Experian Pays $485M for

Written by Evan Schuman
December 14th, 2005

Betting that price comparison sites will play an increasingly prominent role in e-commerce, credit information vendor Experian will spend almost half a billion dollars to take over, Experian announced Wednesday.

Following on the heels of June’s purchases?just days apart?where E.W. Scripps paid $525 million for Shopzilla and eBay paid $620 million for, Experian’s move seems to continue a trend.

Price comparison sites make their money by charging retailers a fee when customers are sent their way.

The big question is whether consumers will start letting price comparison sites influence their purchases in the same way that traditional all-encompassing search engines impact so many other pageview issues.

Not coincidentally, other major players in the price-comparison space include entries from search engine leaders Google (Froogle) and Yahoo (Yahoo Shopping). is one of the larger remaining independent price-comparison sites.

Analysts say that the acquisitions are all about future market-share potential and that’s why the purchases are happening at such high multiples.

For example, Wednesday’s $485 million PriceGrabber grab was buying a company that is expected to deliver only $60 million in revenue this year.

Experian officials point to strong profits being more meaningful than sales, but PriceGrabber’s healthy profit margin is still only projected to deliver $25 million this year.

“We believe that we got a fair price for a good business,” said Experian EVP Peg Smith.

“The market itself is forecast to grow about 40 percent this year, and we expect to grow faster than the market. The underlying drivers for this business are going in the right direction.”

Beyond pure profit growth, the other reason for an acquisition to work is strategic synergy, said analysts.

In other words, if the combination of Experian and PriceGrabber will boost corporate profits for the $2.5 billion Experian more than $485 million, it’s a good deal.

Experian’s Smith said that the retail vertical represents 17 percent of total sales for Experian, and she characterized that as “a very large portion of the revenue.”

For years, she said, Experian has been working with those retailers trying to help connect them with customers. That made a price-comparison site a natural fit, she said.

Some analysts were not so certain that it would be a clean fit.

Sucharita Mulpuru, a senior analyst with Forrester Research, said she had expected someone to buy PriceGrabber, but was surprised at Experian’s move.

“To be honest, I’m really baffled by this acquisition. Experian manages your credit report,” she said. “They have tons of data about people. They’re trying to roll this into their interactive group, but it’s not a strong player in retail. The thing that jumps out about this is the price and the acquirer. In the other cases? and Shopzilla?there was more synergy between them and the acquirer. I find it harder to see how PriceGrabber will serve Experian and vice versa.”

Forrester’s Mulpuru also said she thought Experian paid way too much.

“It was definitely overvalued. I don’t see growth being as substantial because PriceGrabber is so much smaller than its competitors,” Mulpuru said.

“In the month of November alone, they claim they got millions and millions of unique visitors, but Nielsen NetRatings put them at seventh among the most visited price comparison sites. The top sites had 20 million visitors. They had 7 or 8 million, so they’re working off a much smaller base. I don’t know how sustainable their growth will be over time.”

One justification for the higher price is that not all price-comparison sites are the same.

Harry Tsao is the co-founder of E-commerce site and, as a student of E-Commerce, argues that finding the lowest price is actually a pretty poor indicator of the quality of a price-comparison site.

A recent Consumer Reports story, for example, did a shootout between Froogle, NexTag, PriceGrabber,,, Shopzilla and Yahoo Shopping.

Froogle and Yahoo Shopping delivered the lowest prices of the group, with coming in third.

But Tsao argues the absolute lowest prices are heavily polluted with fraudulent sites that advertise prices for products they don’t have, with the scheme’s goal to upsell consumers once they try and buy.

“I think finding the lowest price is a very poor metric” for determining the quality of a price-comparison site, Tsao said.

“Sites like PriceRunner and Froogle include anybody that would sell the product online. Froogle especially tries and list everything under the sun from every single merchant online” including “a bunch of illegitimate retailers.”

Tsao argues that PriceGrabber does much more to weed out frauds, so while their prices may not be the lowest, they are a more accurate reflection of the prices available.

Experian’s Smith said the vendor screening process was one of the attractive features of PriceGrabber.

“They are very selective in vetting who their merchants are” based on customer reviews and other methods, Smith said, adding that price comparison sites see a lot of customers choosing on non-price attributes, such as the proximity for a brick-and-mortar location or the comfort-food-aspects of a branded manufacturer and branded retailer.

Another differentiation that Tsao argues is SKU-matching to make it more likely that consumers are seeing apples-to-apples product comparisons.

“If they don’t do SKU association, it might be a completely different product,” he said.

Experian’s Smith agreed. “It might be a compatible print cartridge as opposed to the manufacturer’s own print cartridge,” she said.

“PriceGrabber will not allow that to happen. They will fire merchants if they are misleading consumers.”

Another key argument for Experian’s acquisition is what company officials said is PriceGrabber’s site visitor loyalty, resulting in a lot of repeat customers.

Forrester’s Mulpuru agrees that there is a lot of interest in the price-comparison segment today, but she questions the wisdom of that focus.

“I’m skeptical of the future of price comparison sites. On a Forrester survey, e-commerce marketing budgets grew 20 percent, but the price comparison budget was flat to nominal?maybe five percent,” she said.

“More money is going to the paid searches like on Yahoo and Google. It’s misguided to think the growth in price comparison sites will continue over time.”

As a business model, Mulpuru also questions the comparison site’s longtime viability.

About “70 percent of people online in the U.S. don’t use shopping comparison sites. This is 2005 data I’m referring to. From a retail perspective, I’m becoming more skeptical of these price comparison services. Outside of the holiday season, it doesn’t work for most retailers,” Mulpuru said.

“At the same time, you’re paying for it, it’s on a cost-per-click basis. Retailers aren’t foolish. If they’re paying for clicks and they’re not getting the conversions, it’s not going to work.”


Comments are closed.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.