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December 7, 1998

Call Your Agent For Online Shopping

Intelligent agents gain use-but are they effective?

By Clinton Wilder

he concept of intelligent agents--software programs that will automatically deliver exactly what a network or database user is looking for--has been a major focus of computer research labs for years. But the popularity of the World Wide Web has created the most fertile ground ever for the commercial application of agent technology: shopping agents, or "bots," that do automatic comparative price shopping on the Web.

The providers of agents talk about their great potential for business-to-business commerce, particularly for commodity items. But so far, the most serious business use of agent technology is in consumer shopping on the Web. A variety of agents are available to search for the lowest prices on everything from Beanie Babies to digital video players to high-end PCs. But not all online merchants are enamored of agent technology or its effect on electronic commerce.

The widespread use of agents hasn't taken off the way many experts had predicted. The reasons for that reflect the evolution of Web commerce into a marketplace that's a lot more like the real world than many would have expected. The Web is a place where branding and marketing matter a lot more than technology, and customer loyalty has prevented rampant commoditization of products (see story, "Web-Based Service"). Price matters, but not to the exclusion of consumer concerns such as brand trust and service.

"It's been said that agents would change the dynamics of Internet commerce, and that certainly hasn't happened yet," says Julia Pickar, an analyst with Zona Research Inc. "They're making some waves with the most price-sensitive shoppers, but they're not for everybody."

Some leading shopping agents include Excite Inc.'s ProductFinder, which the search-engine portal added by acquiring NetBot Inc. and its Jango technology earlier this year; Junglee, acquired earlier this year by Amazon.com; Yahoo Shopping; C2B, acquired this year by Inktomi Corp. from C2B Technologies; and MySimon, an agent developed by a recently launched startup of the same name.

In theory, agents can bring the market goal of "perfect information" within reach of an online buyer. That is, an agent can report the list price from every available seller that stocks a particular item. "But there's a dirty little secret--no agents search the whole Web. That's just impossible," says Nicole Vanderbilt, group director of digital commerce at market research firm Jupiter Communications.

Instead, agents search a much more limited universe. MySimon, for example, searches about 800 merchants. "No shopping agent can guarantee the absolute lowest possible price," says Kirstin Hoefer, the product manager for Jango agent technology at Excite. "And we believe that people don't want too many results because it's overwhelming. We try to query the most up-to-date information, and we include classifieds and online auctions as well as direct merchants."

Excite doesn't disclose actual usage numbers for its ProductFinder agent, but Hoefer says the most popular product categories are PC software, video games, Beanie Babies, golf equipment, and PC hardware, with flowers surging near the top around Mother's Day and Valentine's Day. Excite and other agent sites say merchants want to be "comparison shopped" because the Web traffic they get is motivated to buy and will often turn their searches into sales. "They want the traffic, and it's high-conversion traffic," Hoefer says.

Exposure Helps
Analysts and merchants say that's true--to a point. And that's where the use of agents gets controversial. "It's a fine line between love and hate," Jupiter's Vanderbilt says. "Retailers never like to be side-by-side with their competitors. But the kind of customer who buys solely on price is not one that most merchants want anyway. So they figure the exposure can't hurt--if they capture traffic going to Yahoo, for example, that's bound to help them."

Merchants always have the option to "block" an agent pinging their sites for data. It's technically easy to screen out traffic from specified IP addresses. When Andersen Consulting launched one of the earliest Web shopping agents three years ago, an experimental effort for compact disc prices called BargainFinder, it found some online music merchants blocking the technology.

Few merchant sites block agents today, for three main reasons: Agents have become more commonplace, they do drive traffic to the sites, and companies recognize that comparison shopping goes with the cyber-territory. "The first thing we tell our merchants is that if you're going to be on the Web, you're going to be next to your competitors," says Venky Harinarayan, Junglee's VP of business strategy.

Most merchants are willing to accept that, but not all embrace the intelligent-agent concept. "It can only be narrowly applied to easily definable consumer commodities," says Paul Gaffney, VP of commercial sales at Office Depot Inc. "But even then, what's the legitimacy of the lowest-price merchant? And is the agent truly provider-independent? In some cases, agents actu-ally work against 'perfect information,' because price is just one part of that."

MySimon, unlike some agents, doesn't charge merchants to be part of its searches. Instead, its business model is commissions--2% to 5% of each sale made to a buyer who accessed the site through a MySimon search. "Our model is to become like MasterCard or Visa--they take a transaction fee every time," says MySimon co-founder and CEO Michael Yang. Merchants also have the option to pay to post logos or ad banners on the MySimon site.

Agents can drive traffic to merchant sites, but what drives traffic to agents? As with so many other Web activities these days, the answer to that question is portals. The relationship makes sense for both sides: The portal delivers users, and the agent offers a service the portal can tout.

That was the thinking behind the pairings of Jango with Excite, Junglee with Amazon, and C2B with Inktomi, which runs the HotBot search engine. MySimon hasn't signed a blockbuster portal deal yet, but has license agreements with several moderate-traffic sites, such as the Big Yellow and Canadian Yellow Pages directories, the Talkway chat site, and the Taxi online shopping guide.

A Shopping Revolution?
Portals and the agents are hoping comparison shopping will catch on and, in Yang's words, "revolutionize the way the Web is used." Some recent online consumer behavior research may be encouraging. A survey of about 5,000 Web shoppers conducted by Jupiter Communications earlier this year found that 77% of their purchases were "intended"--that is, buyers went online knowing exactly what product they wanted to purchase. And of those making intended purchases, 79% visited at least two sites before they bought the item. "So it would seem that people want the comparison-shopping functionality that agents deliver," Vanderbilt says.

But that doesn't mean that the buyer, whether using an agent or not, always chooses the lowest price. Agents can give buyers a pretty good idea of choices, but in the end, the consumer weighs many factors before typing in that credit-card number, among them merchant name recognition, trustworthiness, and track record.

Nineteenth-century British social critic John Ruskin wrote, "There is hardly anything in the world that some man can't make a little worse and sell a little cheaper, and the people who consider price only are this man's lawful prey." Shopping agents can point out the prices, but it will always be up to the Web customers to choose the path most likely to leave them satisfied buyers rather than lawful prey.

Photo by Gary Parker