Price Comparison Sites Explained
June, 25, 2008
Price comparison sites claim to be able to help you get the best deal by collecting prices of goods and services from multiple suppliers so that you, with a simple mouse-click, can compare what's on offer across the whole web.
A quick browse on a search engine reveals a multitude of price comparison sites for almost anything; credit cards, loans, mortgages, insurance, utility suppliers, mobile phone deals, shopping, and even wine. It can only be a matter of time before there is a price comparison website for price comparison websites!
These sites aren’t really new, but recently their popularity has soared with the advent of increased broadband uptake; high-speed internet means you can get the answers to lots of searches in seconds. Also as the cost of living rises people are keener than ever to make savings and ensure they are getting the best possible deal on everything from electricity to car insurance. To give you an idea of how lucrative this market has become, Moneysupermarket.com, the UK’s biggest financial comparison website, is valued at more than one billion pounds and has over 5 million visitors a month.
How they work
Price Comparison websites provide “best buy” tables so you can compare different products and prices. The tables may be for a specific product such as a savings account, or based on your specified requirements (for example, an insurance policy or mortgage).
Investing in an ISA? Legal & General ISAs
So how do they get their facts and figures? Well, they use a variety of technologies including something called “screen-scraping,” a technique that retrieves quotes from the relevant websites – or by companies themselves sending through data on their products for the sites to aggregate.
Many of these sites are making big profits, unsurprisingly by being paid by companies and online brokers whose deals they list. Payments can be “per click” – when you chose to click through to a specific deal – or when you apply for and purchase products. And like any other website, there is also a buck or two to be made from online advertising.
The sites perform at their best when you know exactly what you want. For example, on a shopping comparison website if you are looking for a specific type of TV it’s extremely straightforward: it simply boils down to price.
Are they any good?
These sites are generally fast, easy to use and free. They’ve give the opportunity, in a way never available before, to shop around for the best deals, They have also been credited with forcing down prices, particularly for financial products, with providers competing to appear on the best buy tables. This is surely good for consumers?
Free remortgage quote and/or advice
Personal finance guru Martin Lewis, founder of the Moneysavingexpert.com, says: “They are a powerful pro-consumer force, better than what was available before – though there’s still room to do better.”
The pitfalls
These websites are a business and need to turn a profit so don’t assume you are always going to get the definitive picture. These sites don’t always show all the brands or suppliers. Might they give more prominence to those which pay them the most?
It is also worth noting that some commentators argue that the screen-scraping technology used by many to collate their price data doesn’t always provide enough to supply an accurate quote.
Jeremy Moll, of comparethemarket.com, says: “Some price comparison sites that rely on screen scrapers merely provide estimates and not real quotes.”
Need a loan? Free quote and advice
The “best buy” tables produced by these websites face criticism for being misleading as they may not take into account all the features of a product. For example, a car insurance table may rank deals on the basis of a headline-grabbing rate splashed on a website ad, not taking into account the true price based on, say, a discount for multiple drivers or policies available if you deal direct with the insurer.
The fiercest critics
Perhaps the most vocal critic of price comparison websites has been Direct Line: last year the company launched an advertising campaign attacking the insurance comparison websites. They argue that consumers are paying for a “middle man” and these sites are giving the impression of giving a comprehensive search of all available policies when some insurers don’t appear.
Direct Line, as the name suggests, prides itself on dealing directly with the public and never appears on comparison sites. The comparison sites shrug off this criticism, alleging that Direct Line is often not the cheapest and is not willing to compete on price to get on their tables.
Saving for your children? Child Trust Funds
Some financial services companies are blocking price comparison websites from publishing their product information. Is it because they fear coming bottom of the league tables?
Are they regulated?
It’s on the cards. The regulator Ofcom is currently monitoring price comparison sites, to try and ensure consumers can be confident they are getting accurate information. Also earlier this year the Financial Services Authority announced it would be reviewing the regulation of insurance comparison websites to ensure the way they operated constituted giving advice.
In conclusion, price comparison sites are businesses, so there is always a bottom line. Take the pros with the cons and you will be getting lots of useful information for free. However, like any other online resource, you might want to check out a few and see which one is working best for you. Maybe a cheap deal isn’t the most suited to your requirements (but the second cheapest might be!).
Feature: The First-Time Buyer's Plight
SaveBorrowSpend Philippa Adam
