As I said last Friday, Shopping.com is no longer not accepting new merchants until January 1, 2008.

I appreciate Shopping.com explaining their side of the story to me earlier this week. I’m not always the easiest person to work with and the openness Shopping.com executives have demonstrated over the last couple months has been a breath of fresh air compared to my previous dealings with the company.

According to Shopping.com, the company is investing its resources into its existing merchant base and into customer service. They are prepared for the holiday shopping season and doing a lot of things to help their merchants like providing a monthly email, conducting webinars, and even launching live chat (coming soon). Shopping.com wants the most productive relationship possible with its current merchants.

The reason I felt sick hearing the news that Shopping.com is no longer accepting new merchants is because I see another side to the story. I’m not saying that my side of the story is correct. In fact, I could be completely wrong, but it’s what makes most sense to me.

So here’s my view, which Shopping.com flat out rejected:

Shopping.com dropped the ball. Plain and simple. Could you imagine Google Adwords telling people tomorrow that it can’t accept any new advertisers? NO. It’s unimaginable. That would mean that Google was not prepared technologically or otherwise.

Shopping.com should have been prepared for a holiday rush and it wasn’t. I applaud the company for taking care of its current merchant base, but cutting off new merchants just says that it (systems? technology? manpower?) can barely handle its current merchants (and thus the support emails that say to expect a reply in 5-7 days).

Just as the company has made recent strides to improve the quality/cost effectiveness of leads its merchants receive, the merchant management process (sign up, data feed management, account management, etc.) will also be addressed. Still, this is an embarrassing setback.

As for the financial impact, because Shopping.com is such a tiny part of eBay, cutting off new merchants isn’t going to really do anything. Furthermore, Shopping.com makes a significant percentage of its revenue from advertising sales and Google AdSense and that revenue is not going to dry up overnight - in fact, I’m sure ad sales is booming.

As for raising its initial deposit to $700, I feel that Shopping.com doesn’t care about the smaller merchants. This is also a theory that Shopping.com flat out rejected. Now I’m a bit more practical here, there’s sometimes significant cost involved with getting a smaller merchant up and running. I understand this because we deal with it at SingleFeed every day. But if you lower the barrier to entry in terms of cost, the potential upside is huge.

My favorite phrase is metrics oriented marketing, what the web enables you to do: run tests, track and make decisions based on actual data. By increasing the minimum initial deposit to $700 (from $50), you cut off tens of thousands of merchants from ever considering running a test with you. If the service is good, you should offer merchants a trial at little or no cost because the proof will be in the results.

But what do I know? I’m just a blogger. I’d rather take into consideration what the other shopping engines have for initial deposit requirements:

Google Product Search - Free
Become - $25
Yahoo! Shopping - $50
Shopzilla - $50
Pronto - $50
PriceGrabber (Soft Goods) - $50
Smarter.com - $100
NexTag - $150
Shopping.com - $700

And then there’s Google Adwords @ $5 and Yahoo Search Marketing @ $30. While these guys don’t have to worry about the dreaded data feed, it’s important to note that PPC advertising on Adwords and YSM is the standard. That’s what everyone knows and loves. So the shopping engines should be somewhat in line with these minimum required deposits in order to effectively convert potential advertisers into paying clients.