Price site shake-out

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Everyone likes a bargain and the rapid growth of price comparison websites shows that savvy consumers are prepared to shop around online to get the best deal.

Moneysupermarket.com, launched almost a decade ago, was quickly followed by a host of other sites offering comparison on everything from flat screen televisions to mortgages. As the market expanded supermarkets, search engines and financial companies scrambled for a piece of the action.

Credit checking giant Experian yesterday confirmed speculation that, "due to interest from a host of private equity and listed companies", its PriceGrabber site is under review, which could lead to a sale of the business.

This comes just three months after Yahoo said it was looking at ways to improve the performance of its European shopping comparison site Kelkoo, triggering reports it was also up for sale. And last month, the Daily Mail and General Trust closed down energy bills comparison site Simply Switch just 18 months after paying £16.5m for the business. After years of rapid growth is the price-comparison market coming off the boil?

The websites make money by receiving commission for customers they send to a provider, when a successful sale goes through, or through advertising. Some also generate income by passing on personal details to other companies.

Analysts said yesterday that PriceGrabber, which does the majority of it business in the US, has performed well as part of Experian and was "not being sold on a position of weakness". Christian Koefoed-Nielsen, an analyst at Panmure Gordon, said that Experian are constantly reviewing the business. "This is more of a stand-alone business and therefore if they can get a good price for it without damaging the existing group, it makes sense," he said. "The business appears to have grown quite strongly under their ownership over the last three years."

PriceGrabber had 17 million online visitors a month when Experian bought it but this has grown to 26 million. And underlying revenues grew 9 per cent in the three months to December.

In a statement to the Stock Exchange yesterday, Experian said: "As part of its strategic planning process, Experian is undertaking a review of PriceGrabber and its fit within the Experian portfolio. This review is at an early stage and Experian will make a further announcement when appropriate."

AOL and private equity firms have been touted as potential buyers and a company spokesman said it expects to get more than the $485m Experian paid for the business in December 2005.

However, it is a different story at Kelkoo, which is not believed to have been performing so well.

One of the key issues for price comparison sites is that the market has become overcrowded which means that only the most successful are likely to survive. Moneysupermarket.com, which floated on the stock market in July last year with a market value of £800m, is the market leader in the UK for financial products and attracts about 45 per cent of all online financial traffic. uSwitch.com, which enables consumers to cut down their energy bills, is also a clear frontrunner, which meant that Simply Switch was unable to compete.

And the market for companies which focus on retail products is even more saturated. One analyst said the barriers for entry for those comparing retail products, such as flat screen televisions and DVDs, were lower than those comparing financial products, such as mortgages and insurance, which meant there were many small players in the field.

Just 5 per cent of shoppers say they use comparison sites for retail purchases, according to research from Verdict. Yet, a recent study from research agency Consumer Intelligence showed that 50 per cent of people would use a comparison site to choose insurance. This has grown from 10 per cent five years ago.

Nick Gladding, the senior research analyst at Verdict, said that a key reason people don't use sites more for retail purchases is that "their brand profiles are much lower than those of retailers... They simply don't have the advertising presence to make them as 'front of mind' as most retailer brands," Mr Gladding said.

Ian Hughes, the managing director of Consumer Intelligence, believes that the growth in the financial sector may also be levelling off. "I don't think this will be a space where there is going to be a lot of new entrants," he said. "It is a crowded space."

PRICEGRABBER.CO.UK

Based in Los Angeles, the site was launched in 1999 in the era of the internet boom. The entrepreneur Kamran Pouzanjani founded the site with $1.5m of funding from angel investors. Sold to Experian for almost $500m in 2005, it claims to have 26 million active customers per month.

pricegrabber.co.uk

PRICERUNNER.CO.UK

Launched in Sweden in 1999, and bought by ValueClick for £16m, PriceRunner has offices in London, Munich, Paris and California. Comparing items from clothing, health and beauty to electrical goods.

pricerunner.co.uk

KELKOO.COM

Operating in 10 European countries, Kelkoo was founded in 2000, following mergers with Zoomit, Dondecomprar and Shopgenie, and was acquired by yahoo in 2004.

kelkoo.com

CONFUSED.COM

The online arm of car insurer Admiral, Confused.com is one of the UK's biggest insurance comparison services. Launched in 2002, it has grown to dominate the car insurance price comparison market.

confused.com

MONEYSUPERMARKET.COM

Specialising in financial services, in nine years it has become the market leader with 45 per cent of online financial traffic. It floated on the stock exchange last year for £800m and was founded by Simon Nixon.

moneysupermartket.com