Experian Pays $485M for PriceGrabber.com

Following similarly sized purchases of Shopzilla (E.W. Scripps) and Shopping.com (eBay) this summer, price-comparison sites seem to be what Web empires want under the tree this year.

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 PriceGrabber.com, Experian announced Wednesday. Following on the heels of Junes purchases—just days apart—where E.W. Scripps paid $525 million for Shopzilla and eBay paid $620 million for Shopping.com, Experians 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). NexTag.com is one of the larger remaining independent price-comparison sites. Analysts say that the acquisitions are all about future market-share potential and thats why the purchases are happening at such high multiples. For example, Wednesdays $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 PriceGrabbers 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, its a good deal. Experians 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. Click here to read more insight about e-commerce from columnist Evan Schuman. 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 Experians move. "To be honest, Im really baffled by this acquisition. Experian manages your credit report," she said. "They have tons of data about people. Theyre trying to roll this into their interactive group, but its not a strong player in retail. The thing that jumps out about this is the price and the acquirer. In the other cases – Shopping.com 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." Forresters Mulpuru also said she thought Experian paid way too much. "It was definitely overvalued. I dont 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 theyre working off a much smaller base. I dont know how sustainable their growth will be over time." Next Page: Not all sites created equal.