INVESTOR'S BUSINESS DAILY, March 25, 2004
As Comparison-Shopping Sites Take Off, Shopping.com Eyes IPO

Shopping.com Ltd., the king of comparison-shopping Web sites, is taking another stab at going public.

The company, which scrapped a 2001 plan for an initial public offering, has more to offer this time around. It posted its first annual profit in 2003. And it doubled revenue and traffic on its Web site in the last year.

Shopping.com expects to raise up to $75 million with the IPO, filed on Tuesday. The company, which changed its name from DealTime Ltd. in October, is one of the few e-commerce companies to take the IPO plunge in the last year.

The comparison-shopping industry is still relatively small, but Shopping.com has grown quickly in recent years. Founded in Israel in 1997, it moved its U.S. headquarters to Brisbane, Calif., last year. The company has 279 employees worldwide and ended the year with $25.6 million in cash.

By 2008, consumers will spend $280 million online, or about 10% of all retail sales in the U.S., says market tracker Forrester Research Inc.

Shopping.com is trying to get into a position to cash in, says Dan Hess, an analyst at comScore Networks Inc., a research firm. "The surfacing of IPOs among e-commerce players is a sign of continued steady and strong growth of e-commerce as a whole," he said.

A growing number of consumers use services like Shopping.com before they make a purchase, analysts say. That was especially evident last Christmas, says Patti Freeman Evans, analyst for market tracker Jupiter Research. "Ten percent of all consumers who shopped online used comparison-shopping services before making a purchase," she said.

Shopping.com reported a profit of $6.9 million in 2003. That compared with a loss of $5 million in 2002. Revenue more than doubled to $67.2 million, according to Shopping.com's filing.

Most of Shopping.com's revenue comes from sending sales leads to its retailers. The rest comes from ads. Consumer traffic to Shopping.com more than doubled to 14 million unique visitors in February vs. a year ago, says market tracker Nielsen/NetRatings Inc.

The volume of Shopping.com's lead referral business has been booming of late.

The company ended the year with 219 million lead referrals, up from 77 million in 2002 and 38 million in 2001, according to the filing.

At the same time, though, revenue per lead declined from an average of 34 cents in 2002 to 28 cents in 2003.

Like many other online comparison-shopping services, Shopping.com made its mark by letting consumers compare prices and features for consumer electronics.

The company says its average revenue per lead declined because it expanded into lower-priced product categories, such as home and garden, jewelry and apparel. It also lowered referral fees to attract more merchants, said the filing.

Last year, Shopping.com rival NexTag Inc. also expanded beyond consumer electronics.

Consumers demanded it, says Rafael Ortiz, co-founder of NexTag.

"Consumer electronics is still growing, but now you have 50% of consumers (on the site) searching for clothing and home and garden products," he said.

To stay on the growth path, Shopping.com has upped its marketing. The company spent $3.8 million in the fourth quarter on TV ads.

It also boosted its traffic and credibility with online shoppers by acquiring Epinions Inc. in April 2003 for $30.5 million in stock.

Epinions, an e-commerce site, gives consumers access to more than 1.8 million product and store reviews. The reviews, penned by consumers, are similar to those found on larger e-commerce sites such as eBay Inc. (EBAY) and Amazon.com Inc. (AMZN)

The ability to compare items and read reviews in one place makes sites like Shopping.com even more important for consumers, says Jupiter's Evans.

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