Estimated reading time: 7 minutes
To begin with, in recent years there has been a gradual spread of so-called online businesses, including, the so-called comparison websites; these are designed with the purpose of offering their consumers the possibility of consulting the rates of different suppliers - in the most varied sectors - allowing them to choose the most advantageous ones. In this regard, just think of electricity providers, telephone operators, hotel facilities, insurance or financial service providers, and much more. At this point, it behooves us to ask ourselves how these websites work, given the fact that they have been able to establish themselves by revolutionizing traditional business sectors and experiencing exponential growth.
Online Business: Analysis of Comparison Websites
The business model used by comparison websites is quite simple; in brief, it consists of gathering information about particular goods or services from competing sources in order to then present them to their consumers within a 'single platform. Therefore, Comparison websites act as true intermediaries in commerce, in that they connect potential customers with suppliers of different goods or services.
Online Business: Monetization Options
As a consequence of this, one advantage of this online business model is the many monetization options available. Let's look at the 3 most common ones:
Commissions on Transactions
In this way, the web platform will earn some commissions - usually in percentages-calculated on the value of the transaction made when the user purchases a given good or service from the provider. This mode is also known as 'affiliate marketing' in that the platform that sells the product actually acts only as an intermediary by not owning the good and not selling the service directly.
Subscription or Listing Costs
This monetization option consists of charging a subscription fee for using the services offered by the platform or charging a 'fee' at the time of listing.
Sponsorships
The platform itself may use its own "digital space" or blog to host advertisements or sponsored articles from third parties for a certain amount of money, which will obviously depend on the web traffic received.
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Main Benefits
This recent online business model has interesting advantages, let's see The most important ones together:
Convenience for Consumers
The main advantage of comparison websites lies in their ability to offer great convenience to their customers. The aggregation of different options among various providers in a single platform greatly simplifies both the research and decision-making process.
Excellent Scalability
Because comparison websites do not own the inventory and are not directly involved in providing services, they are not bound by the constraints or bureaucracy related to their administration or management. This allows them to expand rapidly into new markets with minimal upfront costs.
Online Business: Main Disadvantages
High Competition
One of the most significant challenges facing the online business model of comparison websites is the intense and difficult competition. With relatively low barriers to entry, new platforms can enter quickly and saturate the market. Obviously, market entry today presents many more difficulties unlike 15 years ago.
Regulatory Issues
One aspect that should not be underestimated is the legal aspects governing certain areas in which Comparison Websites operate. Continuous legislative activity in transportation, electrical supplies, telephony, and financial services can make such business very complex and expensive, especially when one wants to operate on an international scale. Obviously, this aspect can create a rather significant barrier to entry or expansion.
Online Business: Dependence on Suppliers
The heavy reliance of comparison websites on providing products or services offered to the public is a very sensitive issue. While this allows for high scalability and variety, it also implies the need to continually negotiate contractual terms and conditions.
Dependence on User Ratings
The entrepreneurial success of this online business model depends heavily on maintaining user trust and satisfaction. In fact, negative experiences had with a supplier can be directly reflected on the comparison website.
Online Business: A Conclusion
In conclusion, Comparison websites represent an interesting online business model that undoubtedly has clear advantages. This is supported by the many successful cases that have managed to establish themselves over time in such competitive sectors. On the other hand, however, it is undeniable how this business choice is not easy to implement and is not without risk. Like any online business, there are so many variables that are not directly controllable or manageable. In addition, one must take into consideration how rich the market already is with such businesses and how challenging it is to establish one's business and differentiate it properly.
