SimplySwitch, the price comparison website owned by Daily Mail and General Trust (DMGT), is to shut down after failing to measure up to performance targets set by its new owner.

The utility price site's failure is a blow to a media group, which paid £16.5million in cash for the business as part of a wider effort to reduce its dependence on newspaper advertising by investing in a string of websites.

Executives blamed falling utility prices for a decline in demand - although the market leader, uSwitch, owned by EW Scripps, said that it had not seen a similar slowdown. Those close to DMGT, which bought SimplySwitch in August 2006, said that the site did not have enough traffic to generate profits.

Andy Hart, a managing director in DMGT's Associated Northcliffe Digital, said: “Last year saw a sudden and unexpected fall in the energy price comparison market. Despite the best efforts of the SimplySwitch team, it is with considerable regret that we are entering into a collective consultation process with employees.”

DMGT paid £16.5 million up-front, making millionaires of SimplySwitch's founders. Karen Darby and Alistair Tillen, the former call-centre workers who co-founded the site in 2002, walked away from the sale to DMGT £5 million richer. Bridges Ventures, the venture capital group, made £7.5 million from the sale, 22 times its original £345,000 investment.

In its half-year results, DMGT took a charge of £53 million on struggling online ventures, including SimplySwitch, and no further write-off is understood to be required. DMGT is also sitting on a big loss on its investment in Loot, the classified advertising paper bought for £190 million but now barely profitable after losing advertising to online rivals.

The SimplySwitch closure comes as demand for switching services is set to rise in 2008 after steep rises in energy bills. Npower, EDF and British Gas have all introduced double-digit rises in gas and electricity prices in the past month, causing consumers to search for cheaper deals. However, the price comparison website industry last week suffered a blow when the Financial Services Authority said that it is investigating the market amid claims that the sites mislead consumers.

Christina Rebollo, a spokesman for the rival uSwitch, said: “We are experiencing record growth in core business areas, including personal finance and car insurance, while the energy switching market remains stable. Although we experienced a reduced level of activity last year, due in large part to a climate of declining energy prices, we firmly maintain our position as market leader in this area.”

SimplySwitch began a month-long consultation with its 65 employees on January 17 and is due to close its doors after February 20, when the consultation ends.

News Corporation, the parent company of The Times, is to create an online fashion store in a joint venture with the French Brand Alley, which specialises in selling surplus stocks of designer clothes at discount prices. Terms of the deal were not disclosed, but it is hoped that the UK site will generate £100 million in revenue and have four million registered users in four to five years, according to the Brand Alley chairman, Sven Lung.