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Shaping a Standout Shopping Aid

These days, comparison-shopping Web sites are as hot as search engines were in the 1990s. And just like the early days of online search, both large and small providers of price-comparison services are trying to win and keep as many users as possible.

So far, an equivalent of Google has yet to emerge. The market's biggest player is (SHOP) -- which made a big splash this fall with a lucrative initial public offering -- followed by and Google's (GOOG) Froogle and Yahoo!'s (YHOO) Yahoo Shopping channel have lagged behind the niche players thus far. CEO Kamran Pourzanjani says his business has an edge in this crowded market because it's privately held and doesn't rely on venture funding. While other VC-backed concerns may succumb to the pressures of investors eager to cash in, Pourzanjani believes he has more time on his side. "It has been an incredible experience in just being able to think long-term and focus on the product and user experience," he says. The Culver City (Calif.) outfit is funded entirely by angel investors.

Although boasts 16 million unique users, 10.5 million products in its database, and 6,500 merchant clients, the race is on to stand out from the crowd. "Competition in this market is pretty fierce," says Safa Rashtchy, analyst at Piper Jaffray. "All of these sites need to really work hard to distinguish themselves."

BusinessWeek Online reporter Amy Tsao recently spoke with Pourzanjani about the challenges still ahead for his company, which has been profitable for 16 straight quarters, he says. Edited excerpts of their conversation follow.

Q: Comparison sites look very similar. How is unique?

A: I actually hear this quite a bit now: Everybody in the space looks the same. You really have to start using them to begin appreciating the differentiation. It's a feather in our cap that we've introduced many of the features that you see today in the industry. A lot of different companies have adopted them because they make sense.

Q: What are some examples?

A: We started what is called SKU association. We basically bundled or associated all these products -- they're identical with each other together. And then we would say: O.K., here are the product results that we have.

Other examples are bottom-line price: The inclusion of tax and shipping. This is something that we've had almost since inception, about five-and-a-half years ago, and, of course, that's something others have introduced more recently.

We also have what we call product tours. It gives you 3-D pictures of the products and more detail. Another differentiator is we will tell shoppers if a product is "refurbished."

Q: How are smaller merchants using your site?

A: Over half of our sellers are smaller-sized retailers and merchants. Many utilize us to expand sales and reach domestic or international markets that may not otherwise be available to them.

We list the smaller merchants alongside the larger ones, effectively helping to level the playing field. For those who may not have a site of their own, our Storefronts section provides sellers with the opportunity to list and sell their products. Registering products doesn't cost anything, and the seller is only charged when a listed item is sold.

Q: How do you plan to continue growing?

A: A week ago, we launched our travel channel. It's in beta stage right now. We have an auto channel, which is actually a completely unique way for people to comparison shop for automobiles. We do think it makes sense to get into all of these, but we don't just throw them out there, populating the channels with search results from third parties and calling it a day. We think that doesn't do the space any justice.

Q: What about international markets?

A: International represents a huge, huge opportunity. About eight months ago, we started our U.K. site. Clearly comparison shopping is a universal concept. Our site lends itself quite well to international. In fact, we've had a number of different language sites over the past three years -- Portuguese and Spanish -- that are geared for people in South America or Latin America who buy from North America. Next, we'll focus on Europe. There will be a lot more opportunities in countries like France and Germany.

Q: You have been profitable for 16 consecutive quarters. Can you keep that up amid so much competition?

A: Absolutely. The addition of competition is not going to negatively impact revenues or profitability. As a case in point, in paid search, the addition of more competition has not dampened revenue growth and profits, as rates for keyword buying have increased.

Over the years, a community of well-informed and ready-to-buy shoppers that trust and rely on PriceGrabber has formed. Merchants have also gained by working with us as they can market and drive sales to this large and highly valuable community of shoppers. Merchants can increase their sales and profits, and best of all, they do this on a pay-for-performance basis, usually at a fraction of the cost of any other marketing and/or advertising means. Comparison-shopping sites are one of the most cost-effective ways to acquire customers.

Q: You've said you aren't interested in venture funding. What's your strategy to take the company to the next level?

A: We currently have adequate resources to execute our strategy, and hence, we aren't seeking any outside financing. However, from time to time, we do evaluate strategic and financial transactions in order to help us better fulfill our mission. We'll keep open all of our options for any future funding, whether through third-party investment in the company or the public markets.

Q: Yahoo and Google are better funded and better known. How do you plan to compete as those companies ramp up their efforts in comparison shopping?

A: Near-term, there's room for growth for everybody. Competing with well-funded companies is not new to us. Most of our competitors had raised or have had access to tens or hundreds of millions of dollars, and we have done exceptionally well in that environment without access to venture financing. Our goal has always been to offer users the best comparison-shopping experience on the Web. We currently have and will continue to maintain adequate funding on hand to continue achieving this goal.

Yahoo and Google have had competing services for a few years, yet we have continued to thrive. Still, we do believe the addition of comparison shopping to any large site increases awareness amongst the millions of Internet users who are still unfamiliar with it. In the longer term, leaders in our sector will be the companies that offer Internet shoppers the most effective solution for their needs.... We have always led the industry in innovation and quality of user experience.

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