Shopping.com annouces major CPC increases

Some categories will jump 150%

[redzone]

We've been hearing all the buzz about lack of available inventory, and CPC pricing will increase in 2005.

I just received the new Shopping.com minimum CPC rates that go into effect 2/1/05:

The most notable subcat increases are:

Electronics -> Flat Panel TV's - $.40 to $1.00
Health & Beauty -> All SubCat's - $.15 to $.50
Home & Garden -> Small Appliances - $.30 to $.50
Jewelry -> Watches - $.40 to $1.00
Kids & Family -> Strollers, Car Seats, Cribs & Carriers - $.30 to $.75
Office - MultiMedia Projectors - $.40 to $1.00

These are minimum bids, as advertisers can open bid for position at Shopping.com, who uses a Top 3 approach. This position algo dictates the Top 3 get the majority of the exposure, and the rest of the listings pay the category minimum.

These increases are very signifigant, not only in the fact of the amount of the increase, but it will most likely set precedence that the other shopping comparison engines will follow with like price hikes.

Our advertisers showed great ROAS across all of the SCE's during the holiday season.

I am quite sure that the advertisers that utilized Shopping.com's conversion tool, are partly responsible for the increase. If you give an engine the ammunition, they will most likely fire the gun?

We constantly come across prospective advertisers that claim that the various paid search engine's conversion tracking is free..
Why pay to use a 3rd party single interface, when they can log into several engines for free?

I think Shopping.com's pricing increase is partly due to the availability of conversion data from their advertisers.

I forecast that category based pricing increases may not be limited only to SCE's either. It would be very easy for Overture to implement minimum bids based on vertical market. It's a nightmare to think about, but there is only so much inventory out there....

[davec]

Is there a list of these prices for each category on the web somewhere?

I'm particularly interested in seeing if these increases are being duplicated in the UK.

Any info would be appreciated, looking at their site it doesn't seem to give any pricing info (I imagine it's after the sign-up process).

Cheers
d

[redzone]

Davec,

You have to be an active merchant to receive the full category pricing....

[davec]

Redzone

Yep that's what I thought. Thanks for confirming.

d

[redzone]

Bizrate followed Shopping.com's announcement, by announcing their own price increases today.. :(
It's the domino effect.. Though bizrate mentioned a discount for Summer months, which is an interesting twist...

[shorebreak]

Redzone,

Were BizRate's CPC increases more or less than Shopping.com?

Thanks,
Shorebreak

[redzone]

Shorebreak,

BizRate increased the same in some categories such as Health & Beauty.

But Other categories they are far below Shopping.com's new minimum:
Kid's & Family: $.20 versus $.75 for Shopping.com(some products)
Watches: $.50 versus $1.00

One of our client's who sells approx. 3,000 models of Timex/Fossil that range from $50-$150 retail, told me his entire watch products line will have to be removed from Shopping at $1.00 CPC.

The main point to remember is that Shopping.com forces you to bid a single price across all your products within a category. You can't select 10% of your products to be at one bid, and the remaining 90% at the minimum category bid.

Bizrate/Nextag allow you to specify individual bids for each product listing. But Shopping.com's display algo. recently moved to a "Top 3" get all the exposure, and the remaining listings only pay minimum category bid.

[shorebreak]

Interesting details Redzone, I appreciate it.

In the of the watch vendor, the big question is, are there other places where he can take his spend and place it profitably? If no, then Shopping.com is in the driver's seat; if yes, then Shopping.com might have some trouble as a result of this price change.

I just don't see other sources of large volumes of converting traffic popping up these days, do you?

[redzone]

Shorebreak,

Well, based on industry numbers Shopping.com has about a 20% share of the CSE market. So, there are other alternatives in the market place. BUT, most merchants are already allocating spend across "all" the CSE's.

Here's the problem I see with Shopping's increase for the Watches category to $1.00 US CPC.

The majority of watches sold online, are probably typical of the merchant I mentioned above: $100 - $200 range. I doubt many Rolex purchasers buy online. (It's just one of those purchases, you want to "touch and feel", before you spend the money?).

At a 3% conversion rate, and a 30% GP margin, the merchant is going to spent $100 to make $140 GP. $40 doesn't leave much room for keeping the light's on... Fossil sells direct, so this category increase, might just swing sales directly to the manufacturer. But, some manufacturers like Timex, place value in their wholesalers, and don't compete directly against them.

It will be interesting how this all plays out, as a higher percentage of consumers are buying through product listings at the CSE's, than ever before.

[melvynandrew]

There are ways to get good conversion for a product. Every retailer has to make a living. The problem with having to bid for positioning is that some retailers with a more limited ad spend are not benefiting fully from listing. Let's face it, if you're not in the Top 3, it is not easy to gain exposure and SALES.

These rate hikes are going to make a lot of retailers mad especially in the watch and jewelry section.

[shorebreak]

Any Shopping.com advertisers who are planning to pull back spend from them because of the 2/1 price increases?

[PPCBT_guy]

Because of OVT's free market pricing concept, it is hard for OVT to raise click prices. They would have to change to a more controlled environment (unless OVT simply raised the cpc minimum across the board - which @ say $.25 would price some industries out of OVT) with different minimums based on category to really take advantage of the revenue data. Thats a major change.

HOWEVER they could easily use the conversion data to set category cpc minimums in the Yahoo inclusion program.............

Its a strange new world. In how many other mediums does the ad seller know the gross profits of their advertisers?