IAC, Amazon and Retail Price-Compression on the Internet (AMZN, EBAY, GOOG, IACI)


I noted yesterday that the easy availability of price information on the Internet is incrementally negative for retailers generally and e-commerce companies in particular, because it increases price competition -- and therefore margin compression. So it's important for investors in online and offline retail stocks to keep a careful eye on the comparison shopping space.

Here are two developments to note:

First, Sound Money Tips highlighted a remarkable service this morning that lets you take full advantage of Amazon's 30 day low-price guarantee. Here's how it works: you input your product number into a web site, and if the price drops in the 30 days after purchase you get an email telling you, so you can request money back from Amazon.

Now, this is a great personal finance tip, but investors should focus on the stock implications. My guess is that low-price guarantees don't cost retailers that much, as most customers don't track prices efficiently. Well, the Internet changes that. Bad news for Amazon (NASDAQ:AMZN), bad news for other e-tailers, and bad news also for offline retailers.

Second, IAC's comparison shopping tool, Pronto, is now in beta. Pronto is a downloadable tool that sits as an icon in your system tray. When you click on the icon, it opens a small window containing price comparison information.

Brian Smith, who runs a site dedicated to comparison shopping engines, reviews it as follows:

I’m wary of downloadable shopping comparison tools... One very nice thing about Pronto is that it sits in my system tray and simply changes color (from blue to orange) when a price comparison can be run or similar products are found... I’ve run a number of searches and so far I’m impressed with the comprehensiveness of Pronto’s database, but the actual price comparison experience has not been that great.

The picture at the top of this article is a screenshot of the pop-up window from Brian. Not pretty, not particularly efficient, and probably not much of a threat to the comparison shopping services provided by eBay (NASDAQ:EBAY), Google (NASDAQ:GOOG), Scripps (NYSE:SSP) and Yahoo (YHOO). But the message is clear: another leading Internet company is promoting price comparison tools on the Internet.

Interesting, by the way, to note that Barry Diller built this in-house, and was true to his September 2005 comments that comparison shopping companies were overvalued.

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