Yahoo! Enters Increasingly Crowded Comparison-Shopping Market

Yahoo continues to blur the line between search and shopping. The Sunnyvale, CA-based company on Tuesday rolled out a new search engine featuring integrated e-commerce functionality.

The product is designed to go head-to-head with search leader Google by merging algorithmic search and Web crawling technology and with product and merchant information.

According to company officials, consumers will now be able to search for comparative products and prices and compare merchants before making a purchase, generating revenue for Yahoo through commissions or other fees when users click one of their links to buy from a retailer.

The deal is closely related to Yahoo's impending acquisition of Overture, which supplies the search solutions powering the new shopping platform.

Yahoo expects revenue from sponsored search queries to more than double by 2006, company CFO Sue Decker said in an address at last week's Banc of America Securities Conference, forecasting that the global sponsored search business would grow from about $2 billion in annual revenues today to $5 billion in 2006.

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Yahoo's stepped-up focus may spell trouble for smaller e-commerce players and even the strategies of big online merchants such as Amazon.com and eBay Inc., although experts are not willing to speculate on the future just yet.

The landscape of comparison-shopping services includes DealTime.com, mySimon, BizRate, and PriceGrabber, among several others. Thomas Jones, Senior VP of Shopping Services and Advice at CNET, says that since more users are going to the web than ever before, there is room for competition. The online shopping arena has become very commoditized, he says, and there are no significant differences between shopping sites. It is the little touches that make a difference, he adds.

The new Yahoo platform will offer both merchant reviews and user reviews, which Jones says may present a potential problem, because user reviews are difficult to monitor. CNET operates Shopper.com and MySimon.com. What sets them apart, says Jones, is unbiased editorial reviews.

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