Media company E.W. Scripps Co. Thursday announced that it purchased U.K.-based comparison shopping site uSwitch for $366 million. The acquisition follows Scripps' purchase of shopping engine
Shopzilla.com last June for $525 million.
The 6-year-old uSwitch is known as a vertical search engine for utility companies--mainly energy providers. Revenue last year was $25
million; this year, revenue is expected to nearly double, to $40 million to $45 million, while profits are expected to total $10 million to $15 million.
The Scripps acquisition, which cost eight
to nine times revenue--compared to the four to five times revenue Scripps paid for Shopzilla--raised some eyebrows on Wall Street. Merrill Lynch, for one, lowered its rating on Scripps to neutral from
buy as a result of the purchase.
In a report issued Thursday, research analyst Lauren Rich Fine stated that Merrill Lynch would have expected Scripps--parent company of HGTV and the Food
Network--to extend Shopzilla rather than buy another shopping engine. "We would have expected them to leverage this technology geographically or to other areas of comparison shopping rather than make
a hefty acquisition to enter a new area of comparison shopping," Fine wrote.
The Merrill Lynch report also noted that uSwitch and Shopzilla have different business models; uSwitch receives
commissions when users switch service providers.