CompareNet. Part 2

Friday, July 1, 2011 6:57

CompareNet also offers links directly to retail ordering sites and takes a cut of any resulting purchase. CompareNet structures each deal differently, in some cases taking a percentage of the sale (between 5 and 15 percent), and in other cases taking a flat bounty per sale, which Traina declined to quantify. These transactions represent over a quarter of CompareNet’s revenue. Transaction partners include, audio/video retailer Crutchfield, computer supplier NECX (see story, p58), and general merchandiser CyberShop. Much of the balance of the company’s revenue comes from the sale of banner ad space.

No profits to show yet, of course. The company has spent around $5 million building a database of products and their features, and constructing data-mining tools that enable the site to mix-and-match and reorder lists at the beck and call of consumers. The company eats the ongoing cost of maintaining the database, as it constantly updates information about the ever-changing models in different consumer segments. About 60 percent of the company’s 40 employees do nothing but maintain the database, says Traina. The cost of adding customers — manufacturers — is declining, he claims, as the company becomes better known and its executives make fewer trips to sell themselves.

The challenge Traina faces is to convince enough product vendors to buy into his advertorials, advertising space, and transaction links. Although the appeal is clear to the consumers who make 2 million unique visits to the CompareNet site a month, the attraction is less obvious to the vendors that CompareNet hopes will buy into the site. Traina says he has 10 “meaningful” customers, and needs 20 to break even. He is optimistic that CompareNet will turn profitable next year.

He might get there faster if he can increase consumer visits. Traina is targeting 2 million monthly visits, noting that volume could embolden him to raise his rates. He is reeling in visitors by buying banner ads on other sites, claiming, for instance, to be receiving 30 percent click-through from ads on The RealNetworks site and 9 percent on Infoseek’s site. (These rates far outpace the industry average, which, according to Milpitas, Calif.-based NetRatings, dipped to .09 percent in July after hovering around 1 percent this spring.) He also shares banner-ad revenue with companies including Netscape Communications and Excite, whose sites direct Web users to CompareNet.

CompareNet is building other revenue sources as well. It sells anonymous marketing information to vendors based on user shopping and browsing patterns. While this information is devoid of demographics, it provides basic insight on how many Web surfers have expressed an interest in, say, 27-inch television sets versus 13-inch models. Traina is considering adding demographic information with users’ permission.

Thomson’s Harmon says he may supply CompareNet with information on the closest location where a requested model is in stock. “We’re going through a supply-chain reengineering process, a key part of which could be CompareNet,” says Harmon. “CompareNet could help us close the loop down to where to buy — whether it’s an electronic purchase or at a retail location.”

CompareNet also recently added postings from the Deja News chat group service, and includes product reviews from various publications including Road & Track, Car & Driver, Tennis Magazine, and Stereo Review.

The company has attracted some notable investors: In June, Intel pumped in an undisclosed amount that closed CompareNet’s first-round financing. GE Capital VFS also participated in that round, which Traina will only say “was in the millions” and which relinquished a one-third ownership stake to the investors. The company’s first $1 million in funds actually came from what Traina jokingly refers to as his “MCI round of financing — friends and family.” (That’s a legitimate approach when you’re from a wealthy family like Traina’s; his father, John is a successful importer/exporter who at the time was married to millionaire novelist Danielle Steele. The two have since divorced.)

Traina says he and co-founder John Dunning ponied up $160,000 of their own money early on — soon after Traina’s epiphany in the electronics store. Proving, too, that there’s no telling what sort of calling you’ll receive when you go out shopping for a phone.

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