiter's Freeman Evans. "Letting Shopping.com operate as an independent entity will be a good thing while bringing the general benefits of being part of eBay," she said. "EBay has done a good job of nurturing PayPal and using PayPal services within their organization to build both businesses, but also allowing PayPal to grow externally. EBay has a pretty good track record with this kind of ownership."

Some financial analysts also praised the planned acquisition.

"We believe the acquisition is consistent with the company's strategy to expand its presence into the broader e-commerce market," wrote a team of research analysts from J.P. Morgan Securities. In addition to expanding the sales channel for existing eBay merchants, the acquisition may also attract new sellers to its platform, they wrote.

Meanwhile, David Edwards, a research analyst with American Technology Research Inc., praised the deal for two reasons. It increases eBay's exposure to ads, and specifically to paid search results, and it may help eBay retain large merchants that are unhappy about the company's fees and other issues, he said. "We believe that a well-executed integration of the eBay and Shopping.com platforms provides an avenue for merchants to extend their reach by selling products via Shopping.com from their own websites," he wrote.

EBay is offering to buy all outstanding shares of Shopping.com stock at US$21 per share in cash, or about US$620 million. EBay had annual revenue of US$3.3 billion and net income of US$778.2 million in 2004, while Shopping.com had US$99 million in revenue and net income of US$12.2 million in the same year.

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