Ecommerce Rating Service

KAREN LAKE: Can you give our audience a brief overview of what your company offers the business and consumer communities?

CHUCK DAVIS: We're the leading site for b2c commerce. We've got over 1,000 stores on our site. They're rated by consumer buyers on the web. For the business community, we offer a great vehicle for merchants to show off their ratings and show why they're better than their competition. We let the buyers compare across different merchants as to why they should purchase from and give their credit card to vendor A instead of vendor Z.

KAREN LAKE: How does that rating service work?

CHUCK DAVIS: After a purchase is made, a little invitation comes up saying, "Tell BizRate what you think about this online store." We give information from the survey back to the merchants so they know how they're performing, and we aggregate those ratings and post them on our site.

KAREN LAKE: Do businesses take those ratings and put them on their sites?

CHUCK DAVIS: Some sites, like Hewlett Packard or Office Depot, put BizRate on their home page with an icon saying, "This site is BizRate Customer Certified." When you click on the BizRate icon on their homepage, you see their live report card with the rating. The whole idea is to give consumers more confidence in shopping.

KAREN LAKE: How does a business gain the trust of customers? What do you think is important to consumers?

CHUCK DAVIS: Right now the Internet is a giant black hole for many consumers. They don't know who they're giving their credit card numbers to, whether they'll ever see the goods or the company will take returns. BizRate instills confidence in buyers so they can make proper decisions.

KAREN LAKE: Can you give some examples of the questions on BizRate surveys?

CHUCK DAVIS: We ask about performance issues: ease of use of the site, amount and quality of product information, breadth of product selection and price value. Then we ask, "How many days do you think it will take for you to receive the widget and pin from UPS or FedEx?" If they say seven days, in ten days we follow up with an e-mail saying, "Now what do you think about this merchant? Did you receive the goods? Was the delivery on time? How was customer support?" It's these measures that show the difference between the various merchants out there.

Over the Christmas season, 40 percent of the sites we listed at BizRate did not take returns. That seems pretty odd because we're all so used to sites taking returns. But you really need to look at the different customer service policies of these sites. In fact, 10 percent of the sites on BizRate charged a restocking fee over the holidays. So you could send your purchase back, but the merchant would deduct something from your refund to do it. This is the kind of stuff you couldn't find out if you just bought from some portal.

Navigation: Design, Bots, Search

KAREN LAKE: When you talk about ease of use, what do you think consumers are looking for?

CHUCK DAVIS: There's an odd thing about the way people order online. Something like two-thirds of all shopping baskets are never uploaded. People load items into a shopping basket and then get spooked-maybe from shipping rate sticker shock. For ease of use, the transaction has to be really simple with no hidden costs.

KAREN LAKE: Is speed an issue?

CHUCK DAVIS: Speed is definitely an issue. During the holiday season, our research found that if a website was slow, consumers said, "If this site can't handle loading pages, what does that tell me about their fulfillment operations, their customer service and my chances of actually getting this item?" That was one of the main categories for site abandonment in the fourth quarter. If they had no confidence in the site itself, why would someone even think about buying later on?

KAREN LAKE: What part does navigation play in ease of use?

CHUCK DAVIS: Navigation is a big part of it, but a more important aspect of ordering online is the convenience of the wallet factor. Folks like shopping on Amazon because Amazon remembers all your information and they have one-click ordering.

We picked up a company called eBoodle that has a companion browser technology. So instead of waiting for consumers to come to BizRate, we're going to travel with them. Once they fill out the form, we'll remember all their key attributes: name, address, credit card-if they want to leave it, that is. It's BizRate's one-click version of the technology. While we all like what Amazon has, it only works on Amazon. What hasn't been seen before is the convenience of ordering from any website.

KAREN LAKE: So it's like a smart card technology.

CHUCK DAVIS: A smart card or a wallet. It also has form filler technology. The big advantage is that it's context sensitive. If you're looking for something on the web, we'll be able to tell you, "Here are all the merchants that have it. Here are their ratings. Here are their on-time delivery percentages. Here's their customer support. Here's their price."

I think price is overly played in the media and with consumers. Price bots are everywhere. At BizRate we firmly believe that price is just one of many measures. We measure ten different items in our report cards rating the merchants. You don't want to save $10 on a computer if it's going to take you ninety days to get it.

KAREN LAKE: There are definitely priorities. In our interview with Josh Goldman of mySimon.com, he talks about the same thing. We were flabbergasted to learn that price is not the top issue. People care about customer support, customer service, response time-things like that.

CHUCK DAVIS: That's one of BizRate's big advantages. Price bot technology is widespread on the web, but finding out if items are delivered on time and how customer support works can only be done with a point of sale measurement and a follow-up survey. BizRate is the only company doing this.

KAREN LAKE: How much product information do consumers want, and what's the best way to display it?

CHUCK DAVIS: Product information also depends on how big ticket the item is. If you're buying a video or book, you want a certain type of information. If you're buying a digital camera with a bunch of features that costs a thousand dollars, you probably want to compare those features against other products.

KAREN LAKE: Should all that information be on one page, or should the user be able to drill down?

CHUCK DAVIS: BizRate owns the where-to-buy space. If you know what you want to buy, BizRate is where you go to look at that digital camera across fifty merchants. You can find it at the right price with the quality measures that are important to you.

KAREN LAKE: So there's no bot technology here? You're actually hosting the store on your site?

CHUCK DAVIS: We have the comparison engine on our site. What we actually do is compare the different merchants that sell a particular item.

KAREN LAKE: How is BizRate currently laid out?

CHUCK DAVIS: BizRate has a new search element called SuperFind, which allows you to find anything you need on the web. We don't delineate between products and merchants. You just type in whatever you're looking for and get a lot of choices to compare across products and merchants.

KAREN LAKE: How important is search to consumers?

CHUCK DAVIS: It depends on the type of search you're talking about. Price search is important, but we're surprised that there's no on-time delivery search on the web, except at BizRate. We prominently list the expectation level of when something will be delivered, so when someone orders they expect the product at a certain time. That's where we follow up and say, "Did you get it or not?"

It's very interesting to see which sites make it or don't. We have a lot of 4-star or 4.5-star sites, but when you dig into the details of the ten measures we look at, a site may have a 2.5- or 3-star rating for on-time delivery. When I shop, I look at two of the ten quality ratings: on-time delivery and customer support. That shows me what's under the sheets-whether the site can provide the item in a timely fashion and take it back from me if I don't like it.

b2c rating Service: Fulfillment

KAREN LAKE: Can you share the other rating questions with us?

CHUCK DAVIS: There's performance, which is at the point of sale: ease of use, product information and product selection.

KAREN LAKE: Then there's price, right?

CHUCK DAVIS: Price was the fourth question, followed by ease of ordering.

KAREN LAKE: Once they've delivered the product, what kind of questions are there?

CHUCK DAVIS: We find that how a merchant does on the fulfillment breeds the most loyalty. Was the product represented properly? Did you get what you bought online? It might look one way and be packaged another way. What you thought was a compact camera was actually a big, clunky thing. Also important are on-time delivery, product representation, customer support and privacy policies. Are you getting spammed? The last criteria is shipping and handling. Did you get popped with charges you weren't counting on? That happens a lot.

Customer Feedback and Cookies for Data Mining

KAREN LAKE: What percentage of people take the survey?

CHUCK DAVIS: We get tens of thousands of surveys back every day. Over four million people have filled these out. It's popular because it reinforces the consumer's confidence in the merchant. Customers feel this is a site that cares about their opinions and is striving to improve.

KAREN LAKE: Do you feel the survey itself is a good reflection on the businesses?

CHUCK DAVIS: Yes. That's why you find the Hewlett Packards putting it on their home pages. It instills even more shopping confidence in that site.

KAREN LAKE: Does it always pop up automatically or can the user say, "Activate this now"?

CHUCK DAVIS: We invite every buyer and give them the chance to fill it out. There's no obligation but we have to ask everyone. Only a certain percentage will fill it out. Let's say it's December 14, the peak holiday shopping day for the last two years. If you find that's the day a site isn't working well or fulfillment isn't working well because they're all backed up, we can't random sample every tenth person. We have to sample everybody to know if there's a problem because maybe one in fifteen people is going to fill out the survey.

KAREN LAKE: What secrets have you learned over the last couple of years about what motivates somebody to fill out a survey? What changes have you made in your internal system to make it more effective?

CHUCK DAVIS: We started with an in-depth survey and we make sure it stays up to date. We've had so many surveys filled out that we don't have to ask people for demographic information the second time they fill one out. We can get on to the performance questions.

KAREN LAKE: That's assuming the vendor you're working with has the capability of remembering who this buyer is, correct?

CHUCK DAVIS: Or BizRate remembers who's bought from where.

KAREN LAKE: Is that based on e-mail addresses?

CHUCK DAVIS: The e-mail address is one way and there are cookies.

KAREN LAKE: So when I put in my e-mail address, you say, "We know these people so we don't need to ask them a plethora of questions."

CHUCK DAVIS: Right. That's also a customer satisfaction aspect. Some people here wanted to add the question: "What do you think of this survey?" When I came here in December it was a longer survey and we've cut it back. Over time we'll probably keep cutting it back, because when you get tens of thousands of surveys everyday, you don't have to ask as many questions.

We have a critical mass of data by merchant and category. The information we gather is not only about a merchant, but also about how often one shops in a category and how they feel about a merchant. The news that b2c commerce is pulling back is not apparent at BizRate. We've added over a hundred new merchants each week for the last three weeks. The Internet is the type of environment where new stores can and will pop up all the time.

Privacy and Customer Service

KAREN LAKE: Chuck, if I want to become a BizRate Customer Certified business, what do I need to do?

CHUCK DAVIS: First you sign up. There's no fee. That's an important part of our model. We want merchants to survey their customers and let them vote on how well they're doing. Second, you have to put some code on your receipt page. It's an invitation saying, "Tell us what you think about this merchant."

KAREN LAKE: How have you handled the privacy issue? You're dropping cookies on people's computers and saying, "We want to remember you."

CHUCK DAVIS: They're different issues. Cookies help consumers because sites can be personalized and questions don't have to be repeated.

KAREN LAKE: Do I know when you're dropping a cookie on me?

CHUCK DAVIS: Yes. The privacy issue brings up another feature at BizRate. We have over half a million members, buyers who sign up to help us with surveys and so forth. Another convenience feature is that BizRaters get their own e-mail addresses. We could have Karen@myBizRate.com as an intermediate address to help sort your e-mail out. We forward whatever you want to receive. Do you want everything? Do you only want receipts from your web transactions? Do you want us to hold back the spam?

KAREN LAKE: So a consumer can come to your site and say, "I want your e-mail service so I can have a place to look up the receipts from everything I've bought. And these are three companies I want more information on."

CHUCK DAVIS: With the eBoodle acquisition, we have account management that's launching late this summer. We'll be able to keep track of every transaction you've made on the web. At the end of the year you get this great year-end summary showing everything you spent-like the American Express Gold Card sends-which is a frightful experience because you had no idea.

KAREN LAKE: Yes, I don't like those.

CHUCK DAVIS: But it works really well on BizRate because if you shop at any of 10,000 sites on the web, all your transactions are consolidated. If you liked the tulips you got last spring but can't remember which site you bought them from, you'll come back to BizRate and look it up in your account management system.

KAREN LAKE: I've never heard of anybody offering e-mail for a particular site. Do you know if anybody else is using that model?

CHUCK DAVIS: I'm not sure that it's e-mail we're doing.

KAREN LAKE: But this is my personal space for keeping track of everything that's happening?

CHUCK DAVIS: Oh, yes. I don't know of anyone else who does that. Again, we're here to look out for you. We want to make sure you've got the confidence to buy wherever you want to buy. We can help you with the ill effects of buying on the web, which might include all the different e-mail lists you eventually get on. It gets cumbersome.

Automation, Pay for Performance, Traffic

KAREN LAKE: You mentioned your growth rate.

CHUCK DAVIS: We've signed up over 4,500 merchants since our inception.

KAREN LAKE: Tell us how you're automating that. I hope it's not manual.

CHUCK DAVIS: No, it's not manual. We're running a scale economy, similar to eBay. eBay and their competitors found out that if there were too many items for sale and not enough visitors, people wouldn't list on their site. The converse is also true. It works well for eBay because there are a lot of buyers and a lot of sellers. If the balance gets out of whack, the whole model falls apart.

eBay has something like 80 percent share of market. Their competitors have an imbalance because either they don't have enough buyers or they don't have enough listings for sellers. If you want to sell your old laptop computer, you're probably going to go on a site that has a critical mass of buyers, right? That's what works at BizRate.

Per Media Metrix, we have over four million unique visitors a month. We're now the ninth largest ecommerce site in Media Metrix. We were number seventy-eight a year ago. So on the traffic side, our buyer numbers are growing. On the merchant side, it took two years to get the first hundred merchants on our site. Now we're getting a hundred in one week. Once we hit critical mass, like eBay did, the merchants come to us.

KAREN LAKE: How are you automating that? What happens when I come to you and say I want you to sell my products on BizRate?

CHUCK DAVIS: There's online registration. Then we have someone contact you to figure out how we can get you the code and tell you how the system works so you can put the code on your receipt page. Once the surveys start coming in, we're in contact with you to let you know your ratings and how many surveys we've gotten back. We post them on the site after we get back a critical mass of surveys.

KAREN LAKE: Regarding revenue models, I can have a survey on my site but I can choose not to have you sell my products on the site, correct?

CHUCK DAVIS: Yes and no. We don't let you post a survey forever and we can pull the survey off your site. You get a trial period. The idea is that if you don't like your ratings, hopefully you'll fix your practices. If not, it's going to get exposed on BizRate. BizRate is really about the best of the best websites that sell. We're like the Good Housekeeping Seal of Approval because we have that best demographic-our people buy monthly on the web. They may have bought at least six times in the last six months.

KAREN LAKE: Is there a difference between a business using your rating survey and BizRate taking a cut of the sales generated from your site?

CHUCK DAVIS: They're the same. Our site has a gold merchant list for all the sites that have the survey at the point of sale on that receipt page. Because our traffic is so heavy, we end up being one of the largest sales distributors for many of the ecommerce sites featured in our directory.

KAREN LAKE: Chuck, what are the top revenue generators at BizRate.com?

CHUCK DAVIS: Our main revenue generators are ecommerce and research. Ecommerce is interesting because right now a lot of sites are going out of business and/or have spent their marketing/advertising dollars inefficiently. We're all about pay-for-performance. If you get a sale, we want to get a sliver of that, like eBay does. We find that a lot of the other sites don't do that.

The portals charge million-dollar slotting fees. Sites have to differentiate, get their brand out and spend millions of dollars to become an ecommerce site. That's a very inefficient process. When you go from few to many-a portal listing seventy toy stores instead of two-that doesn't help the consumer because they can't compare the different merchants. Whoever paid the portals the most money will come up.

Think about the portals. How did they become portals? They started as search engines. When they were search engines, they helped you find anything you wanted on the web. But when it came to ecommerce, they didn't keep that model. They only let you find whoever paid them the most money.

BizRate has created the "many to many exchange," the only open and inclusive marketplace in the b2c space. Like eBay, it's the leader in that scale. This has allowed us to charge by pay-for-performance," taking a sliver out of every transaction. That's our ecommerce model and etailers love it.

Unfortunately, no one else can do it because they know that click-throughs are only 1.5-2 percent. Last month we were at 8.6 percent. Not only do we have record traffic, but buyers who come to BizRate actually buy. That doesn't exist anywhere else. Our average purchase is over $100 while the typical ecommerce sale on the web is $65.

KAREN LAKE: Tell me about your research revenue model.

CHUCK DAVIS: The research revenue works in a few different buckets. Companies buy bound monthly reports from us that show how they're doing on the ten performance metrics. The report also shows where their traffic is coming from and what is the intent to buy from them again. It compares them to others in their category, not specifically but in the aggregate.

In the toy example again, one company can compare itself to seventy aggregated companies. That's a very helpful measure. If your sales are averaging $50 but the whole category is at $70 per transaction, you can't find that out anywhere but at BizRate. We'll tell you that your mix of merchandise scales more to commodity items or that you've got too many promotions going on so people are just buying cheaper items.

As you know, on the web you need to have not only efficient purchases and low customer acquisition costs but also a decent revenue from your site. A $50 toy site may not survive against a $70 site.

KAREN LAKE: I've read that the sliver on the pay-for-performance model in the ecommerce space is between 1 and 20 percent. That's quite a range. How do you decide what percentage goes to whom?

CHUCK DAVIS: The only reason we mention the huge variation is that we have sixteen categories of commerce on our home page, and it's going to twenty at year end. We put travel on there in December and we just launched an online brokerage in May. If you look at travel, online brokerage, computers and toys, they all have different mechanics. A computer company will never give a 20 percent commission because they don't make that much. They're probably making 5 percent so they might give us a point. But a video company might give 10 or 20 percent.

KAREN LAKE: So it's based on category, not on vendor?

CHUCK DAVIS: That's correct.

KAREN LAKE: Do I negotiate that with you? Let's say I'm IBM. I'm pretty big and you want to carry IBM. Are you going to give me a lower percentage?

CHUCK DAVIS: In the last year, companies like Be Free have been serving as intermediary pay-for-performance sites to help people who are spending. There are many deals to be had out there. We work with the etailer directly and/or with a company like Be Free.

KAREN LAKE: So it's basically an affiliate model?

CHUCK DAVIS: It's an affiliate model, and we also have a cost-per-click model. It doesn't always make sense to have affiliate deals with an affiliate model. Affiliate deals are commissionable deals. For Mother's Day we featured flower sites in different parts of BizRate. Flower sites get inundated for Valentine's Day and Mother's Day. If a site can't handle the volume coming from BizRate, that's not our problem. If a site is running slow and they can't get the sale, we don't want to be penalized on that commission. So in many cases we do a cost-per-click and work it out up front. We sent you the buyers, now you work on closing the deal.

KAREN LAKE: Is it similar to GoTo.com, which is truly a cost-per-click model, or is it cost-per-visitor?

CHUCK DAVIS: GoTo is a good analogy. In addition to the affiliate model, we sell like GoTo because it works well for many sites. We also practice what we preach and buy space on GoTo because we think their model is a good one.

KAREN LAKE: What is the typical price for a cost-per-click arrangement?

CHUCK DAVIS: It runs the gamut depending on category. Sporting goods has a different conversion rate than computers, for example.

BizRate is a great site for computers. If you're going to plunk down $2,000, you want to know who you're giving your money to. The conversion rates are much higher and there's a different sensitivity of what you can charge. With another consumer base category that might not have the same click-through, you can adjust your rates.

Closing Advice: Growth Strategies and Vision

KAREN LAKE: You've built an enormous amount of traffic. Can you pinpoint for small businesses your top three strategies for building that traffic?

CHUCK DAVIS: The first is to build a strong communications group that can help build your brand. We're very lucky because the media likes to talk to BizRate and find out our results and where we stand. For example, we had about 2,000 media mentions in December, and this number doubled in January. Now the media is asking us, "Well, BizRate, what did you see? What happened in the toy category? What happened in the sporting goods category?" Communications is a big aspect of this.

The second strategy is we have a lot of viral growth. How do you get people to spread the word and come back and bring their friends? I think the real viral growth is coming from merchants. The merchants are all endorsing BizRate.

KAREN LAKE: So that logo says, "You've got to check out BizRate."

CHUCK DAVIS: Yes. That logo is on 1,700 sites right now. It's like the Good Housekeeping Seal and it's getting us a lot of promotion.

KAREN LAKE: So we have PR, viral growth and I think you had a third strategy.

CHUCK DAVIS: The third is the pay-for-performance model. We can afford to spend on advertising because we're amortizing the expense over 1,000 stores. That's a much more efficient model than promoting one brand. But we're really saying, "Come to BizRate and you'll get the best stores on the web." We don't just go out and buy prime-time TV, we do it responsibly. We do a lot of GoTo type stuff, we have a lot of billboards in the Orange County/LA stretch, we've targeted seventeen cities and done some radio.

KAREN LAKE: What would you tell a best friend who came to you and said, "Hey, Chuck, I want to start my own Internet business. I know you've worked at Disney's GO.com and now you're the CEO of BizRate.com. Can you advise me?"

CHUCK DAVIS: First, you have to have a vision and stick with it. You can change the strategies to accomplish your vision, but you've got to have conviction and push for that.

The second thing-and many sites don't think about this-is why do I exist and why should I exist. That leads to the profits. You have to get cash flow to break even. If you don't, there's going to be a problem. It's important to figure out your revenue model and your break even model. Until a few months ago no one really cared about that. One of the reasons I came to BizRate was to create different revenue streams and make sure the business is profitable.

KAREN LAKE: So have the vision, make sure you understand your revenue model and plan to be profitable at some point, right?

CHUCK DAVIS: Yes. We hope we can be cash flow/break even sometime next year.

KAREN LAKE: Is there anything else you'd like to share with our audience?

CHUCK DAVIS: Well, you've certainly asked tons of stuff. I just want to talk about a fun new feature on our site. We've created a special deals section on BizRate. A lot of sites out there have deals, but deals in the context of quality are great. You want to know the quality ratings, but wouldn't you also like to know which sites have free shipping, which sites will give you $10 off, which sites are going to give you a free mystery gift? We think this will help people start their shopping at BizRate.

KAREN LAKE: Let's close with that. Thank you so much for joining us, Chuck.

CHUCK DAVIS: Thank you very much