With its decision to buy Infochoice and BidMyLoan, revealed yesterday, insurance infomediary iSelect is making a $33.5 million bet on the way people shop online.
It’s also buying a competitor to its equity partner ninemsn, which owns around 35 per cent of iSelect and half of Infochoice competitor RateCity.
And it comes on the back of a $30.16 million investment it received from US private equity group Spectrum Equity Investors back in March.
Should Spectrum Equity be happy with the decision?
Like most intermediaries, including brokers, iSelect says it helps consumers simplify the purchase of complex products and services. And let’s face it, products don’t get more complicated than life insurance, health insurance and mortgages, with hundreds of products with vastly different features on offer.
The question is, will people continue to turn to comparison websites for help, or will they instead turn to friends and colleagues, as they have traditionally done, but via social networking and social search, both of which are becoming more commercialised.
And is Infochoice the best option for iSelect to expand into the financial services comparison market?
Many of the early investors in the comparison site industry were buoyed on by the UK market, where up to 40 per cent of leads to financial institutions are generated by comparison sites, led by market darling Moneysupermarket, which floated in 2007 with a market value of £843 million.
Despite years of trying, the three major financial comparison sites in Australia, Infochoice, Ratecity, and Mozo have been unable to generate anything like the 40 per cent of leads their UK counterparts boast. Here it's more like 1-2 per cent.
Google continues to be the main competitor to comparison sites in Australia, attracting millions of dollars in search advertising every year, from banks alone.
And if that isn’t threatening enough, Google continues to expand its comparison search functionality in the UK and US, expanding into savings, home loan and credit card products.
Looking specifically at Infochoice, it’s been struggling to keep up with RateCity and Mozo, since Mozo managed to steal its Fairfax partnership business in 2009, helping to boost Mozo traffic.
iSelect founder Damien Waller is an optimist however, telling Technology Spectator iSelect’s ‘virtual advice’ model goes far beyond the basic comparisons ever likely to be offered by Google, and Infochoice is generating enough traffic to justify the purchase price and make it a better option than going it alone.
“Infochoice is generating a significant number of unique visitors every month, not far off what iSelect is generating, so together we could generate almost 10 million unique visitors per annum,” Waller says.
iSelect is significantly ahead of its financial comparison site peers, with Waller claiming after nearly eleven years in the market it’s now generating one in six health insurance sales.
Waller puts iSelect’s success down to its decision to combine online tools, including a needs analysis engine, with offline support, so that users of iSelect can actually pick up the phone and talk to a person that understands the products on offer.
But he’s not yet willing to commit phone support to the financial products compared by Infochoice, admitting the margins on some financial products would make this unviable.
One way to deal with this would be the addition of more social elements to iSelect and Infochoice, something Waller says is on the cards. Site users will eventually be able to rank products, and access popular social media functionality, including being able to ‘like’ or ‘unlike’ products.
If it can get the model right iSelect could soon dominate the comparison space with plans afoot to expand into utilities, and mobile phone comparisons.
It will need to move quickly if it is to outrun the shadow of the search giants.