BizRate was founded in June of 1996 by 27-year-old Farhad Mohit. While earning his master's degree in entrepreneurial management at the Wharton School, Mohit gained his first in-depth experience with the World Wide Web by creating an online site for the school's journal. It was then that he came up with the idea for BizRate, which he believed would address some of the major concerns many consumers have with online purchasing. As stated in a January 2000 article in Computer Weekly, "however professional and enticing an online store may look, it could be run by a company with little financial backing or less-than-honest intentions." To help customers find reputable and reliable places to shop in the rapidly growing and increasingly diverse Web marketplace, Mohit wanted to build a site that would give consumers objective information about an e-store before they actually made a purchase.
He wrote a business plan for the venture as his thesis, and enlisted the help of fellow student Henri Asseily to develop the technology. Using $260,000 borrowed from family and friends, including marketing professor Dave Reibstein, Mohit and Asseily began creating the site. Over the next two years, they also worked on securing additional financial backing. The largest chunk came when Mission Ventures, based in San Diego, California, contributed $4.5 million in April of 1998. Chuck Davis was brought in as CEO in December of 1998. He previously had worked as president of Internet gateway Go.com, owned by Walt Disney Co. While Davis focused on day-to-day managerial issues, Mohit continued to work on developing strategy. When BizRate was officially up and running, Mohit offered things like product discounts, a $50,000 sweepstakes, and a $50 instant-win offer to draw people to the site. He also differentiated the site from competitors like Gomez.com by using data from actual shoppers to create ratings rather than hiring a staff to do that.
BizRate gets its information from customers who shop at the site of a participating e-business, which is labeled with a "BizRate Customer Certified" seal. Once a shopper completes a purchase from a site participating in BizRate's ranking program, a BizRate questionnaire appears on the screen. Each time a questionnaire is completed, BizRate adds the data to the existing information about the e-store, so overall ratings may change over time. BizRate visitors can view these ratings and base shopping choices on them, while the e-businesses themselves can use the information to improve their performance. Online retailers can purchase monthly data reports specific to their e-store for $20,000 per year.
In the fall of 1999, the firm repositioned itself as a shopping portal by offering direct links to those retailers who were willing to participate in the ranking system and give BizRate a portion of the sales—ranging from one percent to 20 percent—that originate at its site. Within a year, more than 50 percent of BizRate's revenues came from these commissions. The firm also made money by licensing its data to sites like Consumer Reports Online.
The firm published The Best of Online Shopping 2001 in November of 2000 to help holiday shoppers who were still leery about making online purchases. As quoted in the November 2000 issue of Business Wire, BizRate CEO Chuck Davis stated, "The real question on every consumer's mind this holiday season isn't the financial future of dot-coms—it is whether Internet retailers will be able to provide compelling gift ideas and deliver on service." Davis believes that the book, along with his firm's rating system, will help to boost shoppers' confidence about online purchasing, a goal that was of particular importance to many online retailers after a few e-commerce fiascos during the 1999 holiday season left shoppers shaken. For example, Toysrus.com 's inability to meet an unexpected spike in online orders left many customers empty-handed on Christmas Day, without the toys they had purchased from the site.
At the end of 2000, BizRate launched its C3 Marketplace, which included features like improved search capabilities covering more than 1,500 e-tailers, a discount area that showcases special deals on certain products, a listing of the best-selling items on the Web, standardized check-out procedures, and a gift idea center. The C3 Marketplace also let customers opt, for the first time, to allow BizRate to save their password and other personal details such as address and credit card information for future purchases. A seller's auction allows merchants to request their e-store appear at a specified place within the search results of certain product categories. For example, Flowers.com might request that their site appear first anytime a BizRate.com visitor searches the Flower and Garden category for roses. Unlike its competitors, BizRate doesn't charge e-tailers for each placement they receive. Rather, fees are based on how many users actually visit a site. Therefore, Flowers.com would not be charged each time its site appeared first within specified search results. Rather, its fees would vary based upon the amount of traffic it received from the placement.
Most analysts recognize the value of BizRate's rating system for both consumers and merchants in the relatively new world of e-commerce. However, some critics argue that BizRate's rating system will become obsolete as online shoppers who become increasingly familiar with the Web will likely return to their favorite sites to do business. Mohit counters this by pointing out that new businesses, particularly traditional brick-and-mortar companies, continue to open e-stores and overhaul existing sites. Instead of relying solely on a growing base of new sites to rate in order to justify its potential for continued success, BizRate also is developing new technology to bolster its presence as one of the Internet's top shopping hubs. Hoping to give online shoppers another reason to visit its site, the firm began working in 2001 on a system that will allow customers to keep track of their online spending by listing all completed purchases in a single account.
"BizRate.com Becomes Second to Amazon as the Most Popular Retail Site on the Web." Business Wire. February 15, 2001.
"BizRate.com Launches an A-Z Online Shopping Guide Book in Time for Holiday 2000." Business Wire. November 15, 2000.
"BizRate.com Solves e-Commerce Woes with Launch of New C3 Marketplace." Business Wire. October 17, 2000.
Mcnamara, Paul. "BizRate.com Founder Farhad Mohit Eyes Every Aspect of His Business the Same Way Comic Steve Martin's Cop Character on 'Let's Get Small' Looked at a Shrunken Motorist: We're Gonna Have to Measure You." Network World. February 5, 2001.
"Siteseeing." Computer Weekly. January 13, 2000.
Smith, Geoffrey. "There's Good Reason for the Buzz about BizRate." Businessweek Online. November 26, 1999. Available from www.businessweek.com.
Weintraub, Arlene. "E-Commerce Crusader." Businessweek Online. June 5, 2000. Available from www.businessweek.com.
SEE ALSO: Amazon.com; Business-to-Consumer (B2C) E-Commerce; E-tailing