September 23, 2002

DealTime is a free service for shoppers since retailers are paying to have their merchandise listed on the site., based in Netanyah, Israel, has hurdled a lot of barriers over the past three years to develop its innovative online shopping site, which allows customers to choose the best deal between competing merchants.

Specifically, the company has managed to contend with a world economic slump, an Israeli recession, armed conflict with the Palestinians and the crash of hundreds of highly touted Internet business companies to become the No. 5 Web retailer in the United States. DealTime is behind industry giants eBay, Amazon, MSN and Yahoo, but ahead of the Internet operations of bricks-and-clicks retailers, such as WalMart and Sears.

And, despite the hard times, company officials say DealTime has begun turning a profit on revenues the company estimates will hit $30 million in 2002, more than double its sales of $14 million in 2001.

From the shopper’s point of view, DealTime works very simply. At or its co-branded sites, including the shopping channels at the Lycos, Alta Vista and Ask Jeeves Internet portals, the customer simply chooses what he or she wants to buy – clicking his or her selection by brand name, such as Palm or Olympus, or product category, which could be anything from a digital camera or DVD player to jewelry, garden furniture or wine. Next, a table listing a number of online retailers who are offering the product, a product description, plus prices and other charges pops up on the computer screen.

DealTime is a free service to shoppers who are comparing products and prices on the Internet. Merchants who pay to have their merchandise listed on DealTime pick up the tab for the service and the company also receives revenue from more traditional advertising on the site.

The balance between the two revenue streams, once about 50-50, is now heavily skewed toward the merchant listings, which now produce about 90 percent of DealTime’s income. Indeed, the number of merchants who offer their products in the price-comparison tables on DealTime Web sites has more than doubled in the past 18 months, while ad income has contracted. Merchants usually pay for their listing on according to how many times surfers click on a link to them.

“The company was founded on the premise that the Internet would allow shoppers to harness the power of information, enabling them to make the right purchasing decision,” said chief executive Dan Ciporin, who was hired away from MasterCard International in 1999, prior to the dot-com meltdown. “I thought that this was an enormous business opportunity.”

DealTime officials attribute their company’s survival in a hostile environment – which saw RUSure, another Israeli company with a similar technology, disappear – to a couple of key factors. Already in late 2000, DealTime anticipated an upcoming shortage of funding for developing companies, and moved forward its target date for producing substantial revenues that would finance continuing operations and eliminate the need for additional investment cash. Beyond that, DealTime was realistic enough to start cutting staff and operations in advance of the dot-com meltdown, avoiding heavy debts and a cash crunch.

In the first two years of Ciporin’s tenure, DealTime was in an expansion phase, like much of the Internet industry. But at one of the meetings between senior managers from Netanyah and those who work out of its offices in New York, there was a recognition that the times were changing. Ciporin said they first sensed trouble in late 2000, and at a management retreat in January 2001 began adapting themselves to the emerging reality.

“Traditionally, venture capitalists expect a return on their investment in five to 10 years,” Ciporin said. “We realized at that time that we would have to move our profitability timetable up significantly, to three years. So, we conducted a thorough review of all company activities, by both location and function.”

One of the first cutbacks was to eliminate Web sites the firm was running in Germany and Japan, which would take too long to become profitable.

“In Germany, a large number of people are not comfortable using credit cards, the predominant method of payment in online purchases, and in Japan, most people pay COD,” Ciporin said.

Instead, the firm decided to focus on what he calls its “core” geographies, the United States and the United Kingdom.

It also decided to do away with some services with dubious commercial viability. First to go was a price-comparison program that users had to download and install on their computer in order to concentrate on a service that was accessible by simply calling up the site. The plan was to target limited resources towards improving the site and on building strategic partnerships that would increase DealTime’s user base and make it attractive to merchants.

Now that the strategic retrenchment has been accomplished, DealTime is moving ahead again by implementing ideas it thinks will lure more customers and produce more revenue from merchants.

The company is planning to enhance its site with a service that calculates approximate tax and shipping charges for each item, according to zip or postal code, and e-mail alerts to notify shoppers when a particular item is available at a designated price. It has also developed a way to charge merchants for the service when the customer orders by phone, instead of clicking onto the merchant’s Web site.

Prior to the dot-com shakeout DealTime raised $115 million from a list of investors that in addition to Israel Seed Partners and AOL Time Warner includes such well-known names as Bank of America; Bertelsmann, the German publishing giant; and Singapore Telecom.

In addition, the company picked up its first big strategic partner, America Online, in May 2000. The deal included both an investment in DealTime by AOL Time Warner, the U.S. firm’s parent company, and an agreement to incorporate DealTime’s comparison shopping service into the AOL customer package.

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Jason Harris

Jason Harris

Executive Director

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