Understanding the Influence of Comparison Shopping Engines Internet World, 30 th April 2008

1. Understanding the Influence ofComparison Shopping EnginesInternet World, 30th April 2008

2. Agenda • Why should you care about CSEs? • How do CSE’s work? • The CSE landscape • CSE 1.0 • CSE 2.0 • Understanding the True Influence • Common CSE pitfalls • Key Takeaways • Q+A

3. ChannelAdvisor and CSEs…

4. Why Should You Care About CSEs?

5. E-Commerce – Large and Growing 20% Year over Year • Jupiter Research Data US Retail Forecast 11/07 and European Retail Forecast 8/07

6. Online E-Commerce Channels Growing in Importance • More consumers shopping online via search, comparison shopping engines, marketplaces. • Today up to 75% of sales for an internet retailer is driven by online channels. • FBR Research based on publicly available Gross Merchandise Volume (GMV) Information. Also corroborated by ChannelAdvisor’s real-world data.

7. E-commerce Everywhere Which of the following types of online tools/services, if any, do you usually use when you conduct online research before making a purchase? Source: iCrossing

8. Acquisition, Retention, and CLV Average cost-, value-, and profit-per-order, by marketing tactic: Source: Forrester Research, Cantor Fitzgerald

9. Other important CSE datapoints • Forrester – 75% of online shoppers influenced by CSE • ChannelAdvisor – some customers see CSE as large as 40% of GMV • Comscore: January 08 UK: • 33m unique internet users • 17m visited CSEs • 51% reach

10. How do CSE’s Work?

11. Comparison Shopping Engines • How it works • You pay for traffic on a per-click basis (called CPC in the industry) • Per-click determined by category and merchant auction • Traffic driven to your e-commerce site for potential conversion £X/click

12. How do CSEs get traffic? • Direct navigation • This is a relatively small amount of traffic • CSEs are, in general, not sticky • SEO • Generally strong results in natural search results, strong Page Rank • Portal/Search Partner • AOL, eBay, MSN Shopping, etc. • Paid Search • A huge driver of traffic for these sites • Often not high placement on very broad terms • Effectively reselling traffic to merchants • Sometimes sell it back to Google and Yahoo via AdSense / Yahoo Publisher Network • Network Partner sites (super-affiliates) • Shopping.com ads also appear on eBay, Dealtime, • PriceGrabber powers AOL and CNET

13. The CSE Landscape

14. Understanding CSE 1.0 and CSE 2.0 • CSE 1.0 • Vintage <2000 • Product catalog driven • Usually heavily electronics oriented • CPC • Stagnant, little to no changes since 2006 timeframe • Primarily acquire traffic from paid-search • CSE 2.0 • Vintage >2006 • Variety of models to enhance experience/business • Reviews (Ciao) • Social (Crowdstorm/Facebook) • Traffic/fun (Jellyfish) • BizModel (CPA – Jellyfish) • Comprehensive • Vertical orientation (Mobile-phones) • Local (Abcaz) • Integrated checkout (shop.com)

16. Comparison Shopping Engine Share Data

17. Jan 07: CSE 1.0:76%, CSE 2.0:24% Jan 08: CSE 1.0:71%, CSE 2.0:29% CSE Share Data (US)

18. CSE UK Market Status • The CSE 1.0 sites either were developed by large companiesor have been bought • Shopping.com/DealTime – eBay • Shopzilla/BizRate – EW Scripps (rumored to be for sale) • PriceGrabber - Experian (a subsidiary of GUS Plc) (rumored to be for sale) • NexTag – Providence Equity Partners Inc. • Kelkoo – Yahoo! (rumored to be for sale) • CSE 2.0 activity: • Pronto (IAC), Smarter (MeziMedia) – acquired by ValueClick (pricerunner) • Jellyfish acquired by Microsoft • Recent trend toward “social shopping” • These sites currently generate a relatively small amount of traffic • Potentially high conversion rate • Low barrier to entry • ChannelAdvisor gets constant requests for new sites, both from clientsand the sites themselves • Increase in niche sites over time • Result: expect more to come!

19. Understanding the True Influence

21. Common CSE Pitfalls

22. Datafeeds for Beginners • Each CSE has a ‘feed specification’ • Usually a CSV or XML file that includes required, recommended and optional information about your products • Title, price, shipping info, tax info, EAN, model number, destination URL, image URL, etc.. • You have to FTP the information on a daily basis (or when you want updates sent to the engine) • Datafeeds are tricky because: • The specs change constantly • If you get it wrong you can pay dearly • It’s impossible to know what’s “really” required vs. optional vs. recommended • Every engine is VERY different so you can spend a lot of time managing this as it goes up linearly with the number of engines you support • E.g. 7 engines is 7 times the work of 1. • The datafeed is typically how you manage ROI so that causes more complexity

23. Common CSE Pitfalls • Operational Complexities • Feed changes • Removal of non-performing products • Updating of price information • Updating of inventory (out of stocks/in stocks) information • Site differences • Surveys/reviews • Lack of transparency • Data: Impressions/CTR • Behavior: Search versus browse • Success factors: Which tactics are effective? • Conversion rates • Making sure your items are optimized/matched correctly • Don’t underestimate the time or complexity

24. Key Takeaways • Opportunities • Forrester – 75% of online shoppers influenced by CSE • ChannelAdvisor – some customers see CSE as large as 40% of GMV • Economics still ‘work’, niche sites highly effective • Next wave of innovation coming with CSE 2.0 – are you ready? • Google Product Search! Did I mention that it’s FREE? • 50% of UK internet audience uses a CSE each month – they are strategic to getting mindshare • Challenges • Increased fragmentation • Brand recognition • Retailers “put off” by CPC model and increasing rate-cards • ROI management is complex due to most engines not sharing cost data/allowing bidding • Positional/landscape awareness non-existent

25. Thank You!james.scott@channeladvisor.comfor a copy of this presentation