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A Web site for gift seekers

Barry Diller's family of Net businesses is introducing Gifts.com, a site that helps gift buyers remember and shop for important occasions.

5 min read
Mark the date: InterActiveCorp, the Internet company that became a conglomerate thanks to Barry Diller's open wallet, has actually created a Web business of its own.

The company plans Monday to introduce Gifts.com, a site for helping gift buyers remember and shop for important occasions. InterActiveCorp's entry into this category could spawn a round of new competition among shopping sites and retailers such as Amazon.com, which until now have offered a universe of good presents but little help to prospective buyers who want to winnow their choices.

Indeed, if there were a site that Internet users were turning to for gift ideas, InterActiveCorp would have tried to buy it. But according to William Lynch, Gifts.com's chief executive, when InterActiveCorp researched the market last year and found few companies vying to offer the service, it decided to break with company tradition and build the site itself.

The company is in the midst of a structural change, splitting its travel-related subsidiaries like Expedia, Hotwire and Hotels.com into a separate unit, while maintaining its nontravel companies like Ticketmaster, LendingTree and HSN under the IAC name. Last month, IAC announced it had generated $6.2 billion in 2004 sales, an increase of 15 percent from 2003.


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In the face of an Internet market that is generally outperforming that growth, however, investors have recently bid down the stock price, which closed Friday at $22.29, well off its 52-week high of $34.62 in April, and significantly lower than its more recent high of nearly $28 in February.

Its new site, Gifts.com, features a search engine that prompts users to choose attributes that best describe the gift recipient and occasion. When users tell the site they are searching for anniversary gifts for an adult woman who is a "domestic diva" and is also "style-conscious," the site returns a list topped by jewelry.

For a woman who is a "music lover" and a "movies and TV fan," the list is topped by a stereo system and a flat-screen TV. When users look to buy the stereo, they are taken to SharperImage.com to complete the purchase.

Although retailers pay Gifts.com an undisclosed fee each time a customer clicks through to their site, Lynch said editors create the lists of best gifts without regard to a company's fee. Rather, editors choose products to highlight, then retailers bid for the right to be featured whenever shoppers select that item from Gifts.com's list.

The site, which has been running in test mode since February, has more than 10 million items in its database, from more than 1,000 retailers, including Amazon, RedEnvelope and Overstock.com, among others. "And we're aggressively getting more," Lynch said. But, he added, the company wants to find "quality merchants and products," rather than simply flooding the site with as many merchants and items as possible.

Gifts.com's timing appears good, said Patti Freeman Evans, an analyst with the Internet consultancy Jupiter Research. "It certainly makes sense to provide ways for customers to find what they want," she said. "There's much more merchandise for customers to sift through now than in past years."

Last year, Internet shoppers bought nearly $1.4 billion worth of gifts, compared with nearly $1.1 billion in 2003, according to Jupiter figures. Evans said site traffic among online retailers was increasing twice as fast as that at other types of Web sites, thanks to competition from traditional retailers that had intensified their online marketing efforts. Now that many mainstream Internet users are experienced enough to move beyond books, CDs and other training-wheel purchases, they are ready to buy more unusual items--and buy them for other people.

Since Amazon.com is the most popular retail site for gift shoppers--having garnered nearly 14 percent of all online sales in the fourth quarter of 2004--it is not surprising that the company is also exploring ways to improve the gift selection process.

Earlier this month, Amazon was granted a patent for a system that could in the future allow it to make recommendations based on gifts customers purchased on the site in the past. (When a customer writes a gift card or requests wrapping, for instance, Amazon counts the purchase as a gift.)

Privacy advocates fretted publicly that Amazon could use the patent illegally to collect data on children, since Amazon's system could determine the likely age of the gift recipient and his or her name and address. Under the federal Children's Online Privacy Protection Act, companies cannot collect data about children under the age of 13 without a parent's permission.

Patty Smith, an Amazon spokeswoman, said the company would do nothing to violate this law and had no immediate plans to develop the technology described in the patent. "Once the patent office says OK, we look to see if there's anything in it that can help customers and our business," she said. "It could be that it's not going to do either of those things."

Still, Amazon seems well positioned to create a gift recommendation service of its own, and recent features on the site suggest that it sees value in such services. Last holiday season, for instance, it prominently displayed a list of the most popular gifts on the site. The company also offers gift wish lists and registries. And, of course, Amazon continues to rely heavily on technology to recommend products related to items a visitor is viewing, or goods a customer has bought.

Whether Amazon or the so-called shopping engines such as Shopping.com, Shopzilla and Yahoo Shopping develop gift recommendation services, Gifts.com will still face competition, albeit from smaller venues such as GiftBee and FindGift.com.

FindGift.com, for one, features technology similar to that of Gifts.com, in that it prompts users to describe the gift recipient, among other things, before returning a list of items.

According to Bob Zakrezewski, the site's co-founder, the privately held company has been operating for seven years, and its site attracted roughly 1.2 million visitors in December. Zakrezewski would not give any revenue figures but said that sales had doubled every year and that the company's payroll supported nine employees.

As with many other sites that refer business to online merchants, FindGift.com initially earned money from the 5 percent to 15 percent commission merchants give to so-called affiliates that send them business. But in early 2001, the company began instead charging companies 11 to 20 cents each time a visitor clicked over to the merchant's site.

Zakrezewski said he believed that Gifts.com's entry into the market could benefit his company.

"I always thought this was an underexplored category, so this will raise the visibility of these types of services," he said. "But they are big, so we will have a challenge."

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