An opportunity beyond compare?

Setting up a price comparison website might look like a licence to print money, but the competition is strong – especially now Google has entered the fray. By Rob Sharp
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The Independent Tech

What do the following characters have in common? An impressive British-Iranian haggler; a meerkat in a smoking jacket; an outlandishly moustachioed opera singer. Here's a clue: they all appear in some of the most irritatingly-memorable adverts on British television. With their catchphrases – "a great deal easier"; "seemples"; "go compare" – and jaunty soundtracks, the tiresome trio have a way of worming their way into your brain.

Their common cause, of course, is to advertise price comparison websites (Moneysupermarket. com; Comparethemarket.com; Gocompare.com, respectively). These online services, which allow consumers to compare the cost of hundreds of different credit cards, insurance policies, utility bills and mobile phone contracts at the click of a mouse are on the face of it, strikingly similar – hence the aggressive advertising. Yet they are also business behemoths. According to figures published earlier this month by YouGov, the British price-comparison market is worth an estimated £500m a year. Since the first of their ilk, Moneysupermarket.com, was launched in December 1999, the number of businesses in the sector has grown to at least 130. The sites tout the best deals in everything from music downloads to broadband packages; from wine to your weekly food shop. And their numbers keep increasing. This month, Oxfam launched Compareforgood.com, which aims to donate to the charity at least two thirds of the money it makes. Last month Google jumped on the bandwagon, announcing AdWords; a feature within its Google.co.uk search engine that allows users to compare credit card deals, just one click away from a search for "credit card deals".

"We are constantly looking for new ways to help people find what they are looking for on the internet," says Ian Morgan, the head of Google UK's finance industry department. "An advertiser decides how much they are willing to pay for every lead and only pays when a consumer applies for their credit card. So, an advertiser does not pay for an impression but an actual lead." While not a comparison site per se, the real reason for Google's investment is the same as any of its comparison site competitors. The company gets a tasty bite of a lucrative market in exchange for minimal outlay on online infrastructure. The site just needs to build up relationships with those offering the financial services, and update its information regularly. This can be achieved as easily as collating a database of weekly emails. Then, it just sits back and enjoys a large slice of any deal the customer pursues.

This business model has been 10 years in the making. In the mid-1990s, the only way customers could compare different insurance deals was by flicking through the Yellow Pages. People used to spend an hour on Saturday morning phoning up insurance providers and getting a handful of quotes. At the end of this drawn-out process, there was no guarantee they would have the best deal, or any at all. The first to see the gap in the market was Simon Nixon, a 42-year-old entrepreneur from Chester. He targeted mortgage brokers, who were increasingly accessing financial information through computers, by founding Mortgage 2000, an online comparison service that only they could access. In the late 1990s, with the expansion of the internet, Nixon decided to focus on the public. He founded Moneysupermarket.com at the height of the dotcom boom, initially dealing in mortgages and credit cards. Confused.com launched in 2002, providing a forum for different insurance products, and Moneysupermarket.com responded with its own insurance offer the following year. Gocompare.com came online in 2006, also trading in the lucrative insurance market, with Comparethemarket. com entering the frame in 2007 (its specialism was insurance and utilities). Nixon's foresight paid off. This year, Moneysupermarket.com floated on the stock exchange, and in the financial year finishing in April 2009 its turnover was £137m. Nixon was ranked 388th in the 2009 Sunday Times Rich List, worth an estimated £140m.

"On our site it will take you three minutes and you can get 120 car insurance quotes," says Ian Williams, Moneysupermarket.com's chief spokesman. "The rise of the price comparison site has featured a shift in the balance of power towards the customer. Previously, it took people a ridiculous amount of time to find things; it was easy to miss out. Take credit cards, for example. We show every credit card available in the UK; 200 of them. We enable you to compare them all by price and features. We have a team of staff making sure our data is always accurate." The credit card companies divert cash that would be spent on advertising into the money they pay the comparison websites. These websites then invest in marketing (TV and print campaigns, as well as "sponsored links" – appearing in prominent positions when a product is entered into a search engine). From the financial service provider's point of view, this makes sense - with a cut of any deal, as opposed to an advertising spend, they are effectively paying for each customer rather than wasting money on people who would never use their services.

According to a report published by Which? magazine in December, the two most popular price comparison sites are Moneysupermarket.com and Confused.com (with 36 per cent and 30 per cent of the market respectively), followed by Gocompare.com (16 per cent), Comparethemarket. com (14 per cent) and Uswitch.com (11 per cent). Aside from major financial services (credit cards, mortgages and pensions, say) there are any number of niche comparison websites. Energylinks.com links through to different utility companies; Mysupermarket.com just looks at supermarket food prices. Comparedownload.com compares the cost of music on a track-by-track basis (Amazon.co.uk, for example, versus iTunes.co.uk). Simplifydigital. co.uk just considers broadband, digital TV and phone bills. Quaffersoffers. co.uk deals in wine (and wins the prize for best name).

For the smaller enterprises, it can be tough getting a cut of the bigger outfits' profits. Last year entrepreneur Toby Pierides founded Gamescomparison.com, which specialises in console games for the Wii, Xbox 360, PlayStation 3, PSP and the Nintendo DS. "I was familiar with travel-based comparison sites and felt like it was a good thing to get into," he says. "My kids like to buy games for various consoles and I decided to use a template I had developed for an earlier online venture – to buy and sell SIM cards – and apply it to a product which is in demand. As long as someone knows about your website you can't fail. Unfortunately, we don't have the purchasing power of some of our competitors, like Pricerunner.co.uk, who spend lots of money optimising their websites so they appear high up in search results. But it is a worthwhile business; the best way of making money is having something that sells itself while you're asleep and a comparison site is exactly that."

Needless to say, Google AdWords doesn't have to worry about Google rankings, incorporated as it is within the engine itself. Users search for "credit cards"; a yellow box appears at the top of the screen inviting the user to compare different choices, bringing up a screen with menu options, and a list of different banks' cards with the option to "apply now". Every time one of these buttons is clicked, Google makes money.

Oxfam's tie-up is a similarly efficient means for the charity to raise funds. Ivan Massow, the founder of compareforgood.com, says he set up his website when he realised that charitable credit donations - whereby credit card users can opt to donate money to charity, for free, whenever they buy something - made up a whopping 11 per cent of all credit card purchases. "I had always been interested in charities making money," he says. "And a part of me was wondering whether you could create a super way of using a charity's brand to raise money. Over the last 10 years there has been a massive increase in the number of people who have wanted to spend their money in more ethical ways. I realised that a lot of these price comparison websites really aren't offering anything different. That's why they spend so much on these identifiable characters in their advertising. So why wouldn't you invest in something, such as our website, whereby you're getting the same service, but the money is going to a worthy cause?"

So what's next for the mercurial price comparison market? Moneysupermarket.com, for one, is rumoured to be developing an iPhone app. "The future, I guess, heralds a number of things," says Williams. "People will want to make the comparison tools quicker and easier for customers and take them to other platforms like mobile phones. As far as our business is concerned, there will be international expansion involved. We Brits took to online banking quite quickly; we're used to dealing with things online. The rest of the world is still to be tackled." Looks like price comparison could yet conquer the Earth. The meerkat, the opera singer and the belligerent haggler are set to go global – putting an entire planet's nerves on edge, and inveigling their catchphrases into thousands more brains. You have been warned.

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