Media giant E.W. Scripps Company will broaden its online portfolio with the acquisition of comparison shopping search engine Shopzilla. Besides giving Scripps a bigger online footprint, the deal will allow the company to build relationships with the engine’s pay-per-click merchant advertisers.
Scripps will pay $525 million in cash for 100 percent of Shopzilla. Scripps will also pay Shopzilla shareholders about $35 million to cover net working capital at the time of closing. The transaction, pending regulatory and other approvals, is expected to be completed early in the third quarter of this year.
“This is a very important day in the continuing evolution of the E.W. Scripps Company,” said Kenneth W. Lowe, president and CEO of Scripps. “This is a market-making Internet business that brings buyers and merchants together at the point of purchase. It’s hard to imagine any business that gets closer to the transaction than this.”
Shopzilla, like other shopping search engines, lets advertisers list their goods for sale, and then charges them on a cost-per-click basis when shoppers are referred to their sites. Shopzilla compiles and organizes more than 30 million products from more than 55,000 stores. Shopzilla also owns and operates the BizRate consumer feedback network.
Scripps plans to operate Shopzilla as a stand-alone operating unit, keeping the company’s senior management team in place. What Scripps will bring to the table is traffic, brand-building expertise, and capital, Lowe said.
“We believe in the long term, online comparison shopping will be a game of expanding market share in a growing marketplace,” Lowe said.
Scripps has a significant online presence through its local newspaper and broadcast TV sites, as well as the sites for HGTV and Food Network. Scripps already is one of the top-50 drivers of Web traffic through its combination of national and local online brands. Home and garden products make up Shopzilla largest category, which will likely benefit from the traffic driven by Scripps brands.
Shopzilla is expected to generate $30 million to $33 million in profit on revenue of $130 million to $140 million for the full year 2005. Most of Shopzilla revenue comes from referral fees paid by participating online retailers for leads generated by Shopzilla. Shopzilla also powers shopping search for sites like AOL, Lycos, Time Warner’s RoadRunner and others.
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