One of the original, and still enduring, uses of the internet is information gathering. The world wide web has always been the great bet settler and refuge for the uncertain. Trivia, difficult facts, explanations, and advice are readily available online.
From there, the web became an amazing how-to engine, with advice on getting every stain out of every surface and teaching every dog every trick, etc.
If the world wide web can quickly connect someone to a global encyclopedia of all sorts of knowledge, why can’t it also act as a consumer super-almanac, locating the lowest prices on any product out there? And why not subject-specific almanacs? Once we arrive at this stage in the process we get to an economy based on comparison engines or comparison sites.
These compare prices of products in particular areas. You’ve seen them: comparisons of hotels, cars, flights, electronics, general consumer goods. It’s hard to think of a product or service that doesn’t have a comparison site associated with it.
Model and Customers
If you had one guess as to how comparison sites market themselves and gain customers, you’d probably nail it. They trumpet their ability to locate the lowest prices. It’s an age-old marketing niche and strategy that has always worked.
The site of course has partnerships with the various brands in the field in question, and its employees do the work to make sure they always have the latest, best deals. This allows the site to function almost like a breathing almanac entry. That is, it’s the place the customer would turn to get all the information it needed.
To take car insurance as an example, there are many companies out there and so many of them claim that their rates are just a bit lower than others. Also, in addition to rates, an insurance policy has so many different components. Going through and finding what is the best value would require a lot of time and effort–the customer would just about have to draw up large graphs and fill in and analyze all the information. A company like thezebra.com, for example, will do all the work for a person.
To break it down, say a customer is looking for car insurance. He or she will need to search companies locally. Comparison sites often organize their information by states or cities, which helps the customer navigate more easily. Having, for example, all the insurance companies in New Jersey at one’s fingertips provides a solid value to the customer. It saves a lot of time.
Further, once the person has used the comparison site to get an excellent price, it’s very likely that the person will use thezebra or a similar site every time. Why go to some other site or why go to individual insurance company sites if you’re not going to get the best price that way?
As you can see, the comparison sites don’t sell their own products, but work as an information-gathering service, a very valuable role to the consumer. In many cases, the comparison site will get a small percentage of profits when the referrals to individual companies lead to sales.
Similarly, some of the comparison sites work on an affiliate basis, meaning they are paid just for driving traffic to the sites of the individual merchants, not only for sales. These affiliate plans will each have their particular terms, with conditions for what sorts of actions taken by customers will result in so much money for the comparison site.
The comparison sites can also bring in money from selling banner ads to the companies in their niche, as well as to comparison sites in related niches or to products that customers of the relevant companies are also known to buy.
Costs for the Business
One of the attractive points about a comparison website is that it doesn’t require difficult and messy tasks of setting up the means of production for a product, organizing the distribution, etc. The business owner doesn’t have to pay for supplies to produce the product initially.
The two main costs are the platform one uses to bring the information to the audience and the cost of labor. The platform involves, first the means for gathering the information–constantly updating prices for things like plane tickets or insurance. This will involve some software suite that the company has to maintain and periodically improve.
But it also includes the framework of the website that delivers the comparison to users.
This has to be clean, user-friendly, and effective. Most comparison companies routinely update their platform to respond to customer feedback and to bring in new features as available. Doing so will allow the information to match the way people actually search, something that often requires feedback.
A good comparison site gives the customer more than just the least expensive deals, but also provides relevant information to customers who are dealing with a complex set of ideas and facts, such as laws, regulations, requirements, etc. While that information might be available elsewhere, it’s relevant to the purchase of the product at hand, so providing it can provide extra value to the consumer.
The employees make up another major cost. It’s important to have an adequate IT staff to keep the servers running, to troubleshoot problems, to answer customer complaints, and to interact with the customers whose products your company is comparing.
Finally, a lot of cost will be put into marketing, consistently making sure that the name of the comparison website is out there, being placed on proper web pages, etc. Some comparison sites have even branched out to television ads. That shows how big a business it is.
The comparison site model is relatively simple, with only a few variables. It is as quick and easy to set up and get running as just about any model. It’s very sustainable, assuming that the business compares products, like car insurance, air travel, or hotels, that have a self-perpetuating need and market.