Epinions: An E-Commerce Success That Almost Wasn’t

Early in 2001, Epinions.com faced the same choice as scores of other dot-coms: Adapt or die.

While the shopping information site, founded in 1999 by former Yahoo, Excite and Netscape executives and funded by some of the best-known investors in Silicon Valley, had attracted millions of repeat users, it was wholly dependent on advertising revenue. It had already laid off two-thirds of its staff, shrinking from nearly 100 workers to less than 40.

However, the company managed to secure a round of venture funding in the difficult market of early 2001.

Within several months Epinions had realigned itself, adding a price comparison feature to its staple of product reviews. The new feature meant that Epinions could charge online retailers directly when it referred shoppers to those retailers’ sites.

‘Bet the Company’

“It was a pretty hard summer,” Epinions CEO Nirav Tolia told the E-Commerce Times. “We bet the company on being able to quickly add what other companies had spent years developing.”

Fortunately for Epinions, the new feature was ready for release by September, and more than 250 merchants agreed to pay for referrals or a commission on sales. By December, the company had stopped losing money.

Although Epinions still faces a difficult competitive environment, its rescue from the brink of doom may serve as a useful case study for other dot-coms.

Find a Market, Stick to It

From the start, Tolia said, the plan that he and co-founder Naval Ravikant had for Epinions was to combine the best features of the two biggest e-commerce success stories, eBay and Amazon.

Epinions tried to blend Amazon’s content model, which is heavy on customer reviews, with the sense of community that eBay has mastered.

And although the market required Epinions to rethink its revenue model, it never strayed from its original purpose, according to Tolia. “We didn’t reinvent the company in 2001,” he said. “We just expanded what we were already offering.”

One Task at a Time

Now that Epinions has stemmed the outflow of cash, according to Tolia, it can turn its attention to the next task at hand: growth.

Epinions wants to grow in several directions. Tolia said he thinks the biggest challenge is to convince users to visit the site for all their shopping information needs. People still associate Epinions with product and service reviews, he noted, but they may not know it has added price comparison features.

Meanwhile, the site, which already offers reviews of numerous products — from online banks to travel destinations, electronics to new cars — is eyeing new areas, such as products for parents and children and home and garden items.

Epinions will be growing internally as well. According to Tolia, the company’s board of directors, which includes several of its venture backers, has approved the hiring of as many as 12 people.

Tech Still Rules

Tolia said Epinions was able to shift to a new revenue model so quickly because of its strong technical team.

“In the end, every company in the Valley comes down to how good the technology is,” he said. “All the other stuff doesn’t matter if you can’t get that right.”

Another reason Epinions has succeeded, Tolia admitted, is that it competes in a fractured market. Shoppers apparently are still figuring out how to find what they want to buy online, he said.

The search engine market continues to expand and grow in new directions as paid listings, many placed by online retailers, become increasingly common. Shopping robot sites that scour the Web for prices and listings have fallen out of favor but are still drawing users. And for those willing to pay, there is always Consumer Reports, which has become one of only a few unquestionably successful subscription-based content sites.

Forget Price

While Epinions has created a band of loyal users, Tolia said it also has convinced merchants of its value. He claimed that 98 percent of firms that sign up for a three-month trial period renew the referral service.

In the end, analysts said, convenience is likely to be the winning formula online.

“For consumers who buy on the Internet, the biggest poverty is of time, not of money,” Gartner research director David Schehr told the E-Commerce Times. “The reason shoppers turn to the Web is because it’s faster and more convenient.”

Tolia said he hopes his company can win by playing the convenience card.

“We want people to see that in the end we can save them time by bringing them right to the product page on Amazon.”

4 Comments

  • Gee, how great that epinions.com came into the black.
    This has nothing to do with no longer paying their writers, now, does it?
    The so-called eroyalties, that epinions.com has made a big fuss about in the past, were never much. The have been reduced to zero starting November 1, 2001.
    Without paying their real "employees", they still struggle to enter the black? How incompetent.

    • I don’t know that the demise of Epinions is such a bad thing. Other than being a nifty place to read sophomoric product bashing, I see no real value. Just my Epinion. I haven’t checked the site in a while, but as for being an e-commerce success, maybe they are selling stuff now, but I don’t remember a lot of actual commerce going on last time I looked.

      • The worst thing about Epinions.com is that you cannot trust a thing written on that site. There are members who write 600+ DVD player reviews that are nothing more than cut and paste info from the mfg site. What good is that? I have learned from reading a lot on Epinions that the only thing you can trust is that the site is full of fakes (with a few interesting creative writers.)
        And to think, they actually pay the jokes of writers they have.

  • I used to write for Epinions and I can tell you that the site won’t last much longer. There are certain members on the site who write hateful messages and total garbage. The site has lost many advertisers due to this. Many members use the site as their personal playground, posting stories about how to abuse your children or have write-off’s using as many offensive words as possible. Many other sordid things go on that unfortunately will bring the site to its collective knees soon. So Sad…

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