eBay Inc (EBAY) 2004 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Shopping.com fourth quarter conference call. At this time all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question and answer session.

If anyone needs assistance at any time during the conference, please press the star followed by the zero. As a reminder, this conference is being recorded today, Thursday, February 3, 2005. I would now like to turn the call over to Ms. Lynn Brinton. Please go ahead, ma'am.

Lynn Brinton, Vice President of Corporate Communications, Shopping.com: Good afternoon and thank you for joining us today on Shopping.com's fourth quarter 2004 earnings call The call is also being broadcast over the web and can be accessed from the IR section of the company's website at www.Shopping.com.

With me on today's call are Dan Ciporin, Chairman and Chief Executive Officer of Shopping.com, and Greg Santorra, Chief Financial Officer.

We would like to remind you that during the course of this conference call, Shopping.com's Management will make forward-looking statements, including predictions and estimates that involve a number of risks and uncertainties. Actual results may differ materially from any future performance suggested in the Company's forward-looking statements.

We refer you to the Company's SEC filings, including Form S-1, for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement. We expressly disclaim any obligation to update this forward-looking information.

Throughout this call, Shopping.com will be referring to our GAAP financial information, as well as providing some insights as to adjusted EBITDA and nonGAAP measures. Adjusted EBITDA is not in accordance with, or an alternative to, GAAP financial measures, and may be different from pro forma measures used by other companies.

The Company has provided a clear reconciliation between GAAP net income and adjusted EBITDA with the financial statements attached to the earnings release. A replay of this call will be available on the IR section of the Shopping.com website starting later this afternoon.

And now I'd like to turn the call over to Dan Ciporin. Dan?

Dan Ciporin, Chairman and Chief Executive Officer, Shopping.com: Thanks, Lynn, and thanks everyone for joining us today for our first earnings call as a public company.

Shopping.com had another strong quarter, reporting record revenue and profitability for both the quarter and 2004. Revenue for the quarter was $33.6 million and adjusted EBITDA was $9.2 million.

We ended full year 2004 with revenue of $99 million and adjusted EBITDA of $22 million. Since this is our first call as a public company, I'd like to take a moment and provide you with some background on the business.

Shopping.com is the leading online comparison shopping service. We sit at the intersection of the internet's fastest-growing market segments, e-commerce and online advertising.

We are transforming both the way consumers buy and the way merchants sell online. We use the power of the internet and our own proprietary technology to gather and configure massive amounts of e-commerce data to provide consumers with the broadest range of well-organized, highly structured data to inform their purchase decisions, including price, brand, product specs and reviews.

For merchants, we transform browsers into buyers, leading to much higher conversion to sale. We believe that, in doing so, that we've unlocked or monetized the value of informed choice.

By the time a consumer at Shopping.com clicks on a merchant offer, they are significantly more likely to make the purchase than if they had come directly from one of the major search engines.

Merchants pay us on a per-lead basis to provide them with these high-quality referrals and can easily calculate the effectiveness of their spending with Shopping.com, using our free ROI tracking tools.

The high conversion rate of our leads provides a very high ROI for merchants, and in turn enables us to grow average revenue per lead. In fact, the sustainable momentum in our business is driven by increased leverage and optimization around conversion to sale.

As you know, increasing numbers of merchants making investments in both CPM brand building online and search engine marketing have driven impressive growth in online advertising. We believe that these same merchants will increasingly invest in online comparison shopping because it offers merchants the ability to generate even greater ROI than traditional CPM and CPC marketing.

As we look at our business, there are a few key metrics that we believe are important in driving growth, and we intend to provide investors with these metrics on a quarterly basis. Revenue growth for Shopping.com is primarily driven by a combination of growth in paid lead referrals and average revenue per lead.

While the combination of these two metrics is important, conversion to sale is the most important, a metric that speaks most directly to both consumer and merchant satisfaction. In order to maximize conversion to sale, we may, in some instances, refine our site in a way that leads to a decrease in the number of paid leads while increasing the value and pricing of those leads.

As long as our revenue per lead follows accordingly over time, we will continue to achieve consistent revenue growth. Ultimately, we seek to maximize the total gross merchandise sales for our merchants through our service.

Other important metrics for us are the number of products and categories covered, which is reflected in the number of SKUs on our site, and the structuring of specific categories. During Q4, we structured new product categories for products ranging from home media servers to coffee grinders.

And we added additional structuring categories ranging from sunglasses to sporting goods. These efforts resulted in an average conversion to sale increases of 34 percent in these categories.

In general, structuring a category increases conversion to sale while reducing conversion to leads, ultimately increasing our revenue per lead. We look forward to updating you on our progress in this area each quarter and have provided a metric sheet, along with our earnings release, to help you in this regard.

Now to dive into the Q4 results. According to comScore, Shopping.com, with more than 25 million unique visits in December, was the third most visited online retailer behind eBay and Amazon, and had the most traffic of any comparison shopping site. Ahead of the comparison shopping services of much larger companies, such as Yahoo and Google.

While we do not break out specific sources of traffic, I will say that our organic traffic - that is, from people bookmarking or typing in shopping com - continues to be the fastest-growing source of our traffic. Average revenue per paid merchant lead increased 30 percent over Q4 '03.

This increase was driven primarily by a seasonal price increase we implemented in November to appropriately capture our value share and improve conversion to sale at that time of the year. During the fourth quarter, we also generated about $92 million paid leads, an increase of 17 percent from Q4 '03.

In Q4, we also made several improvements to our site, including the launch of our Smart Shopper Club and Cash Back program, designed to provide the highest quality leads to merchants. Smart Shopper allows registered members to receive up to 5 percent cash back on purchases from participating merchants.

We designed this program as a means of increasing propensity to buy, as well as customer loyalty. While these programs are still in roll-out mode, the initial consumer response has been very positive.

Partnerships remain an important part of our growth, and in October we renewed our U.K. contract with Google. You should also know that Shopping.com powers the comparison shopping services for many websites, including AT&T, Verizon, Ziff Davis Publications and EarthLink.

Moving on to our international expansion, we believe that there is a significant global opportunity for our service, an opportunity that is vitally important to address this year. In fact, we believe it is as big, if not bigger, than the domestic opportunity.

I'm sure you are aware that many internet and media companies derive more than 40 percent of their revenue from outside of the United States. And we believe, and industry analyst surveys suggest, that we have a similar opportunity.

For this reason, we intend to invest Management's time and financial resources to address this opportunity in 2005 and beyond. As many of you know, we have had a very successful and profitable business in the U.K. for the past four years.

We've grown the percent of revenues coming from the U.K. from 9 percent in 2002 to 15 percent in 2004. We see this success repeating itself and continuing to grow with our plans to launch Shopping.com in France during the first half of 2005, followed by Germany later in the year.

A critical underpinning of our international expansion and differentiation is the unified global product catalog we are developing to serve all international markets. This not only makes us scalable, but will serve as one of the codes in unlocking the power of informed choice on a global basis for consumers and merchants.

For consumers, transparency of merchant costs and product specs will help them take advantage of the significant deltas in price across borders. Our proprietary technology will enable the simple management of these calculations and conversions on a cross-border, and, ultimately, a truly global basis.

Merchants benefit from exposure to a much larger and more diverse market, a global market, rather than just a national one. Now I'll turn it over to Greg to review our financials.

Greg Santora, Chief Financial Officer, Shopping.com: Thanks, Dan.

We are quite pleased with our financial results for the fourth quarter of 2004, as well as for the full year. Before I get into the numbers, I think it is important to point out that due to the seasonality inherent in our business, with 33 to 38 percent of our annual revenue coming in the fourth quarter, it is more meaningful to measure our results on a year-over-year basis, rather than sequentially.

Total revenue for the fourth quarter of $33.6 million was up 33 percent over the prior year quarter, bringing revenue for the full year to $99 million, up 48 percent over the prior year.

Revenue growth for Q4 was driven by a 17 percent increase in paid lead referrals and a 16 percent increase in average revenue per lead. Average revenue per merchant lead grew 30 percent over the fourth quarter of last year. For the full year, paid leads increased by 45 percent.

Sponsored listing revenues represented 40 percent of our total revenue for the fourth quarter and 44 percent of total revenues for the year. Our adjusted EBITDA for the quarter was $9.2 million, representing 117 percent increase over Q4 of last year.

For the full year, adjusted EBITDA was $22 million, representing a 72 percent increase over fiscal 2003. Net income before the deemed (ph) dividend for the fourth quarter was $6.3 million, or $0.22 per diluted share, as compared to $2.1 million, or $0.09 per diluted share reported in the fourth quarter of 2003.

For the full year, net income before the deemed dividend increased 77 percent to $12.2 million versus $6.9 million last year. As a result of our recent IPO, the Company recorded a noncash deemed dividend of $7.2 million in the fourth quarter.

You may recall, we also booked a noncash charge in the second quarter for a deemed dividend to bring the total for the year to $17.7 million. Weighted average shares outstanding for the fourth quarter for the purposes of calculating diluted EPS, was $28.9 million.

Now let's briefly provide some insights on our spending. Cost of revenues in the fourth quarter were $1.5 million, compared to $1 million in the prior year. The increase is primarily attributable to increases in traffic and the number of SKUs on our site, as well as us billing out our second outsource data center.

R&D expenses in the quarter were $2.8 million versus $2.4 million in the fourth quarter of last year. R&D for the full year was $10.7 million versus $7.1 million for fiscal 2003. The 51 percent increase is due to our continued efforts to improve the experience shoppers have on our site as well as our investment in upgrading our platform to support our geographic expansion plans.

Sales and marketing expenses in the fourth quarter were $16.5 million, compared to $14.7 million the prior year quarter. And $50.4 million for all of fiscal '04 versus $37.3 million last year. The increases were primarily attributable to a rise in our online marketing as we continued to improve our ability to generate positive ROIs.

The 61 percent increase in online marketing for the fourth quarter of this year was offset by a reduction in offline marketing of approximately $4 million from the previous year. G&A expenses in the quarter were $4.6 million versus $3.5 million in the prior fourth quarter.

For the year, G&A increased to $13.8 million from $8.8 million. The increase for the quarter and the year was primarily driven by investing in finance and legal resources to build the public company infrastructure.

Stock-based compensation in the quarter was $2.5 million versus $900,000 in Q4 of last year. The increase is primarily attributable to an increase in variable stock charges, which is tied to price movements in our stock.

In 2005, we anticipate growing our operating expenses between 35 and 40 percent. Our investments include head count increases in R&D to support product innovation, both domestically and internationally. International sales, marketing and business development head count for the launch of France and Germany, and G&A to comply with Sarbanes-Oxley 404.

In addition to our head-count increases, we expect to grow online marketing, both domestically and internationally, since we continue to be able to make these marketing investments profitably. Now let me turn the call back to Dan.

Thanks, Greg. Looking ahead, 2005 will be an important year where we will balance margin expansion with strategic investment to accelerate and solidify our leadership in this dynamic space.

We are currently planning for revenue in the first quarter to range between $27 million and $28 million, and adjusted EBITDA from $4 million to $4.5 million. For the full year of 2005, we expect revenues to be in the range of $125 to $132 million, and adjusted EBITDA in the range of $24 million to $26 million.

However, to better understand the profit growth in our core business, you need to remember that we are making an investment in international expansion of between $1 million and $1.5 million in the first quarter, and approximately $8 million to $10 million overall for the full year of 2005.

As I previously discussed, we believe this investment is essential to capitalize on the international growth opportunity. Excluding this investment, our adjusted EBITDA on the core business would be growing between 33 and 49 percent. On revenue growth in our core business of between 23 and 29 percent.

Let me close by saying that Q4 was another quarter of record revenue and strong profitability for Shopping.com. We continue to lead our sector and experienced strong sustainable momentum in the market and our business, driven by increased leverage and optimization around our superior conversion to sale.

To best realize growth in 2005, we will continue to refine our services for both shoppers and merchants as we expand into new categories, add new features and invest for growth to amplify the market opportunity as we grow our leadership position internationally.

I'd like to thank all of our employees for doing a terrific job, and I thank you for your attention today. Iggy Fanlo, our Chief Revenue Officer, has joined us for Q&A. So now we'd be happy to take your questions.

Thank you, sir. Ladies and gentlemen, at this time we will begin the question and answer session. (operator instructions)

Our first question comes from Anthony Noto with Goldman Sachs. Please go ahead.

Anthony Noto, Financial Analyst, Goldman Sachs: Thank you very much. Hi, Dan and Greg and Iggy. A quick question. First, conversion rates. Do you have any sense of how conversion rates were in the fourth quarter for your merchants relative to the third? And if not on an absolute basis, what the change was?

Second question. You had provided a growth rate in revenue per merchant lead. I was wondering if you'd do the same per sponsored lead. And then last, it appears like, you know, paid leads have slowed to about 17 percent year over year growth, a little bit of a deceleration from much higher than that in the last two quarters.

And I was just wondering if you could give us a little more granularity on why such a deceleration? Thanks.

Sure. Hi, Anthony. Well, let me take-take your first and third question. I'm going to let Greg speak to the growth rates and-or the growth in merchant rates versus sponsor rates.

First of all, on overall conversion rates, what I can tell you is that, in terms of conversion to sale, we did have the best conversion to sale statistics we've ever seen on the site in this holiday season in Q4. So I think that we feel very, very good about the conversion to sale results that we've seen on the site.

We had a 34 percent increase, for example, in Q4 to Q4 conversion increases, Q4 '03 to Q4 '04. So we feel very, very good about that statistic. And, as you'll recall, conversion to sale is our ultimate holy grail metric.

That's really what we strive to maximize, because in doing so, we will continue to increase our revenue per merchant lead, and that will continue to drive consistent revenue growth.

And as far as the question on paid leads is concerned, you have to remember again, given that our focus is on conversion to sale, an increasingly total gross merchandise sales that we deliver to merchants in our network, that that is, ultimately, what we're going to focus on. And it may, in turn, cause us to take specific actions on the site that will lead to lower growth in paid leads, lower growth in terms of conversion to paid lead.

A perfect example of that is in some of the structuring of the categories that I talked to in the opening-on the opening dialogue. And I think, as you'll see, while we had a decrease in the conversion to lead, we had an increase, again, of about 34 percent, in overall conversion to sale.

And we had a corresponding increase in revenue per merchant lead. And, again, that's what's really going to drive us and our business and our revenue growth going forward.

So, really, just a better higher quality mix?

Absolutely. Greg, do you want to speak to the-

Yes. Anthony-Anthony, the sponsor revenue per leads are basically flat sequentially with Q3 as well as flat with Q4 of last year. You have to remember that we control the pricing on the merchant leads, not the sponsor leads.

Right. Thank you.

And then, if I can, the international investment, it seems like you're really focused on that opportunity and potentially spending a little bit more. Could you give us a little more color on what's driving that decision, the opportunity, how you're quantifying it and leading to the opportunity? Thanks.

Sure. We see the international opportunity as a huge one for us. We've seen the U.K. business grow from 9 to 15 percent, as mentioned. We think that there's a similar opportunity that exists in Europe and in 2006, in Asia.

And we think that it's very important for us to take advantage of that opportunity now to increase the ability to capitalize on the opportunity in Europe in particular this year by increasing the investment.

We think that the competitive landscape - excuse me - the competitive landscape in Europe is very different in here, and the opportunity to offer a highly differentiated service in Europe is very, very much for the taking.

We intend to offer on the first half of this year in France, an offering which, again, is highly differentiated, which will offer Pan European-true Pan European comparisons. And we think that in Europe, maybe even more than in the United States, the value of that kind of service is extraordinary. And we think that now is the time to capitalize on that opportunity.

Great. Thank you.

Yes, I just had a couple more comments, Anthony, on that international point. First I would- like Dan's comment on extracting the value. I think the value of informed choice here in the U.S. is a strong one, but in Europe it's an even far stronger one, because of the differences that exist across borders.

The second is the competitive landscape, and there really is only one meaningful competitor in Europe and there are several here. And finally, I would say that along the terms of dimensionalizing (ph) the opportunity, in the U.K., historically it's been 6-7 percent of our fixed cost, via 15 percent of our revenue.

And I think we can expect to see similar type of leverage in other geographies in Europe.

Our next question comes from Safa Rashtchy with Piper Jaffray. Please go ahead.

Safa Rashtchy, Financial Analyst, Piper Jaffray: Good afternoon, guys. How are you doing? Good quarter.

A couple of questions on the impact of the fourth quarter, the rest of the year. In your business, I'm assuming that a lot of the metrics that get established kind of set the pace for the year.

You mentioned, Dan, that you had significantly improved conversion to sale. Could you talk about to what degree that and other patterns that you saw will enable you to perhaps change your pricing in 2005? And also maybe increase the paid lead growth rate a little bit beyond what you had in Q4?

Sure. Well, first of all, we are-we think that, at this point in time, we still are in a very low rate as far as pricing is concerned, comparatively speaking. And by that, I mean the percent of gross merchandise sales that we take is somewhere in the mid-to-high single digits. And that compares to double digits for virtually any other marketing vehicle.

And we think that merchants and advertisers are starting to recognize that the kind of value we offer is very significant. And our ability to start to take more value and return is going to increase over the year, just in general, in terms of just basic headroom we have on that side, on that leverage point.

Secondly, I think that we are going to continue to offer a number of different site refinements, particularly on the structuring side. We have a whole variety of different categories that we're going to move toward structuring.

And, again, as I mentioned earlier, when we structure those categories, you do see a fairly dramatic increase in conversion to sale as we offer a much cleaner, tighter information-set of information experiences for the consumer that leads them to buy much more often.

So you'll continue to see that over the course of this year.

Great. Thank you.

Thank you. And our next question comes from Heath Terry with Credit Suisse First Boston. Please go ahead.

Heath Terry, Financial Analyst, Credit Suisse First Boston: Great. I was wondering if you could talk to us about customer acquisition trends a little more. Can you give us an idea of where your direct URL traffic went this quarter, where you expect it to go over the course of this year?

And what you-what kind of leverage you've got in the model over the course of this year in terms of marketing outside of direct paid search and plans for getting that-that organic traffic mix higher?

Sure. Well, we've been very, very happy with our organic traffic growth. It continues to be the fastest growing source of our traffic. We anticipate that that will continue for the course of the year.

And we think that the kind of site refinements, the kind of, I think, experience and differentiation that we offer, is going to continue to drive that organic growth. I think, also, you can see that, from a consumer standpoint, we've clearly gone into the lead.

If you look at comScore statistics, we are the leading-by far, the leading comparison shopping service on the web today, surpassing Yahoo shopping, for example, for the second month in a row.

And I think that consumers are, in effect, saying to us, you do have the highest quality experience out there currently. And that, with the continuing stream of product improvements we have on tap for this year, that is only going to continue.

Iggy, you may want to speak a little bit to the paid marketing side.

Ignacio Fanlo, Chief Financial Officer, Shopping.com: Yes. Heath, we have seen our marketing costs grow, but we've actually seen our revenue from those investments, from that-those marketing spends, grow faster.

So we've actually seen the spread increase, both sequentially and year over year. So, you know, we're excited about that. But I will continue to repeat what we've said in the past, and that's that we aim to optimize for total margin.

In the last two cases, both quarterly, sequentially and year over year, the percentages are working in our favor. But we will always opt for any marketing programs or any distribution deals that increase our total margin and our total scale.

Getting back to the theme that Dan was talking about, and that's really being, you know, the largest in terms of gross merchandise sales. And then, over time, increasing our take rate, or what we're able to extract out of that gross merchandise sales.

Great. Thank you.

Thank you. And our next question comes from Richard Fetyko with Merriman and Capital (ph). Please go ahead.

Richard Fetyko, Financial Analyst, Merriman and Capital: Thanks. Thanks for taking my question, and congrats on the first quarter as a public company. A couple of questions.

First, in terms of your investment, you mentioned $8 million to $10 million, if I'm correct, for the full year of '05. How does that break down between opex and capex?

And secondly, you mentioned in the past expansion into the financial services and other categories, or verticals, if you will. Where do you stand there, if you're still on track to do one in the first half of '05?

So, I'll speak quickly to the category expansion question. We are absolutely on track to launch our financial services offering in the first half of this year. You can expect to see that, again, first half of this year.

And you can also expect, moving forward, that we will be looking very closely at launching into other verticals as well. I'm going to let Greg take the question on the breakout of the international expenses.

Richard, really, the $8 million to $10 million investment in international is all operating expense. We do have capital, but what we were trying to relay to you is the operating expense impact on our adjusted EBITDA going into next year.

Okay. That sounds like a bit of an increase from the prior expectations? I think you mentioned $2.5 million to $3 million per country in the past.

We did that early on in our planning cycle. As we learned more about the opportunity, we decided to invest a little more aggressively, because we think we'll actually leverage our growth prospects going into '06 for us much better.

Great. And if I may follow up on the vertical expansion into financial services and others, could you just sort of go over the strategy there and the thought process behind that? Thank you.

Yes. I think that we believe fundamentally that what we offer, in terms of highly structured information to do comparisons against a broad array of different merchants offering a particular product, or in this case, service, does extend well beyond the traditional focus that we've had historically.

And so we are really looking at areas where we can best leverage, best differentiate, our proprietary technology, the ability to take raw data and transform it, structure it, organize it and present it to consumers in a very easily comprehensible way.

We're looking at where we can best leverage that kind of technology and differentiation, as well as the size of the overall opportunities. So again, financial services is the first of those categories that we're focusing on, but it certainly won't be the last.

Sir, do you have any further questions?

No. Thank you.

Thank you, and our next question comes from Mark May with Kaufman Brothers. Please go ahead.

Mark May, Financial Analyst, Kaufman Brothers: Hi, thanks a lot. I'd also like to thank you for all the metrics. That's clearly welcomed.

Just had a question related to-obviously, your free and direct traffic is the fastest growing segment, but you're still paying for some traffic from search. And wondering if you could talk a little bit about how you manage the prices that you're paying for some traffic versus the revenue?

Obviously one is in a fluent auction market and the other is more of a fixed basis, and wondering how you manage that and how well you've managed that. And I guess on a related note, I've heard from some in the industry talk that maybe you've had some difficulty passing through the 25 percent price increase in November.

If you could, talk a little bit about where you stand with that price increase? Thanks.

Mark, this is Iggy. I'll take both those questions, I guess, in order. The first, you said, it was how do we manage the search engine marketing buys. I think we take a very, very rigorous approach.

We understand the value of each key word from each of our partners over any time period, and we try to optimize against that level of granularity on a consistent and regular basis. So, again, we're taking a very, very rigorous approach. And we have been able to manage that, literally, on a daily basis.

In terms of the price increases, we did put through a 25 percent increase in November, November 1, for the two-month period. It was an undifferentiated 25 percent across-the-board increase for the seasonal holiday period.

We had, you know, a little bit of normal squawking and push back, but at the end of the day, we had not a single merchant, to my knowledge, leave the site during the period. And they enjoyed conversion rates that actually, on average, increased more than the 25 percent.

So, actually, the value they received per lead actually increased, despite the 25 percent increase in value. We rolled back those seasonal increases on January 1, as promised to our merchant customers.

And then, we've instituted again just this past Tuesday on February 1, another differentiated increase. It was category driven, based again very clearly on the value that we're driving to our merchants.

In some cases we saw no increases in some categories, and in some cases we saw increases that were mid-to-high double digits. The overall increase will be in the-probably the low double digits.

Does that mean from a miling (ph) perspective that you'd-we should actually factor in sequential increase in average pricing?

Well, it was 25 percent for two months. You're talking versus Q1 to Q4?

Correct.

Well, you add a 25 percent undifferentiated increase for two months in Q4, and we're having less than that for two months in Q1. So, I would not anticipate that.

And on the first segment of my question now, what is the average spread right now between when you're looking at just the paid leads? How would you expect that spread to change, you know, throughout the year?

So, Mark, it's Greg. We're not going to probably talk about the average spread. But I will tell you for our purchase visits, our margin per purchase visit has gone up both sequentially over Q3 as well as Q4 over Q4.

So, we have seen improvements in our margin on those. And, as Iggy earlier mentioned, we are managing to absolute margin dollars, not necessarily margin percent. So, we've been very pleased with our ability to buy traffic profitably.

So, I guess the one theme I would take away is that we have been, at the very least, and probably exceeded any increases in traffic costs that we've experienced. We've been able to pass along that and more, because of the value. Again, it gets back to what Dan said. The value we're driving our merchants is significantly higher.

And if I could ask one last question. You have a nice chunk of change on your balance sheet. Can you just talk about how you might use that? Not looking for how you might use it this quarter, but just, you know, over the next year or two, strategically, where could you use that money to expand the business?

Well, you know, it's a great question, because one of the nice things about having a lot of financial resources at our disposal is that we have the opportunity and the freedom to invest in those areas where we think there is going to be significant and indeed, even enormous amounts of growth in the future. And that's exactly what we've chosen to do as part of our plan for 2005.

Okay.

Sir, do you have any further questions?

No, thanks a lot.

Thank you. Your next question comes from Shawn Milne with Friedman, Billings, Ramsey. Please go ahead.

Shawn Milne, Financial Analyst, Friedman, Billings & Ramsey: Thank you. Just a couple of questions, Greg. Just a housekeeping item to start. Can you give us-do you have an estimate for the share count in the first quarter?

Yes. We have it on our data sheet, Shawn. If you look for basic shares, we're estimating somewhere between 29.5 and 30 million, and for fully diluted, somewhere between 31.5 and 32.5 for the first quarter.

Okay, great. I'll take a look at that. Dan, can you just talk about-I mean, you talked about new category expansion and financial services. Have you put any dollar bucket around that in terms of what kind of investment that would be?

What I can tell you is that you can anticipate that it will be break even for this year, certainly.

Okay. And then lastly, you know, it just sounds like-I'm not sure exactly what was said on the road show in terms of international investments. It looks like it was stepped up a little bit.

Can you give us a sense for how big the international business would be in '05, and-you know, and just a percent of that revenue number? And do you have any thoughts on '06? That would be great. Thanks.

Well, I think it's-you need to understand that for '05, it's almost entirely an investment year. The revenue contribution is going to be negligible, but it positions us strongly for revenue growth in international in '06, particularly in the second half.

When you've launch a new country, there is a lead time between investment and revenue generation.

Okay. And Dan, this-I mean, any big picture thoughts on anything that you saw competitively in the U.S. and in the fourth quarter around more the pure play sites, and how-you know, how Shopping.com did relative to the pure play companies?

My-our take-well, first of all, I guess I would look to first of all third-party sources in terms of the kind of traffic that we've generated relative to other third-party sites. And that traffic has continued to grow and we think that's a function, very much of the kind of experience we offer.

We think we offer the single best experience, comparison shopping experience on the web today, and we think that's demonstrated by the kind of traffic and results we've delivered.

I guess the second thing I would say is that we are really in the forefront of trying to focus now on driving conversion to sale in a variety of different and innovative ways. In particular, the Smart Shopper program. That is a perfect example of the kind of innovation and the kind of product improvement I think you can see from us or you'll see more of from us going forward in 2005.

It is designed very much to not only increase customer loyalty to Shopping.com, but to again drive towards conversion to sale. And the conversion-to-sale increases that we've seen from those members in the Smart Shopper club have been very, very significant.

So, those are the kind of innovations and product improvements you're going to see from us going forward. Again, all centered around trying to increase and drive conversion to sale for our merchants in overall gross merchandise sales to our merchant network.

Great. Thank you.

Thank you. And our next question comes from Scott Devitt with Legg Mason. Please go ahead.

Scott Devitt, Financial Analyst, Legg, Mason, Wood, Walker: Great, thanks a lot. The question relates to the ASPs that your merchants are getting. Are you seeing any differentiation where consumers are finding the value proposition more relevant above a certain ASP, say $50 or $100, versus people actually searching in the BMV category?

Some clarity around that would be helpful, just to see where you business is impacting in the online retail segment, in general. And then just, secondly, a housekeeping item. On the interest income expense-income line, as you continue to hold this cash, this $867,000, is that a pretty good number for '05 quarterly income interest line? Thanks.

Well, let's get over-let's get the easy one out first, the interest income. Yes, we're projecting, and our guidance articulates that we're forecasting that our quarterly interest income will be between $700,000 and $900,000.

You know, it depends obviously what interest rates do as well as little fluctuations in our cash balances. But that's a reasonably good quarterly estimate.

In terms of ASP, I assume you mean average selling price of the item. Yes, I would say, largely speaking, there is a fairly strong correlation with the higher consideration, higher ASP of an item, we become more and more important.

But I think the-there is a sweet spot, and that number is probably somewhere north of $50 to $75, but somewhere south of $250, that's kind of probably our sweet spot in terms of where we really are seeing the bulk of our comparisons going on.

Sir, do you have any further questions?

No, thank you.

Thank you. Our next question comes from Jeetil Patel with Deutsche Bank Securities. Please go ahead.

Dixon Karmendrof, Financial Analyst, Deutsche Bank Securities: Hi. Yes, this is Dixon Karmendrof (ph) sitting in for Jeetil. Can you hear me?

Yes.

Great. I was wondering if you could talk a little bit about your loyalty cash back program, just in regards to whether you're pleased with the progress and what kind of impact you've seen on frequency users and behaviors for your participants?

Sure. Again, this is a program that we're just rolling out, that we've just rolled out over the holiday season. We're extremely pleased with the progress. As I indicated before, we had two primary goals for this program.

One was to increase customer loyalty to Shopping.com, and two was to drive further conversion to sale. I think in both those regards, we've been again extremely pleased with what we've seen from that. And we are anticipating rolling that program out across the network in full scale, with at lease 250 merchants over the course of the next several months.

And I think that as you do that, you'll see increasingly these kind of-this kind of retention vehicle, this kind of a marketing program, driving again not only conversion to sale, which has been on the order of five to ten times what you would see ordinarily from a non-shopper-club member, but also again increasing retention.

Okay, great. And would you care to comment on the impact on user behavior or frequency beyond that? Any metrics that you track in particular for the program?

No. At this point in time, we're not going to comment on the specific metrics. But I can tell you that, again, we are very, very pleased with the initial results. We've got 92 merchants in the program now. We expect to have 250 in the next several months. And as we roll that program into full scale, I think you'll-we will speak to the metrics on that going forward.

So when you say "rolling it out," you're talking about potential vertical integration with the rest of the commerce platform?

I think we'd be rolling out across all our different properties. Right now, it exists on Shopping.com. It would include Epinions and a variety of others, and would potentially include new categories and new geographies.

Okay, great. Thank you.

Thank you, and at this time, I show no further questions. I'd like to turn the conference back over for any concluding comments.

Thank you all once again for your participation, and we look forward to speaking with you again on the road in the coming quarters. Thank you.

Thank you. Ladies and gentlemen, this concludes the Shopping.com fourth quarter conference call. If you'd like to listen to the replay of today's conference, please dial 303-590-3000 or 1-800-405-2236, and you will need to enter the access code of 11021586, followed by the pound sign.

Once again, thank you for participating in today's conference. At this time, you may now disconnect.