In a move that could help it play a bigger role in fostering online retail sales, search giant Google Inc. has agreed to pay $125 million in cash for Channel Intelligence Inc., a company that assists retailers and brand manufacturers in selling their products across the web.
“We want to help consumers save time and money by improving the online shopping experience,” a Google spokeswoman says. “We think Channel Intelligence will help create a better shopping experience for users and help merchants increase sales across the web.” Google is acquiring Channel Intelligence from ICG Group Inc.
The acquisition could help Google build stronger ties with major brands that are clients of Channel Intelligence, while also bringing Google technology that could help its advertising clients improve conversion rates and shopping cart size—leading to more spending on search as well as on display and video ads, industry analysts say.
“Channel Intelligence is deeply involved with the major brands in the world and that level of relationship with branded manufacturers who have deep pockets is very compelling to a company like Google,” says Sucharita Mulpuru, vice president and principal analyst for e-business at Forrester Research Inc. “I suspect the brand relationships and the recurring revenue CI was generating from these ‘big kahunas’ was really its biggest asset.”
By taking CI under its wing, Google is positioning itself to better compete against rival Amazon.com Inc., No. 1 in the Internet Retailer Top 500, which hosts thousands of e-marketplace sellers on its e-commerce site, says Scot Wingo, CEO of ChannelAdvisor Corp., a company that helps online retailers sell though e-marketplaces. He notes that Google hasn’t supported comparison shopping engines or e-marketplaces outside of its Internet search-based Google Shopping, but could use CI’s technology to expand its presence in online retailing. “To really win against Amazon, Google will need to build a marketplace, and this could be another step in that direction,” he says.
Channel Intelligence, whose clients include brand manufacturers 3M, Panasonic and Cisco Systems Inc.’s Linksys line of home networking products, provides technology that lets such companies link their web sites to retailers’ e-commerce sites. CI also provides services to retailers including Best Buy Co. Inc., Target Corp. and Staples Inc., to help them sell products through comparison shopping engines and e-marketplaces like Google Shopping, Shopping.com and Shopzilla.com. Best Buy is No. 11 in the Internet Retailer Top 500; Target is No. 23 and Staples is No. 2.
Kevin Lee, CEO of search marketing firm Didit, says Google can benefit from using technology such as CI’s product feed optimization to increase the relevancy of product information of clients’ listings on multiple web sites. “Google’s strategy is likely one where the CI conversion enhancement products improve both conversion rate and shopping cart size,” he says. “That lift in conversion often manifests itself as an increased, or more aggressive, bid in search and more spending on display ads and video media.”
Nii Ahene, chief operating officer of CPC Strategy, a firm that helps companies feed their product data to e-marketplaces and comparison shopping engines, says Google will also benefit from Channel Intelligence technology that lets merchants display updated availability of product inventory along with their online product listings. “Channel Intelligence’s Where to Buy technology allows big retailers to display whether or not a product is in-stock,” he says. “While simple on the surface, it’s a nightmare to try to pull out inventory availability and pricing from legacy ERP platforms since they’ve been customized or built to spec for retailers. Channel Intelligence appears to have solved the problem for the likes of Best Buy and Target, so that knowledge is of value to Google, who would love to show that information alongside online pricing on Google Shopping.” ERP, or enterprise resource planning, platforms include back-end retail operations software such as financial accounting and inventory management.
Ahene adds that Channel Intelligence’s technology will help Google in the search company’s efforts to provide a more unified online and offline shopping experience, such as the ability to scan a product in a store or search for it online and see if there’s a better deal at another store or on another retailer’s e-commerce site.
Google’s acquiring Channel Intelligence also caused some surprised reactions. “I’m surprised that the purchase price was that high—seems like a big premium,” Mulpuru says.
The deal is also raising concerns among retailers worried about Google having access to merchants’ sales data through an e-marketplace, including conversion rates, says ChannelAdvisor’s Wingo.
Lee adds the acquisition also positions Google in a more competitive stance with some companies that it already cooperates with, such as Channel Intelligence competitors ChannelAdvisor, Mercent and SingleFeed.com.
Channel Intelligence is among the top vendors to online retailers as ranked in Internet Retailer’s “Leading Vendors to the Top 1000 E-Retailers” guidebook. CI is ranked among the top 10 vendors in four categories: Comparison Engine Feeds, Marketplace Management, Fulfillment and Order Management. In the category of Comparison Engine Feeds, in which it helps retailers feed their product data to comparison shopping engines, CI is ranked second, after Mercent and before ChannelAdvisor.