Web sites that offer comparison shopping for wireless phones and services appear to be a dime a dozen these days. Consumers go to these sites because they promise to be objective. But what happens when wireless companies invest in the e-tailers promising that objectivity?
Recently, mobile-phone maker Motorola Inc. took a $15 million stake in Point.com, one of the industry’s oldest comparison Web sites, and it already has an investment in another site called Cellmania.com. Finnish operator Sonera, which also has stakes in U.S. operators Voice-Stream Wireless Corp. and Powertel Inc., has a minority stake in Simplexity.com.
Some e-commerce executives claim these type of investments give their businesses legitimacy and expertise to move into other areas of e-commerce within a market full of similar Web sites, and they don’t compromise their objectivity because customers won’t come back if they do. Motorola says it has only invested in sites that are neutral.
Others say they try to stay away from these types of investments to avoid any appearance of bias. Consumers already face a bias every time they walk into a retail store because of exclusive agreements these stores have with carriers, and they flock to comparison e-commerce Web sites because they are confused.
“Comparison Web sites are for people who are confused,” said David Horowitz, a renowned consumer advocate. “They want to go to an honest place, but how do you know these sites are honest? Where is the money coming from? Who are they getting their information from? It’s easy to be a magician on a Web site.”
“Consumers want variety and choice,” said Delly Tamer, president and chief executive officer of Letstalk.com. “They don’t want any mystery or confusion. We make a huge effort to be unbiased … One of my key goals is to have at least 50 percent of our customers, visitors and purchasers come from word of mouth.”
Seeking investments from the industry they serve is becoming a trend among many e-commerce Web sites, not just wireless, said Horowitz, who speaks about consumer issues on his Web site called fightback.com, syndicated radio shows, TV programs and in news columns. He also is the consumer advocate for lowermybills.com, a Web site that also offers comparative shopping for wireless service and a number of other products, the only Web site he says he will work with.
“What it’s becoming is called survival,” said Horowitz. “All the Web sites out there are going into a new phase. They need money to survive. People were developing these Web sites with the enormous hope that these were going to return millions. People were dumping money into them like they were dumping garbage. Now the market is falling and many have overadvertised … If you can’t deliver and pay bills, you have to find some way to get money, and that is to get it from a company you can give some hype to.”
The shakeout really hasn’t happened yet for sites selling wireless services. While sales from the Web represent a small percentage of total sales for carriers today, Forrester Research predicts telecom e-commerce will begin to explode this year and the next, as upstart communications e-stores like Point.com, reasonware.com and others take the early lead. Consumers will be enamored with the easy navigation, discount incentives and rapid response to individual preferences offered by these portals. By 2003, these e-commerce sites should begin to drop out or become acquired by portals like Yahoo and America Online Inc. as buying communications services on the Web becomes as mainstream as book purchases, said Forrester.
Today, many e-commerce sites selling wireless services are leery of taking any investments from vendors or carriers.
“We would prefer not to,” said Jeff Kohler, CEO of reasonware.com in Aurora, Colo. “Individual Angel investors fund us and venture-capital firms. That is a very safe road to take … Buying a wireless product is one of the worst experiences. Bias is all over the place.”
Letstalk.com also has taken investments from Goldman Sachs and other venture capitalists. “There is pressure on us to take money from lots of companies,” said Letstalk.com’s Tamer. “We’ll only take it if it makes sense and serves customers well.”
“There are a lot of people out there interested in taking stakes,” said Mike Merrill, chairman and CEO of ePhones. “The question is, what makes sense.”
It’s a fine line e-commerce sites must walk, said Dr. Ronjon Nag, CEO and co-founder of Cellmania.com. He says Cellmania.com uses Motorola’s investment to give it expertise in the wireless industry. It also has investments from OfficeDepot to keep it aware of the retail industry and an investment from BroadVision that gives it expertise in e-commerce.
“You can actually make a trusting relationship, and it’s going to be accomplished by practice,” said Nag. “People live in an age of `co-opetition’ and alliances, and the wireless world is full of examples like that … My belief is that the m-commerce and e-commerce space will shape out exactly the same way.”
Court Lorenzini, CEO of Point.com, said Motorola’s significant investment will be used to grow the company and help propel it into its new business vision-taking its expertise to help other companies get into the e-commerce space.
“We’ve provided ourselves over a long period of time that we don’t sacrifice objectivity,” said Lorenzini. “We have avoided taking investments from the industry as a straight business to the consumer site because it does raise the question of objectivity. Now that it’s less of a force in our strategy, [Motorola’s] investment opens up the door.”
Motorola, which said it won’t rule out investing in more e-commerce sites, said it only has invested in very neutral sites.
“If we can’t compete on our own merits, then we’re not going to win,” said Sue Fullman, vice president and director of Motorola Direct. “We’re really looking for consumer-friendly sites.”
Fullman said Motorola is using its investment in Point.com to pioneer e-commerce in the industry. Customers who go to Motorola’s Web site to buy handsets are passed over to the Point.com site to purchase rate plans. Point.com in turn notifies carriers of an order, and the carrier fulfills the order.
“We’re looking at areas where carriers and manufacturers can leverage relationships to simplify costs,” said Fullman. “There’s a lot of inefficiency in the customer-acquisition process.” Fullman declined to elaborate on how Motorola can leverage these relationships.
Cellmania.com is also taking its company in another direction, toward developing a wireless destination ASP service to enable others to have their own wireless destination site. This is an area of interest for Motorola as well.
U S West Wireless, which has agreements with about 11 different portals, said it isn’t concerned about vendors and carriers investing in these sites.
“These companies pride themselves on being an unbiased resource to help customers make the right choices,” said Larry Luchiano, alternative channel business development manager with U S West. “It’s just another avenue for our customers to buy product.”
Still, Horowitz says he doesn’t know of many companies that take ownership stakes in Web sites and advocate a truly neutral way of doing business.
“Some companies are sure enough about the product to say we just want to be a partner,” he said. “I don’t know too many companies that don’t want you to take a position to promote or not to promote the competition.”
Larry Andreini, vice president of marketing with Simplexity.com, said Sonera’s minor investment in the company has no influence on how it presents and provides information to its customers.
“We provide an objectivity guarantee on our site and think what speaks most clearly is the side-by-side comparisons where someone can see how we present plans. We present comparisons alphabetically,” said Andreini.
Ultimately, Forrester Research says Web start-ups mus
t treat suppliers with respect or risk getting sidelined. Unlike the bias that occurs in retail stores, e-commerce sites can’t favor certain carriers with larger logos or premium shelf space when online retail alternatives are just a click away.
