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Connexity Acquires PriceGrabber, CSEs Consolidate to Compete with Google PLAs

We recently wrote about the evolution of the CSE rate card and bid management, highlighting that the engines adopting more flexible bidding platforms have emerged as the strongest players in the space. To take that a step further, let’s look forward to where CSEs are heading long-term.

On a fairly frequent basis, clients and prospects declare that “the CSEs are dying”. While that statement is true to a certain degree, there is arguably long-term potential for the few engines that offer more sophisticated bidding tools or have powerful, far-reaching shopping networks.

Based on Merkle|RKG data, it seems more likely that the CSE space will condense down to a handful of powerful engines that will continue evolving to compete with Product Listing Ads. This has already started to happen, with Pronto ceasing direct feed operations last year, Facebook purchasing TheFind, and the recent acquisitions of Become and PriceGrabber by Connexity.

Connexity Buys Back Share

Up until last night’s announcement of Connexity acquiring PriceGrabber, we saw Amazon Product Ads, PriceGrabber, and eBay Commerce Network solidifying themselves as the main shopping engines, while Connexity was slowly losing what had once been a strong share of CSE spend.

 

 rkg-q1-2015-cse-engine-spend-share

I am still confident that eBay Commerce Network and Amazon Product Ads have long-term potential.

The former has shown the most promise in its ability to adapt to the changing landscape, with impressive feed processing times and flexible bidding.

And while bidding on Amazon Product Ads is more basic than others in the space, strong returns combined with sheer volume make it a solid engine. We expect to see that trend continue and anticipate that, if the need arises, Amazon Product Ads will dedicate the proper resources to update its platform.

Connexity was on our list of engines that would not survive long due to their inflexible bidding platform. Their Single Rate Smart Pricing requires each product to have a minimum bid of $4 in order to be eligible to serve. The idea is that the retailer will never pay $4 for a click and that demand dictates actual CPCs, but in reality we have seen many Merkle|RKG clients struggle to hit ROI targets due to some of the highest CPCs of any CSE, as shown by this chart depicting Q1 CPC by engine:

 rkg-q1-2015-cse-cpc-by-engine

Connexity’s acquisition of PriceGrabber gives it a much more promising outlook, provided that they truly pick the “best-of-breed” practices from each platform.

Best Aspects of PriceGrabber and Connexity

The most important piece that Connexity can pull from PriceGrabber to drive their CSE business forward is their bidding system. It allows you to submit any bid above $0, which means more sophisticated hands-on account managers can gain an edge by submitting SKU level bids at a calculated ideal CPC.

 

The main piece we want to see Connexity maintain is their partner network. Our clients see click spikes pretty regularly through the PriceGrabber network; in one day we may see hundreds or even thousands of clicks on one SKU without making bid changes. In nearly every instance the traffic is very inefficient and leads to back-and-forth over securing an account credit. These click spikes occur much less frequently on Connexity, which likely speaks to the quality of the two engines' respective partner networks.

Conclusion

We see exciting potential for this engine if Connexity combines its network with PriceGrabber’s bidding. Despite declines, Connexity alone still makes up 17% of CSE spend for our clients, while PriceGrabber accounts for 30% of Merkle|RKG CSE spend. The volume potential is pretty large; the key, of course, will be maintaining these traffic levels while driving revenue efficiently.

Traditional CSEs will likely continue to consolidate in order to grow their networks and provide better ad serving technology in an effort to compete with Google Product Listing Ads.

We also expect to see newer platforms, like Houzz and Polyvore, take strong positions in the feed-based shopping space. The social look and feel of these engines is much more appealing than the traditional CSE and the commercial aspect is still prevalent. Our clients have seen early success on these engines, which will be discussed in more detail in an upcoming post.

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