What does the sale of BeatThatQuote to Google really mean?

by Saul on 10 March 2011  |  4 comments
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The following blog is an edited version of an internal communication that went out to the lovemoney team after the acquisition of Beat That Quote...

The Following is an edited communication sent out to the business at lovemoney.com HQ...

I thought I would send a quick note on Google's purchase of Beat That Quote, late yesterday for £37.7M. If you did not know about it, then it is big news for our sector. It is great news and quite transformative for Beat That Quote, so we should be the first people to say "well done". They have worked hard on their platform and distribution, so this represents a really big step forward for them.

So what about the actual mechanics of the deal, what does it really mean for those involved and our industry in general?  

What we know with a relative degree of accuracy…

Beat That Quote are essentially a technology company, with proprietary engines in most personal finance verticals, so they fit the main acquisition profile for Google.

BTQ launched in 2005, so they have been operating for almost 6 years. In that time they have won some strong portal business, including MSN money and Yahoo.

Their last submitted accounts were in January 2010, stating £8m in revenues and a £2M loss.

Google have been exploring the PF comparison space for some time, first saying they were testing their own pages, and now having made a firm move and commitment to buy.

Why is this a good deal for those involved?

Google has a fondness for “two click properties”, i.e. quick user journeys to get you to your destination. BTQ fulfil that criteria. Whilst you can be critical of price comparison, what we know is that as a business it works commercially on the web. All you need is traffic. Google have traffic.

BTQ probably represented the best proprietary comparison technology in the marketplace outside of Moneysupermarket.com. Moneysupermarket.com were always going to be a difficult acquisition, and the big 3 car insurance engines are already under the wings of large insurers - so BTQ may just be the next best thing as a straight comparison website.  

The most likely plan is for Google to use its vast customer potential and ad network to integrate comparison searches to a wide audience. It means they gain 100% of the margin, instead of just what aggregators pay to arbitrage (probably around 80% of the margin). Google will also have potential to gain higher rates from the advertisers.    

They can integrate Google analytics to take price comparison on a step understanding how the Google network can provide prequalified customers for personal finance comparison.

How could this be viewed as a bad deal for those involved?

So much of BTQ traffic already comes from Yahoo and MSN, they also happen to be Google’s biggest competitors. That doesn’t feel like a natural fit. 

There will be obvious questions of ethics. Google will squeeze the banks for higher margins, and these are the same banks who have just done so well out of algorithm changes, which means a search for credit cards returns all the major card providers. Coincidence? Probably, but it still looks bad. Google have huge reach, but with each move in to these markets (PF / Retail / Property) they alienate another set of businesses and undermine the trust that people once had in them. Do they care? Are they taking the place of Microsoft as the business people like to loathe?

They are upsetting advertisers. Similar to above, but slightly different. Today it is Moneysupermarket.com who is upset, but what about if the next move is to launch the Google Bank. How would Virgin Money feel about that?  

BTQ have a relatively poor customer and business facing brand. This is not sour grapes, as mentioned earlier we think they have done a great job, but the persistent rumours of unethical practices right across the business (better documented elsewhere than here), makes it seem like a slightly odd fit for Google. Will they keep the brand? Will they ban themselves from search results and if they do, does that not say that they recognised what BTQ had done, and yet still went ahead and acquired?

What does it means for the wider marketplace?

The obvious point here is that Google have moved firmly in to financial product provision, so the ramifications are potentially quite substantial. Moneysupermarket, Confused, Comprethemarket & Go Compare will feel the inevitable "Google heat" a little, especially if they move to car insurance. It is something of a shake up.

The third party space will also feel the ramifications. What will MSN and Yahoo do with their BTQ powered finance centres? Especially as the financial results show on BTQ, they were probably over paying for those spaces (although perhaps not when you consider the eventual sale fee).

On the face of it, £37.7M is a lot for a company with significant losses, especially in the current marketplace. But Google have paid for 5 years of product development and the enterprise value that development will deliver (very quickly) with their traffic. It goes to show, that a rare UK acquisition for Google is in PF comparison. It is a very big space, probably worth around £1billion in the UK. Will other media, retail and banking organisations want to play in that game? Very possibly. But how long before we will need to see consolidation? What about an alternative, is there a significant other site operating at scale that is innovating on price comparison (except our good selves of course)?

Finally, what happens next?

Exciting times I would say, the space should hot up, and all this in a down period!

We may see an influx of transformative partners in the PF space, and hopefully the eventual outcome of this is better practices and more focus on the customer.

We (lovemoney.com) remain something of an independent island, slightly adrift of the very competitive price comparison continent. That continent now includes Google, MoneySupermarket, Go Compare, Confused & Compare The Market. Some very big players doing some great things, but we are equally proud of our record, and we will continue to be committed to innovating for our customers and the businesses we work for and pushing the boundaries of a space which is now very established (in both earnings and those operating in it).

Onwards and upwards!