CINCINNATI (AP) - Consumers are urged to 'shop, shop, shop' as KC and the Sunshine Band's 'Shake Your Booty' plays in the background in a new ad for The E.W. Scripps Co.'s comparison shopping Web site Shopzilla.com.
Showing people dancing at their keyboards, the ad is part of Scripps' effort to fire up lagging financials in its interactive division. The company also has added features to the Shopzilla Web site, where shoppers can search for merchandise and compare prices. It is improving the site's search mechanisms and it has increased the links from its other properties' sites.
Revenue and profits at Scripps' interactive division grew in 2006 but have fallen off this year. The group consists of Shopzilla, acquired for $525 million in 2005, and uSwitch Inc., a similar service for the United Kingdom that was bought for $366 million last year.
Cincinnati-based Scripps -- which started as a newspaper company in the 19th century and still owns newspapers in 17 markets -- has been a leader among U.S. media companies in diversifying into new businesses, including its successful cable TV networks, such as the Food Network and HGTV. Buying Shopzilla was part of that diversification, said President and Chief Executive Kenneth Lowe.
'Follow the eyeballs, follow the money,' Lowe said.
Shopzilla's revenue in the second quarter fell to $59 million this year from $65 million last year, and profits were down to $6.8 million compared with $16.5 million a year ago.
The company attributed the decline to the cost of enhancing both Shopzilla and uSwitch.com -- and to reduced activity at both sites.
USwitch helps consumers compare costs of utilities, insurance and banking services and then switch. Both sites' revenue comes primarily from fees that businesses pay when they receive customer referrals through the sites.
Scripps said changing market conditions, including rising competition, also affected both businesses, while costs related to a transition in leadership at Shopzilla also dropped first-quarter results there, by $5 million. At uSwitch, lower British energy costs resulted in a softer market for the switching service, while the company invested $10 million during the first quarter to build brand awareness for uSwitch.
The interactive division represented about 10 percent of Scripps' overall second quarter revenue of $640.1 million. Interactive revenue increased in the first quarter of this year, to $62.9 million, compared with $58.6 million in the first quarter of 2006. But the division reported a $400,000 loss, compared with a $13.9 million profit in the first quarter of 2006.
When Scripps bought Shopzilla in 2005, it predicted the interactive division would generate $30 million to $33 million in profit on revenue of $130 million to $140 million that year.
At Scripps Networks, the segment that includes television and interactive brands HGTV, Food Network, DIY Network, Fine Living and Great American Country, revenue rose 7.6 percent to $308 million for the second quarter.
Scripps attributed lower referral fee revenue at Shopzilla, where more than half of the unique visitors come via general search engines like Google and Yahoo, to a more competitive environment.
'This year there are far more competitors participating in search engine marketing for that traffic, including other online comparison sites and also the retailers themselves,' Scripps spokesman Tim Stautberg said.
ValueClick Inc.'s vice president of corporate strategy, John Ardis, agreed competition is rising, but he said it's not dampening his company's outlook.
'It's certainly true that search marketing is competitive and continues to become increasingly competitive, but as far as it having a negative or noticeable impact on comparison shopping as a channel, we haven't really noticed that as much,' Ardis said.
ValueClick's comparison shopping segment, which includes PriceRunner.com and Smarter.com, generated $8.2 million in revenue in the second quarter of 2007, up 37 percent from the second quarter of 2006. The vast majority of ValueClick's comparison shopping business through the second quarter was based in Europe through PriceRunner, Ardis said.
Lowe assured Scripps shareholders at their annual meeting in April that Scripps remains committed to the division.
'We are not the slightest bit deterred by the short-term fluctuations involving online marketplaces,' Lowe said, though he acknowledged 'the path may be a bit lumpy.'
Shopzilla has led comparison shopping Web sites in unique visitors for the past five months, reporting 21.6 million visitors in August, according to data from comScore Media Metrix. But the division's sliding revenue and profits worry analysts.
Analyst Peter Appert with Goldman Sachs & Co. is telling investors not to buy Scripps stock for now because growth is slowing at its cable networks, its interactive operations are showing weaker results and its newspaper business is in steep decline.
'We are troubled by both the competitive dynamics reported by Shopzilla and the cyclical sensitivity of uSwitch,' he said in a note to investors.
Greg Sterling, founder of Sterling Market Intelligence, an Oakland, Calif.-based Internet research firm, also noted the increased competition facing sites like Shopzilla.
'They need to do some branding and build consumer trust and confidence,' he said.
That is the idea behind the new TV commercial.
'We want to create a connection to the consumer, and if you first make someone smile, you have their attention and can move into the next phase of the message,' said Rysa Pitner, Shopzilla's chief marketing officer.
In addition to increasing its advertising to attract more consumers to Shopzilla, Scripps also links to Shopzilla from its newspaper and cable network Web sites and is adding links to some specific editorial content.
Shopzilla also is using paid search words to anticipate results that are most relevant to consumers' queries, and it hopes to improve the volume and quality of its traffic by capitalizing more on free, natural search words.
And it has added a list of 'curiously sought after' requests to its home page to get more consumers to go their first by illustrating that they can shop for anything at Shopzilla -- even live crickets or water-filled bras.
'It's a subtle yet playful way to get our brand out in front of consumers,' Pitner said.
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