Meerkats that made millions
The unstoppable rise of comparison websites
BY THE time you read to the end of this sentence, someone in the UK will have switched energy supplier and another will have bought car insurance using a price comparison website.
Every other second of every day these companies – which have become a familiar presence on our TV screens with their cuddly meerkats and jolly opera singers – sell a product, for which they’ll get an alleged £60 commission.
Such is the growth of these firms that in little under 15 years they transformed the way we shop around for everything from utilities to insurance, to mobile phones and holidays. They are as wellknown as the household names of the products they sell. Comparing prices has become big business.
Yesterday, the parent company of price comparison website Comparethemarket revealed it was preparing to join the stock market in a float that could see it valued at between £1bn and £1.3bn.
The float of Comparethemarket – famous for its meerkat advertising campaign ( pictured) – could make its founder, South African billionaire Douw Steyn, an even richer man.
Steyn is thought to have little involvement now, having stepped down as non-executive chairman in 2012, but he has reaped the rewards. He has an estate called Steyn City on the outskirts of Johannesburg which he is developing. There is also his palatial cliff- top mansion ( pictured), thought to be the most expensive house ever built in the country.
Comparethemarket, which is based in Peterborough, is part of a complicated company structure. It is owned by BGL Group, which in turn is owned through a Guernsey company that is part of BHL, a South African insurer. This is majority-owned by family trusts of Douw Steyn. There are other trusts representing a second family, and the management team owns 8pc. In the last financial year, Comparethemarket made £94m profit on revenues of £507m. Its next results are due in March.
Justin Modray, founder of advice firm Candid Money, says: ‘There’s no doubt they have made it easier to shop around rather than being stuck on a poor deal.
‘But they are hugely profitable and mercenary to boot. They want to make as much money as possible, and consumers have to realise this comes from their pockets.’
The listing of Comparethemarket shows how far these firms have come in a short time.
Comparison websites began in the late 1990s after the deregulation of the gas and electricity markets allowed consumers to choose a supplier. Uswitch launched in 2000 and quickly rose to become one of the most influential. More sites followed – including Moneysupermarket, Gocompare and Confused.
Their attraction was simplicity. Before these websites, if someone wanted to find the best car insurance or home cover they would have to either call each insurer to get a quote or go through an insurance broker. On a price comparison website, the same job takes just minutes.
Comparethemarket’s own estimates are that they save customers £1.2bn a year, and that customers who swap car and home insurance, credit card and energy providers through them can save £2,300. But, critics argue, they are riddled with problems.
James Daley, founder of consumer website Fairer Finance, says: ‘There is not nearly enough transparency. Comparison websites are too concerned with getting as many people through the door as quickly as possible so they can earn their commission.
‘They offer a valuable service but need to be doing more to make sure people are taking out the right products for them. Some also need to make it much clearer about when they are only listing deals they get paid to offer and not the whole market – this happens a lot with credit cards.’
The comparison sites make the majority of their money from commission from companies for passing along custom.
While the sites admit to making commission, they won’t say how much. Insiders suggest it is roughly £50 for each car insurance policy sold and anywhere between £40 and £80 when customers change their energy tariff.
Others argue that the commission payments mean that consumers are paying a hidden fee which is added to the price of the policy they take out. So while a comparison website seems free, critics argue that in reality they are not. This is disputed by the firms themselves.
Regardless of how they make their profits, in 2013 over twothirds of Britons used a price comparison website at least once – that’s 91,095 people every day, according to figures from data specialists Mintel.
Comparethemarket has now hired advisers Rothschild to sound out bankers and investors about a float. It’s likely to prove a very tantalising offer for many.
‘Comparing prices is big business’