Shop Savvy Wants Better Ads and Smarter Retailers


Shop Savvy, the app that allows Android (s goog) and iPhone(s aapl) users to scan barcodes in retail outlets and get the best prices both in the real world and online, has done a pretty fantastic job of getting downloads and customers. It has been downloaded more than 10 million times on Android handsets (with 6 million active users) and a less impressive 1.5 million times on the iPhone, with about a third of those becoming active users. Today, with a new platform for the iPhone, Shop Savvy hopes to help advance its iPhone fortunes, but it also has a bigger mission: to change the mobile advertising model, and to upend retail.

It’s About Relevance

Alexander Muse, co-founder of Big in Japan, the development company behind Shop Savvy, said in the last two years, he’s been working to convince brand owners that display ads weren’t the way to reach people who use the app. “We have clients like Fairfield Inn trying to give us money, but we won’t take it,” he said. “There’s no point showing someone an ad for a hotel as they scan in a TV at a Best Buy, because if the person is local they don’t need a hotel and if they aren’t local they likely already have a hotel room.” Instead, Muse has been pitching and is finally starting to sell brands on ads in Shop Savvy that relate to the items being scanned, either by offering discounts on that item or a slew of related items that someone might want to purchase.

The key wasn’t selling the idea, but getting past the way that Madison Avenue thinks about buying ads. The big money is still in placing ads in magazines or on TV in multi-million-dollar media buys; ad agencies get a larger commission on such buys and have more incentive to steer their clients to those ads. Mobile, and some newer web, campaigns are far less lucrative, and more innovative ads such as those on Foursquare or Twitter come from tiny experimental ad budgets. Muse says he wasn’t content to be part of Axe Body Spray’s half-million-dollar experimental budget; he wanted to change the way folks bought ads and thought about them as mobile devices proliferate.

The latest iteration of Shop Savvy now highlights the result of two years of Muse talking to agencies and large brands. In the coming year, when consumers scan items they’re interested in price checking, big brands such as Gold’s Gym or retailers like 7-11 will offer discounts on their products or more information aimed at selling products related to the item scanned or more products at the specific location. Revenue sharing is another business model that has recently come to fruition, thanks to placement within the app. Shop Savvy recently unveiled a partnership with Consumers Union, the publisher of Consumer Reports. When someone scans a home appliance, she’ll get a rating from Consumer Reports that tells how it fared in testing, but for more information, the user will have to buy the Consumer Reports app. Shop Savvy will get a cut from app sales as a result of the partnership. Shop Savvy wouldn’t disclose revenue or whether the company is profitable.

Taking a Slice of Retail Margins

For today at least, Shop Savvy is focused more on revenue opportunities — some of which could eat into retailers’ profits. For example, it has a partnership with SquareTrade to sell warranties on consumer electronics to people who scan certain products into the app. SquareTrade offers warranties at about half the cost of Best Buy (s bby), and Best Buy depends on those warranties for a significant part of its profits. Now when I’m at Best Buy scanning in a new camera, I know I can get a warranty at half the cost from SquareTrade thanks to Shop Savvy. That’s good for the consumer, but not great for retailers’ profit margins.

That’s not the only point where retailers might see margins narrowing. In the latest iPhone app, Shop Savvy has opened the ability for its users to snap photos and file pricing information on products they encounter in their shopping expeditions. Such crowdsourcing allows Shop Savvy to get better prices in areas where retailers may not want to give Shop Savvy a feed of its prices (Walmart, for example, only shares pricing on about 40 percent of its products). When given access to more prices, especially on products like groceries — which people buy more often than electronics items — Shop Savvy will see more usage (and users will see more ads) but it also now has a gateway to new services.

For example, Muse would like to offer consumers the ability to plug in a grocery list and have Shop Savvy show them where the cheapest place to shop for that basket of goods is — or maybe even split the basket into the two stores that have the lowest prices on a set of products. Retailers are already using data to get consumers to buy more, or buy higher margin goods, so it would be a nice change to see consumers using that same information to keep a little of the cash in their own wallets.

Embedded below is a video overview of the new iPhone app:

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