it gives them the opportunity to charge manufacturers for higher placement within Guidester search results. When shoppers click on manufacturer-sponsored results, they’re charged whatever cost-per-click amount the manufacturers agreed to pay using AdMatch, with the retailer and Guidester itself splitting the take.
Federman is completely up-front about Guidester’s business. “Manufacturers, to date, have not had an opportunity to influence the position they enjoy in search results inside e-commerce sites,” he says. “We give them that opportunity.”
It should be said that manufacturers can’t simply buy their way to the top of Guidester’s search results. AdMatch takes account of a product’s popularity, as measured by the click-through rates on previous searches. “There would never be an opportunity for a product that isn’t preferred to be in those top search results,” says Federman. “But keep in mind this is an e-tail environment. When you walk into a store, products are not presented to you by virtue of some kind of objective, editorial authenticity. They are placed for the purpose of merchandising. Our system gives an online operation the same flexibility in how they merchandise products and how they create revenue opportunities.”
Guidester was known as Decidia until mid-2006, when it announced a name change and a $3 million Series A funding round led by Draper Fisher Jurvetson Gotham Ventures, the New York affiliate of Menlo Park, CA-based Draper Fisher Jurvetson, as well as a separate cash infusion from DFJ co-founder and managing director Tim Draper. The replacement of founding CEO Joe Chin by Federman, along with the move to Boston and a planned expansion of the sales and marketing staff, marks the next stage of the company’s growth.
And it comes just a month after Guidester announced a key partnership with ATG, which provides e-commerce hosting and software for hundreds of leading brands such as J. Crew, Target, Sephora, T-Mobile, and Best Buy (and where Federman stayed on for a year after the eStara acquisition). The partnership will make it easier for Guidester to sell AdMatch services to companies that use ATG’s e-commerce platform. Indeed, Federman says the company’s highest priority now is to better integrate AdMatch with e-commerce and search platforms from ATG and other companies such as enterprise search providers Endeca and Fast Search & Transfer (recently acquired by Microsoft).
Federman says he doesn’t know why Google, Yahoo, and other companies that offer search-related ad placement haven’t gotten into the market for preferred product placement in e-tail search results. It’s possible, however, that the larger search companies don’t want to risk blurring the distinction in Internet users’ minds between keyword-based ads, sponsored search results, and the ostensibly unbiased results at the core of each search page.
But one thing’s certain: once an e-tailer has added Guidester’s service to its site, there’s a strong incentive for manufacturers to pony up for better search-result placement. “We’ve found that 70 to 90 percent of all clicks on e-commerce sites happen within the top 10 search results,” Federman says. “Yet believe it or not, the search results on some retail sites are still arranged alphabetically. If you’re Sony, and you are missing out on 70 percent of the click-throughs because you’re at the end of the alphabet, you can start to see the return on the investment.”
And, no doubt, the inevitability of the “searchandising” arms race.
