Published: August 10, 1997, 12:20 PM PDT
By Tim Clark
Staff Writer, CNET News.com
Yesterday, in a move that points to the confidence of investors in the future of e-commerce in particular and the Internet boom in general, online giant America On-Line acquired low-price search engine priceadvantage.com for 22.7 million in an all-cash deal that will mostly benefit proprietor Carlos Martínez, head of a 15-employee company ran from the seventh floor of a building in Manhattan.
Although PriceAdvantage.com, founded in November 1995, has barely made a 75,000 dollars profit in its history, it has been considered a very promising asset ever since it entered investors’ crosshairs in mid 1996. Getting an average of 2 million hits a day, PriceAdvantage.com is like a Yahoo! for price tags. Users that access the very user-friendly site can write anything from a generic noun (such as “car”) to a brand to a product name and get a comprehensive list of online retailers carrying the desired item—organized by pricing. Although in some cases the results are frustratingly limited (and a trip to the mall might be significantly more enlightening), industry analysts believe that, as “e-tailing” becomes the norm and most businesses turn to the web to offer products and services, PriceAdvantage.com will be an invaluable tool for costumers and a very profitable company for its owners, probably based on a paid subscription (listing is currently free and open to any cyberspace shop) or a “picked retailer” publicity scheme such as the one that the site currently features (and from which it has made almost all of its profits).
But, beyond the plausible competitive edge PriceAdantage will have in the future as the only site of its type that currently exists, the key to its success is the software it’s based on. Although not radically different from the algorithms that make search engines such as Yahoo, Lycos and Altavista run, PriceAdvantage’s core is extremely precise (and quite fast) at detecting prices and products. Unlike search engines that look for content, PriceAdvantage very rarely turns out mismatches or irrelevant links—you’re almost guaranteed to get real prices for existing products, no matter how vague your request or how garbled the retailer’s site.
America On-Line came first in a furious bidding process that kicked off when Mr. Martínez announced earlier this year his intention to sell the company. While some regard this as sheer madness considering the high fortunes that he could enjoy by staying on-board for at least a few more years, he complains that “it has grown way too big way too fast”. Unlike most CEO’s of high tech companies, Mr. Martinez, brought up in Chicago’s South Side by his immigrant single-mother, didn’t acquire computer or business skills in an expensive Ivy-League College, but in a two-year stint in the Army as an “Information Technology Specialist”. An authentic rags-to-riches story saw him go from working two jobs (as a low-paid network technician in a Wall Street firm and a waiter) a couple years ago to securing 50,000 dollars worth of venture capital to build his dream from the ground up. He reputedly acquired the source code for the search software (which he later modified) from a Stanford graduate for a mere $750.
AOL, which beat archrival Compuserve, and Netscape Co. in the sale, among others, expects to operate PriceAdvantage as a subsidiary. Sources at the online giant hint that it could undergo an IPO in early 1998, after it demonstrates its ability to grow.
