How price comparison portals make money

India's growing population of Internet users is increasingly searching for products and reading reviews online before making a purchase.

India's growing population of Internet users is increasingly searching for products and reading reviews online before making a purchase. To help such consumers, there are dozens of portals offering price comparison across product categories ranging from mobile phones to consumer electronics to insurance policies.

Most of them use sophisticated technology platforms to aggregate information on products with different vendors. The business involves updating the sites constantly with new products and new features. But how do these websites make money?

The most visited such portal in India is The portal is operated by . It gets 10 million monthly visits and has a product listing numbering 30 million. The site does not make money through any channel. It is only in India that Amazon operates such a service aimed at understanding the dynamics of online markets.*

Reviews42, a portal founded by Delhi-based company Solvytech Solutions, claims to own a catalogue of about 4.5 million products across categories like books, mobile phones, and beauty and personal care products. The portal and the mobile application post reviews and allow users to compare prices offered for the same product across leading e-commerce portals like Flipkart, Snapdeal and Amazon. Advertising looks like the usual way to monetize the platform for these sites, but actually it is a very minuscule proportion of their overall revenues. Surjendu Kuila, who co-founded the portal in July 2011, realised last year that generating leads for online retail stores and charging them a cut on those culminating into purchases can be a viable business model.

Kuila thinks transactions are important if an online business like his has to grow. "If I have to build a billion-dollar business online, facilitating transactions are a must," says Kuila, who reportedly has received multiple acquisition offers from leading e-commerce companies. Kuila is now working on a lead generation platform for small local retail stores as well as large organised stores. The portal has added a new feature in the mobile app that allows users to discover offline stores that sell the products they are looking for and even call them from the app itself. The company is also planning to sell software to retailers which will help them to align themselves with the Reviews42 platform and benefit from leads generated online that will be directed to them.

The model is fraught with challenges as the cost of acquiring customers is very high. It needs huge investments in team and technology., which has raised Rs 85 crore from a bunch of investors such as InfoEdge, Intel Capital and Inventus Capital, is still a loss-making venture.

"Revenues through advertising are just two per cent of our total revenues," says Yashish Dahiya, Co-Founder and CEO of the portal, which closed financial year 2012/13 with Rs 44 crore in revenue. "We make money largely by offering leads to insurers and also call centre services," he says. The company spends Rs 1 crore a month on technology.

Another price comparison portal is MySmartPrice, which was founded in 2010 and has tie-ups with 40 to 50 online stores. It charges e-retailers on every lead generated as well as on actual purchases made by consumers. Co-Founder Sulakshan Kumar says the portal is essentially a lead generator and marketing channel for online stores.

"We are planning to expand to aggregating all sorts of products being sold online." Kumar feels they have an edge over online stores as they have no overheads like logistics or managing warehouses. "Even though our revenues are smaller, costs are much lesser too," says Kumar, whose portal has crossed Rs 2 crore in revenue.

*An earlier version wrongly attributed parts of the second paragraph to an Amazon executive.