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Yahoo buys Kelkoo – how will the search value chain shake down…?

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Subject:  Yahoo buys Kelkoo – how will the search value chain shake down…? Ashley Friedlein - Favourite
Author:   Ashley :   view profile | all posts by this author | add to favourites
Date:   18:28:00 26 March 2004
 
So today Yahoo has bought European online shopping comparison service Kelkoo in a EU475m cash deal. Yet another cat set among the search pigeons…

If you took a simple purchase process you might have the following:

1. Shopper searches on search engine for a product to buy
2. Shopper gets results – both paid and organic – which increasingly seem to be from affiliate sites or comparison engines like Kelkoo (they do kind of dominate these days..?)
3. Shopper heads of to merchant to purchase.

The search results part is being commercialized as we know – with trusted feeds, pay for consideration, pay for inclusion, pay per click. As far as I hear only Google are vociferously saying that their organic listings will remain ‘free’ – and many aren’t even convinced of that given the mooted IPO and those resulting greedy shareholders.

The merchant end of the buying process is transparently commercial too. They are there to sell you the product.

The middle bit – the intermediary site – is also commercialized in the case of affiliates and the likes of Kelkoo. And these guys have grown quickly in commercial importance. According to our own recent research 15%-20% of all sales for online retailers come from affiliates or the Kelkoos of this world. Indeed, in some cases, the retailers don’t even bother with their own search engine marketing, preferring to rely on their affiliates to send them customers and pay a commission.

But so far these affiliates and shopping comparison engines have been independent middle men sitting between the search results and the merchant, happy to deal in leads and take their cut along the way. With Yahoo buying Kelkoo, however, the search guys have taken control of the middlemen. They own 2 parts of the value chain. Are they doing this just to make money twice along the way? In the long term do they want effectively to ‘own’ the buying customer and trade them to the highest bidding merchant?

One has to wonder whether Froogle is simply Google’s version of Yahoo + Kelkoo? How far can this go – if you own the start of the shopper’s journey, why not own the whole of it? Perhaps eBay should become the fourth player in the search game..?

Equally, if you are a big online retailer who is reliant on affiliates for 20% of your sales does this deal not make you wonder whether you shouldn’t buy your super-affiliates now, whilst you have the chance, before the search lot buy them up or create their own? Now that Kelkoo’s been bought, surely the likes of Cheapflights.co.uk are in the sights of either the airlines or travel companies, at one end of the chain, or the search posse at the other end?

Ashley
 
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