1Mby1M Deal Radar 2010: ResellerRatings.com, American Canyon, California

Today’s special Deal Radar returns to ResellerRatings.com, a company I covered in a 2008 interview with its founder, Scott Wainner. American Canyon, California-based ResellerRatings.com is a platform for consumer ratings and reviews of online retailers. It features 430,000 reviews of 24,000 retailers, and its reviews are syndicated to Google Product Search, Bing Shopping, Google AdWords (Seller Ratings Extension), TheFind, and ShopWiki. Retailers can participate with the site to generate, monitor, and manage customer feedback.

There have been two important recent developments at ResellerRatings. First, Microsoft’s Bing search engine chose the company as its first provider of online merchant reviews; read more on TechCrunch. As the blog Internet Retailer points out, Bing “ups the ante” on reviews in search with this move. Second, Google AdWords began using ResellerRatings data in its seller ratings extensions. Price Glomski of Search Engine Watch talks more about what these ratings, extension products, and visual search can do for a business in an article published last Thursday. ResellerRatings says that one merchant customer, Newegg, has reported a 10% increase in its AdWords click-through rate since Google AdWords began using ResellerRatings.

Online retail is a $150 billion business, and Forrester forecasts that it will grow to grow to $250 billion by 2014. What’s more, new approaches such as real-time search have the potential to change how businesses attract customers and the relationship between retailers, search engines, and consumers. Mark Drummond of Search Engine Watch gives some background on how this could happen.

At the time ResellerRatings was founded, there was no competition. Today, there are a number of shopping comparison sites (e.g., NexTag, Shopping.com, PriceGrabber, Shopzilla, and Bizrate). Most of those sites let customers write reviews, but ResellerRatings is a pure reviews/ratings play. ResellerRatings, which generates about $50 in revenue from each subscribing merchant per month (i.e., a small amount) aims to compete by taking an unbiased approach devoid of incentives to make merchants happy by removing legitimate negative reviews. It also has several steps in place to ensure that high-quality reviews are posted:

• Reviews are subject to a fraud filter to prevent fake review stuffing.
• Eighty percent of the reviews are positive.
• The average length of its reviews is 75 words, vs. non-descriptive review such as “A++ good store”.
• Merchants can flag reviews from non-customers for removal (this solves problem of competitors writing reviews – flagged reviews are verified using the reviewer’s order e-mail or credit card statement).
• ResellerRatings does not remove reviews for compensation.
• It does not compete with Google Products, AdWords, or Bing, nor any of the other shopping engines, making its data available and valuable as an independent, community-driven, third-party verification platform with a robust merchant management toolset.
• It has been accepting reviews from consumers for the past fifteen years and receives 10,000 new reviews per month, creating a large barrier to entry. It is difficult to amass such a large volume of quality user-generated data.

Revenues are $1 million to $2 million a year. It is 100% bootstrapped, and Wainner has no plans to raise any money at present. Reseller Ratings has 1 million monthly unique users, 580 retail subscribers (e.g., B&H Photo, Newegg.com, TigerDirect, Circuit City, Buy.com, MacMall, Adorama, J&R, Auto Parts Warehouse, Harry & David), and 10,000 new customer reviews added each month. Customers can rate reviews on hundreds of things – books, clothes, electronic equipment, travel services, plants and flowers, software, musical instruments, sporting goods, magazines, food, wine, video games, and so forth.

The company is focusing on three areas to drive growth. First is syndication of its reviews data to third parties such as Google Products, Bing Shopping, TheFind, and ShopWiki (all current deals). Syndication increases the influence of the brand, increases traffic, and increases the importance of the company’s Merchant Member reputation management subscription program for online retailers. Second is social media: ResellerRatings has begun to add various social features to the site to make it easy for reviewers to share their reviews with their social network and to see which online retailers are trusted by their friends. Last is referral partnerships: The company will partner with any other company that already claims substantial online retailers as customers, with the rationale that their customers need ReselleRatings’s reputation management tools, and ResellerRatings can share in subscription revenue, offering the partner an incremental revenue source.

Wainner, who is the CEO, is also expanding the management team. Until now he has been the entire team, managing a virtual company of seven to ten people on his own. This year, he is making strides to shift the company into a functional structure to enable accelerated growth. He has hired people in areas such as Web development, design/UX, project management, and social media marketing and has identified a candidate CTO.

With the two developments discussed above, Wainner believes that it can now be said that ResellerRatings has a substantial impact on the click-through rates and overall performance of every online retail Google AdWords, Google Products, Bing Shopping advertiser. Wielding this influence has significant financial value to any number of large brands (e.g., Yahoo! Store, Yahoo! Shopping, Microsoft, Nextag, Pricegrabber, Shopping.com, eBay), via acquisition. The acquirer would obtain 450,000 high-quality customer reviews of which 80% are positive, a robust reputation management customer interaction platform, 600 online retail monthly subscribers with associated recurring revenues, and the ability to drive substantial performance and CTR increases for every AdWords, Google Products, and Bing Shopping advertiser. Or, for similar brands that don’t yet have their hand in online retail (e.g., Yelp), an acquisition would enable their entry into the market.

Recommended Readings
In Quiet Coup, Google Now No. 1 Shopping-Comparison Web Site (from Investors.com, powered by Investor’s Business Daily)
Journey of a Child Entrepreneur: Scott Wainner
Deal Radar 2009: Bazaarvoice

This segment is a part in the series : 1Mby1M Deal Radar 2010