Shopping Engine Bidding Gets Smarter

Shopping.com rolled out new technology that changes the way merchants bid for placement on the comparison shopping site, mimicking the systems already in place at Overture and FindWhat.com.

The Shopping.com Smart Bidding System lets merchants set the maximum bid they’re willing to pay for a certain ranking; it then automatically ups the bid in one cent increments, so that a merchant never pays more than a penny more than the next highest bidder. If a merchant sets her maximum bid to $0.60 for the first listing, for example, and the next highest bid is $0.45, her cost per click (CPC) will automatically be lowered to $0.46, while her ranking is preserved.

The automated Smart Bidding System also relieves merchants from having to check their listings’ positions each day. If a merchant wants to stay in the top position, he can set a maximum bid at $0.55. Shopping.coms Smart Bidding System will automatically maintain that top position at the lowest possible CPC. If his CPC reaches $0.55, he will be notified and given the option to raise his maximum bid in order to stay on top.

The system uses concepts consumers will be familiar with from eBay’s proxy bidding service. In the search marketing world, it’s most similar to automatic bidding functions from FindWhat.com. But San Franscisco, Calif-based Shopping.com has added a warning system that automatically lets top bidders know if they’ve entered a maximum bid more than 50 percent greater than the bid immediately below. The alert lets high bidders set the bar extremely high if so desired, but also allows them the opportunity to lower their bids so that they are just a penny higher than what the second bidder is willing to pay.

Aside from the alerts to high bidders, the underlying technology, developed in-house, is very different from those used by other search players, said Iggy Fanlo, Shopping.com’s chief revenue officer, because of the complexity of the data transfer. With paid search services like those from Google, Overture or FindWhat, Fanlo said, “All they’re doing is a link-off. You buy a keyword, type in the URL and the creative copy, then you’re off to the races.” While Shopping.com also provides a link-off, it entails a completely different amount of data. Merchants must include the price, availability, shipping data, tax info, product description and image as well as the URL. Before the automated system went live, merchants had to either provide a data feed or enter the data into a spreadsheet. Consumer reviews are also linked to the product listings, a result of Shopping.com’s origins in a merger between comparison shopping service DealTime and product recommendations service Epinions.

The new system “pops the bubbles” in the bidding process, according to Fanlo. Merchants who needed to be sure they got a certain ranking would sometimes bid more than was necessary to achieve that place, leading to inflated prices. “In some cases, merchants were leaving money on the table,” Fanlo said.

Of course, that was Shopping.com’s table they were leaving the money on. Fanlo said the theory behind helping merchants pay less for placement was, “We’ll lose in the short run and make it up on volume. Merchants are our customers, and it’s one of our core principles as a company to be fair with people.”

At the same time, he said, bids for some placements might actually go up. In theory, merchants might be more willing to pay what a particular ranking is actually worth to them, because they’ll know they will only pay that maximum if it’s necessary to maintain a desired position. In an automatic proxy auction when multiple bidders have set maximum bids, the auction price can run up almost immediately to that maximum.

The company expected to see an initial decrease in paid listings revenue, due to the lower prices merchants might pay for rankings. But revenue is up after all, Fanlo said, thanks to the holiday shopping rush.