Shopping.com Showing Weakness?
In the spring of this year, I received an e-mail from Shopping.com advising advertisers that they had modified their algorithm to adjust ad spending. Basically, the system would analyze conversion rates for products and give back advertisers some money based on a set formula. They call it Value-Based Pricing(VBP), here is an excerpt:
“We have recognized that not all clicks convert equally and as a solution we implemented a value-based marketplace pricing model – Value-Based Pricing (VBP). With this system, our partner team proactively adjusts the charges per click to you by rating the partner against a standard model. From rating all of our partners’ performance against a standard model, they created a scoring system that accurately and quickly communicates a partner’s performance in terms of average cost of sale and conversion to sale of their overall traffic performance.”
What this meant to me was, advertisers were spending too much money for their ROI (return on investment) and were loosing. Shopping.com realized this and tried to adjust.
Also, in lead up to the Christmas rush, Shopping.com sent another e-mail advising their minimum bid rates would drop by 15% in an effort to attract more sellers. In previous years, minimum bid rates were raised in an effort to generate additional revenue during the holiday shopping season. Here is an excerpt from this email:
“Effective November 15, 2008 through December 31, 2008 we will decrease the standard CPCs in over 25 categories by 15%! The 15% decrease will be applied in top holiday categories and sub-categories such as GPS devices, MP3 players, video games, flat panel televisions and musical instruments. ”
Both of these changes by Shopping.com tell me they are having trouble keeping sellers happy on their site. Sellers are only happy if they have a good ROI, or at least even a break even. Based on CPC (Cost Per Click) problems, sites like Shopping.com, Google, Yahoo, MSN loose advertisers because the ad spend is too high vs. the conversion rate.
As Jigantus.com keeps saying, the “Internet Marketing Model Is About To Change,” we intend to change it.
Tags: shopping.com, value based pricing