The death of online price comparison

23 December 2011

ciao1The news of Microsoft selling off Ciao to the mid-size French company LeGuide.com has us scratching our heads here at Bitterwallet HQ and wondering if we are seeing the end of online price comparison. The golden days seem to be behind us as the old big names slump in traffic and value. Ciao was bought by Microsoft for a half-billion dollars only a few years ago but has been bought in cash by a company with EBT of €8.6m and a market cap of only €51m. Kelkoo was bought by Yahoo back in 2004 for €450m and sold a scant 4 years later for a rumoured fraction of the price. Pricegrabber jumped on the mid-2000 sales club by selling to Experian for a half-billion and has slipped down the traffic rankings since then.

It seems the heady valuations of 6 years ago haven't panned out as the sector has declined in popularity even though online shopping has grown massively. Indeed it seems illogical that price comparison portals with their early head start haven't become the defacto starting point for online shopping. While other ecommerce sites such as codes, group shopping, cashback, and deals have exploded, the comparison sites have taken a distant back seat.

There are two probable reasons for this decline: (1) comparison sites were built on the idea of a rational consumer, someone who was carefully planning and executing on their purchases, (2) the model and traffic of price comparison in the first decade was built around traffic arbitrage and search rather than genuine consumers.

Let's take apart reason two first. The initial boom of price comparison was built on the back of organic search as comparison sites churned out millions of pages optimised to rank on the long tail of model number and product search. If you think back to 2004 you probably remember doing a model number search and seeing nothing but page after page of comparison sites ranking for these keywords. Google slapped down these rankings on an individual basis with site penalties in the subsequent years but their recent focus culminating in Panda has made this a central part of Google's ranking algorithm. In a nutshell Google doesn't want pages rankings which are simply link collections to other sites - they want unique content or some value add. Second, the early comparison models were built around CPC (cost-per-click) payments from retailers to the comparison sites. A little bit of simple math (buy incoming clicks for less than outgoing clicks) meant they were able to funnel through large amounts of traffic from cheap sources and simply arbitrage the pricing. This practice has declined as cheap traffic sources have declined and retailers improved their source value attribution tracking and moved away from CPC towards performance models. Lastly, the entrance of Google into the comparison market with Froogle (now Google Shopping/Product Search) and mainly the promotion of these Google Shopping results to the top of the results page has meant that organic traffic for comparison has pretty much dried up.

The second reason is not as simple but I think strikes to the core of why comparison was valued so highly at its peak. When shopping tools are built we often consider the end user to be a rational and ideal future self - the kind of future self that will eat healthy, budget carefully, bike to work and never get *that* drunk again. In reality our present self is very different and driven more by soft social and psychological factors rather than logical reasoning. In the sector of online shopping the price comparison site is more of a tool for the rational future self which is not the mode most people are in when they make a purchase. On paper it looks like the price comparison site would be a necessary piece of the online shopping boom - after all wouldn't every single purchase be checked on a price comparison before going through checkout?

In the end it seems that convenience and reputation are still as powerful online as offline. Consumers continue to keep Amazon as the largest online shop because they trust the service, enjoy the convenience and more or less believe that it's probably a reasonable price they are paying. Sites like Groupon have shown that consumers will happily purchase without comparison based on the narrative of the sale (50% off!!) and the time pressure (today only!).

A third reason for the decline in price comparison may be that the online market has become increasingly large and less transparent. With the boom in private sale sites where prices are hidden behind a registration wall, special discounting services like Amazon Prime, and, again, sites like Groupon where prices are short-term and limited, it has become difficult to compare true prices. Simply put, the price is harder to compare than in early online shopping days where the number of merchants was limited and prices were easier to compare like-for-like.

A last bit to throw in is that as online shopping has become the norm and more brands have become trusted consumers may be less likely to visit price comparison as a trust reference and product discovery mechanism.

After all that waffling on - what say you the Bitterwallet consumer? Have you found your price comparison use habits shifting? Do you remember using comparison sites more in the past?

40 comments

  • hi
    Well, that was a boring story...
  • captain.cretin
    The big comparason sites of a few yearsago killed themselves by being lazy; go visit one today and they still dont have a clue. There ARE comparison sites that offer useful service and have plenty of extras, but all of the ones I know are for airline tickets. Kayak Orbitz and cheaptickets All give you extras, like links to baggage allowances, health and travel tips, text alerts for your flight etc. Without them, I would have paid nearly £700 for a one way ticket from China to UK on a cruddy airline, instead of under £400 for tickets with Emirates!!!
  • Jeremy
    Bet it was still a cruddy airline though.
  • SW
    The number of rational consumers hasn't shrunk - it's growing. However as a proportion of internet users it has shrunk - you don't have to be 'smart' to use the internet any more, almost everyone's on the internet now, including some more reckless spenders. If as a company the biggest and most lucrative parts of your customer base aren't using price comparison, price comparison isn't that important to you. And if the less profitable customers use price comparison, it drives down any revenue that you're willing to return to affiliate sites, including price comparison, which reduces the quality & diversity of said sites. Cashback sites would also be a factor - really savvy consumers would use price comparison but complete transactions through those... even less money for price comparison sites.
  • Claire
    I'd love to use a price comparison site if I could find one that actually worked. They all churn out unrelated garbage and seldom come up with the lowest price. That's the real root of the problem...they're all shit.
  • callum
    Probably because they are all rubbish. I can't remember the last time I used one and it gave me the lowest price for what I wanted - they will even get it wrong from the major stores like Play and Amazon, let alone the dozens of others. Much easier to just look yourself in the first place.
  • qwertyuiop
    tl:dr summary anyone? I get that Paul seems to think that the sale of one company spells Oblivion for countless others, but yeah - I bet if someone steps on a dry twig these days or a bird shits on a car one of the BW editors will write an essay of inane content to commemorate the event!
  • qwertyuiop
    Oh good, your site appears to have taken such a shine to my words that it's printed them twice. Hilarity ensues!
  • Mr G.
    As others have said it has become more and more obvious that comparison sites don't give the best price, try Google Shopping (erstwhile Froogle) some time - total bollocks. If something doesn't do what it purports to do you just don't keep using it.
  • Justin C.
    The problem is, as will always be, he who pays the piper calls the tune. My local superstore won't tell me that the butchers down the street sells steak less than they do. Why would a commercially operated comparison site be different?
  • Chris
    I'd respectfully disagree too. I suspect many of the bargains on HotUKDeals are originally discovered on price comparison sites. Sure the biggees may be on the way out but the smaller ones like find-dvd.co.uk are still a godsend. Then, of course, you've got all of insurance etc related ones like compare the meerkat. I predict consolidation. In fact - I'm quite surprised that HotUKDeals doesn't have its own service. The likes of Groupon look overrated to me. It was a fine idea in principle but no-one wants spam everyday for 20% off fish nibbling your feet services which is what they seem to have become. I would agree that the valuations - like much of the tech sector - are ridiculous though.
  • Mike H.
    Who carries 8.6m in cash?
  • mark a.
    Wow - BW getting some quality writing?! More like this please.
  • Me
    Froogle is brilliant - have found many a bargain through it and look up anything I'm going to buy with it. Doubt they make any money though, as I will actually purchase through topcashback when I purchase. Same with find DVD, find game, find cd. All excellent sites that work pretty damn well. Yes they sometimes miss out the odd site but generally are very good at what they do. That said, kelkoo and the like were shit - it was as if only 2 shops had actually signed up to the site as you'd only ever get these ones show up when you searched for something, even if they were £100s more expensive than elsewhere.
  • Nick T.
    @ Jeremy. If you think Emirates is cruddy, you've obviously never flown with them. For good guidance on the best prices I use the Invisible Hand plug-in for Chrome. It's proven itself a number of times. Use that, healthy scepticism (check camelcamelcamel to make sure Amazon aren't massaging their price reductions) and a bit of common sense and it's still perfectly possible to pick up a bargain.
  • Billy
    Price comparison sites trumped by the savvy cashback shopper. In dedicated areas it may work, but I'm not really sure retailers give a hoot about who's driving traffic to the site. Many of the so called price comparison engines are not polished enough or real time. Neither do they include tips such as live discount vouchers/multi buy opportunities, all of which are a factor in the decision making process.
  • Businessman
    Nice article I had in fact been wondering why my searches were not all crapped up with those useless Kelkoo links anymore. I do use Froogle and it does find cheap stuff if you use it intelligently. The key is knowing what the general market price is for whatever you have your eye on. If you see it all over the internet between say 80 -120 pounds then Froogle finds it somewhere for 50 you know you have got a bargain. Of course before buying you do another search for how many customer service horror stories from that retailer.
  • computerbar
    Who needs comparison site when there are hotukdeals Quidco and TCB!!!! The business model these Comparison site using are show which one is cheap to buy but never shared the full/maximum cashback with the users. People are more savvy now they are using these sites for comparison only and when they make decision services/goods sre bought via link from their Quidco or other cashback account :) to get the maximum cashback.. Keep an eye on Hotukdeals and Quidco.. within next 5-6 year Microsoft/Google/eBay/Yahoo will be fighting to pay at least £2 billion these sites...
  • Vincent
    I really enjoyed reading this article and I would love for the author to write more about his opinions on the different online shopping models. I used to frequent comparison sites but as my knowledge and experience of online shopping grew, I found that I was able to find better deals on my own. Comparison websites are still useful to search for travel-related and insurance prices but they still have a long way to go to incorporate the lesser valued items into their search. At the moment, they are able to compare only certain retailers. If they are able to fully develop a functional comparison search engine that can compare prices of most of the top online retailers, then I feel they still have potential to grow its user base.
  • bigmuffins
    I seldom use comparison sites now as I found them pretty useless tbh - clicked on link to the lowest price but then the actual price is much higher and that's on sites like John Lewis or Amazon. I'm with Claire on this - they are all rubbish!
  • jjames
    tbh I can see the cashback sites going the same way - at one time you could get £30-40 back on a £500 purchase from say Currys or Comet, now you would struggle to make £8 and this seems to be a trend with all the major retailers slashing their cashback.
  • Prune
    I gave up on 'price comparison' sites pretty quickly and that was during their supposed heyday. Even in the early days of Google, if you searched for long enough, you would discover better prices, ones omitted from Kelkoo and Caio, etc. 'Skinflint.co.uk' is pretty good, though. Mix it with Google Shopping (always visit the sites in the results to check they aren't fake prices) and Amazon and go through Topcashback or Quidco and you should always get a good price. Having said all that, the race to the bottom price will drive many out of business - when thousands could easily afford that extra 50p. God, I sound like a socialist [shudder].
  • The M.
    Those sites are rubbish, really waste of time. Froogle does the job and it actually finds what you are looking for.
  • Blake
    Price comparison websites are a model which seems, even to the layman, incredibly corrputable, and several disreputable apples (when combined with every snubbed company vomiting NOT ON COMPARISON WEBSITES all over their advertising) spoiled the batch for in the mind of consumers. The reality of the situation is if we want a product but not a brand, a deal website serves better, if we want a brand, prices are generally fixed enough that we wind up valuing the extras over the marginal cost differences, and the impulse buying niche is greedily devoured by Grouponalikes and traditional retailing.
  • John
    I always used to use price comparison websites. However incrasingly they started searching for similar sounding products to the point that it became too painful searching the results, others just always used to display a selection from the same old sponsors. They have been architects of their own downfall imho. Even Froogle can't get it right, often displaying the cheapest prices from retailers you've never heard of, only to click through and find the price didn't include vat, or the product page is for a case fan and not the new graphics card I was looking for.
  • Rob
    Good read, more like this please!
  • CAT
    Many interesting points but none mentioning the Real reason; Comparison engines are BIASED? Well they only provided prices of resellers whom spend money with them OR generate revenues from them such as afffliates, hence the conflict of interest. So if i am reseller and i have some items to resell at the lowest price AND i refuse to pay a commission to these comparison sites they will NOT include me in the comparison list. Similar to PC World who match prices with the competitors they choose themselves... Similar to a champion saying he is the world champ of the countries he chooses... Hence the obvious bias. And i am talking from experience, as I worked for a company who often had IT goods the cheapest in the UK but because we didnt agree in paying any fees to these comparison sites we were not included and people were missing out on the lowest prices. That is the truth about these 'biased' sites. They may master the web technologies well but they have no clue about the business part of it, and unless they understand both parts it is doomed.
  • Andie
    I generally use google shopping to gain a list of prices, but never c lick thru, as I then click thru via quidco to the actual site! i may also check certain relevant sites, or consumer sites such as hotukdeals, or MSE. price comp sites I only use via quidco, and check up alternatives anyway - mainly for insurance
  • Hospedagem d.
    Its like you read my mind! You appear to know a lot approximately this, like you wrote the guide in it or something. I feel that you could do with a few % to force the message house a bit, however other than that, that is magnificent blog. A fantastic read. I will certainly be back.
  • NoukyPooh
    I like using pricesavvy.co.uk, it's tiny and honest. They're the only ACTUAL independent price comparison panel operating in the UK. I think they're not from the UK originally though... if you google it they also do consumer review panels, and then grade webshops on pricesavvy according to these reviews.... I think that is pretty fair! Not something I've seen before... Thank you for this blog :) Extremely interesting :)
  • Sabrina T.
    Price comparison sites are basically the same. Gather links from affiliates and make money when action takes place. I think google favours the big ones and slap the smaller ones.
  • My m.
    [...] first resource for bargain hunters like me! As a result, unlike deal sites like Groupon and other price comparison sites, HUKD feels like your friendly uncle offering you advice on where you can get things you [...]
  • seo f.
    We appreciate you the particular auspicious writeup. Them the simple truth is used to be a leisure profile them. Look intricate for you to extra supplied agreeable from you! Nonetheless, just how could most people converse?
  • best t.
    Quality articles or reviews is the crucial to attract the users to go to see the web site, that's what this site is providing.
  • Wrong V.
    A funny article. Seems like Marketing's people always come from the same boring school... and takes consumers for idiots. That's why theses website felt down : Because the Consumer is Clever enough to not be taken for a cow for a long time.... A consumers that want to compare REAL PRICES and REAL OPTIONS makes: REAL Comparative website. That's "Rational". Simple as that. There's still many comparative website by the way.... good ones with good options-
  • Lindsey
    Excellent site you have here but I was wondering if you knew of any discussion boards that cover the same topics talked about here? I'd really like to be a part of community where I can get feed-back from other knowledgeable individuals that share the same interest. If you have any suggestions, please let me know. Cheers!
  • 上品 2.
    Greetings from Florida! I'm bored to tears at work so I decided to browse your blog on my iphone during lunch break. I enjoy the info you provide here and can't wait to take a look when I get home. I'm amazed at how quick your blog loaded on my phone .. I'm not even using WIFI, just 3G .. Anyways, great site!
  • 新着 �.
    Hello, I do think your website may be having internet browser compatibility issues. When I take a look at your web site in Safari, it looks fine but when opening in Internet Explorer, it has some overlapping issues. I simply wanted to give you a quick heads up! Besides that, fantastic website!
  • Blondell
    This is my first time visit at here and i am in fact impressed to read everthing at one place.
  • Carlos
    I recently discovered I can make my own price comparison site with Wordpress that finds the same best prices and gives me more cash back than any of the other cash back and/or price comparison sites on the net. Maybe trickle down technology has something to do with the decline in profits of the major players. I have certainly noticed more and more niche price comparison sites out there each and everyday. My sites included. I have built several. And, it's true the niche comparison sites have better content than the traditional sites because they have niche articles written to comply with Google's unique content rules which aren't bad rules for the consumer.

What do you think?

Connect with Facebook, Twitter, or just enter your email to sign in and comment.

Your comment