Pricing Tickets, Planning For More

Aug. 3, 2005 — -- Tired of sitting in line overnight for the chance to see U2 live in concert? Outraged that you shelled out $500 to the seedy scalper on the corner for nosebleed Coldplay tickets? A new online service, Fatlens.com, is working to help you out of these jams, and if the company has its way it could eventually change the scope of online retail.

Fatlens, which launched June 15, uses search engine technology to sift through a variety of online merchants and compile a list of available tickets. A search for U2 tickets for an October concert in Madison Square Garden, for example, turned up 5,000 possibilities with prices ranging from $125 to nearly $1,000 per seat.

The company expects upwards of 200,000 unique visitors to the site this month and has received some favorable news coverage for its unique, but niche, service. Tickets, however, are only the first step in what the company hopes will be a foothold in the broader online retail industry. Company founder and president Siva Kumar said Fatlens hopes to add 10 to 15 additional products to the site by this fall, with plans to eventually offer even more retail options. The goal is to compete with the online ventures of traditional retailers like Wal-Mart and Target as well as other price comparison sites like Shopping.com.

"The philosophy behind it is to find the places where comparison shopping options are not as good. The technology we have will give the consumers more options than anyone else," Kumar said.

Comparisons in Travel, Retail

Price comparison technology has been used for years in the travel industry, and sites like Orbitz.com and Expedia.com have become online travel agencies for consumers looking to price the cheapest airline ticket or car rental. The practice has also grown steadily in the online retail world.

Industry leader Shopping.com lists retail items ranging from books to computers to furniture from thousands of merchants and registers about 50 million unique page views globally per month. The company saw revenues in the first quarter this year jump 38 percent over 2004 levels.

Analysts say price comparison gives the online-only ventures, called "pure players," like Shopping.com and competitors Shopzilla.com and NexTag.com an advantage over the Web ventures of traditional retailers.

"They do present a competitive threat because it's an environment where they put all of the different merchants' products in one place. For shoppers that makes it totally a price decision," said Scott Devitt, an Internet analyst at Legg Mason.

Some of the Web's big boys have taken notice. Shopping.com was recently purchased by eBay, and Yahoo! and Google are experimenting with retail price comparison. Industry analysts predict online-only retail sites will see investment dollars pile up in the next year as online advertising and retail sales continue to mushroom.

Can Can a Fledgling Start-Up Compete?

So why does a brand new site like Fatlens that currently sells only tickets and gets a fraction of the traffic of more established sites expect to contend in such a diverse, competitive market? The key, Kumar said, is that Fatlens offers one feature that current industry leaders can't compete with: classifieds.

In addition to searching through established ticket retailers like Ticketmaster, Fatlens sifts through classified sites like Craig's list and even eBay. The plan is to apply the same search capability to other retail items. It's a seemingly small addition, and analysts agree that the addition of classifieds alone is unlikely push Fatlens past competitors. But as sites work on technology that will encompass more choices, it's likely that price comparison will broaden to include a wider range of merchants, including classifieds.

"You're going to see a blurring of the lines between classified listing services and retailers that use price comparisons," said Scott Kessler, Internet analyst with Standard & Poor's. "Over time you're going to see more sites offering listings and those sites are only going to become more sophisticated."

If the line between classifieds and traditional retail listings disappears, online retail could become a virtual flea market, where retailers face price competition from single sellers and even used merchandise. But analysts say that's unlikely, as most customers will remain loyal to trusted brands.

Kumar said the complex technology Fatlens uses to search thousands of classifieds will allow the company to offer hundreds or even thousands more merchant and price options than current price comparison services.

The Limits of Listing Fees

Most price comparison sites make money from a mix of advertising and "click-throughs," or a fee for the number of people who use their sites to click to other merchants. They also charge merchants a listing fee to use their sites as feeders. These listing agreements, Kumar said, limit the number of potential searches.

"There are only about 20,000 merchant sellers using feeds," he said. "But there are well over 1 million people selling things online, and there are about 200,000 recognized sellers advertising online."

A Shopping.com spokesman would not reveal the number of merchants the company's service searches.

Kumar said the complex algorithm Fatlens technology uses to search through thousands of classifieds will allow more complete searches. It will also compute the number of click-throughs that lead directly to sales, allowing the company to bill only for sales rather than charge a merchant fee to be listed. This, he said, makes the number of potential merchants limitless, an advantage over sites that operate with a finite number of merchants who agree to pay fees.

"Unless the comparison experience is giving you all the options, it's not really complete and it's not really doing its job," he said.

Some Obstacles Remain

One potential roadblock in searching classifieds along with traditional retail listings is that the text of the listings often varies widely. For example, the description of a shirt sold by a traditional retailer like Tommy Hilfiger or Polo, or a car listing by Chevrolet or Ford could be very different from a similar classified listing, making it difficult for buyers to differentiate between products that might be the same.

"The level of information in classified ads is limited," said Legg Mason's Devitt. "It would be interesting and it could work, but it would take a lot to display the information in a way that makes buyers want to buy."

The technology is bound to become more complex as any site offers more retail options, and competition is sure to increase.

"Technology is going to rule here. The key is not necessarily what you're offering but how you are going to present it," said Standard & Poor's Kessler. "More and more sites are going to start offering listings and those sites are going to become more sophisticated."

Kumar acknowledged that Fatlens is not likely to overtake its more established competitors anytime soon. But the company believes it has a leg up in the technology race.

"They've been around for a while and we're just growing. It could take a few years," he said. "The business arrangements are not difficult -- it's the technology. And we've got the technology."