I’m pleased to announce that we’ve been acquired by Microsoft.  Microsoft announcement here.  Brian and I view the acquisition as a great way to expand the vision of Jellyfish and we are thrilled to join the Microsoft team.   

News out from Google today that they are expanding their Pay Per Action beta on a global basis.  (Full release here).  Although now world-wide, the PPA beta is still limited to the AdSense publisher network and doesn’t touch Google’s own paid search listings.   

As I mentioned in my March post discussing the Google beta, Google has a huge cash cow to protect in its Pay Per Click advertising system, and its move towards Cost Per Action advertising would likely be slow and methodical.  This news didn’t disappoint. 

As long as the PPA program at Google is limited to third party publishers on Adsense, this program will have limited success.  As a publisher, it is far easier for my site to generate click revenue than conversion revenue.  What’s more, Google’s PPC rates are extremely high because of the liquidity of its PPC back end auction.  Google will need that kind of competition in its PPA program to create higher rates as well over time.  

Google is asking its publishers to take a lot of additional risk, something that I’m sure the vast majority of them will be unwilling to do until it is clear that higher ad revenues await.         

Internet Pay Per Click search advertising is getting complicated.  Our CEO often calls it Internet Chemistry, but it’s really more like a form of Actuarial Science that is increasingly applying complex statistical methods to predict future advertising performance (e.g. the likelihood of a conversion).

Niki at Bronte Media was recently discussing an interview with Anil Kamath, one of the founders of Efficient Frontier, a search marketing firm.  Anil’s interview is a great example of how PPC marketers are becoming more and more like hedge fund managers on Wall Street.  Why do you need a PhD in predictive analytics to be a PPC marketer these days?  Two main reasons: 1) the tremendous growth in the long tail of available keywords; and 2) the giant chasm that still exists between the click and the conversion. 

Basically, Efficient Frontier and other PPC gurus try to optimize search ad campaigns by analyzing click and conversion results from a really big data set of customers.  Here is an excerpt from Anil’s interview:

You can’t just Bid a keyword based on its own conversion; you need to look at the elasticity of the Bid as well in terms of how your bid effects your position in the market place that you are participating.  What the competition is bidding against you, and how many clicks you’ll get more or less based on whether you bid more or less on that keyword.  When you take the information of that keyword, and combine it with information that you have about other keywords; you’ll have a pretty complex problem. 

Complex indeed.  It seems to me that statistical expertise like this is the reason that Nextag-the master of using large sets of keyword data to create search arbitrage opportunities-was recently valued at $1.2 Billion. 

But does search marketing really need to be so difficult?  Efficient Frontier uses a lot of complex statistics to back into some pretty simple overall business goals on the minds of direct marketers.  In Anil’s words:

The business goal could be to spend a hundred thousand dollars and maximize my registrations, or maximize my revenue.  Or, it could be to get twenty percent margin, while getting you the most revenue possible.

Contrast this to the simplicity of Cost Per Action search advertising in general, and the Jellyfish Value Per Action model in particular.  The beauty of VPA is that it closes that chasm between the click and conversion, eliminating risk and a lot of math homework in the process.  Marketers’ jobs become much easier when they only pay for successful conversions because they can easily translate their ad spending into their overall business goals without a lot of complex math.  At Jellyfish, we have lots of advertisers now using our back-end ad platform to manage their CPA commissions at a product and category level.  And each time they set their commission level, they are directly setting their rankings in our system and the return on their ad spend, without having to worry about click burn, the potential for negative ROI, or the complex statistical analysis of the PPC system.   

This root simplicity (complexity will develop in CPA-optimization land as well) is one of the reasons that we think Cost Per Action advertising will continue to grow to become a dominant form of online direct response advertising.  Here’s hoping Jellyfish will be a big part of it. 

What?  You’ve never seen a Jellyfish roundup?  Here goes . . .

It’s been a busy couple of weeks of news for Jellyfish and I’d like to quickly summarize some of the key highlights. 

Smack Shopping Goes 24 by 7

Smack Shopping is now open for business 24 hours a day, 365 days a year (full release here and show schedule here).  7-Eleven better watch out!  Anytime you come to Jellyfish.com, there is now a live Smack Shopping show with our unique price dropping auction taking place.  We’ve also added a host of great social shopping features, including personal shopping pages (you can see mine here).  Early results are extremely positive, with our daily uniques up almost two fold and fantastic feedback from our community.  I’m just worried we may have to start a Smack-a-holics support group soon. 

Investor Business Daily Coverage

Thanks to Patrick Cain for a great article covering Jellyfish and Smack Shopping his past Friday.  As analyst Peter Kim mentioned in the article, programs like Smack Shopping need to be tied into solid content and a strong user experience, and we’ve worked hard to ensure that is the case.  I’m continually impressed with the loyalty and retention of our Smack Shoppers.  Becky Ford over at CompareRewards.com discusses our Smack loyalty here. 

ChannelAdvisor Partnership

We announced on Monday a fantastic partnership with ChannelAdvisor (full release here).  ChannelAdvisor is a fantastic company (Scot Wingo’s CSE blog is one of my favorites to keep up to date on the Comparison Shopping space), and the partnership will help us continue to bring tier 1 retailers into the Jellyfish Value Per Action advertising platform.  Scot was one of the first people we discussed the Jellyfish.com model with pre-launch, and its great to be partnering with ChannelAdvisor. 

Jellyfish just announced a unique customer acquisition program:  Co-hosted Smack Shopping events.  Full Release Here.  The release features our show with Slashdot taking place at 2pm Central today, which you can check out here.    

How do co-hosted events work?  It’s pretty simple really.  We partner with web sites that are looking to create a fun and valuable event to engage and reward their own user base.  We set a Smack show date and time, our partner promotes the event, and we run the show, absorbing the production costs.  Our partner gets to reward its users with a unique online event that helps keep its brand top of mind at virtually no cost.  And we get our brand and value proposition out to a whole host of new users by serving up a rewarding experience rather than annoying and interrupting them with unwanted advertisements.  It is kind of like the traveling circus, Internet style.     

Jellyfish has already had successful Smack shows with a host of great online properties, from Ars Technica to The Consumerist to The Chicago Tribune.  Look for lots more co-hosted shows in the upcoming weeks.  And if you’re interested in learning more about how we can bring the Smack circus to your town, please e-mail Aaron Everson, our Director of Business Development (ate@jellyfish.com).  

Jellyfish is pleased to announce a partnership with Channel Intelligence today that will help accelerate our efforts to add new retailer partners to the Jellyfish.com shopping search engine.  Full Release here.    

This news is an opportune time for me to talk briefly about the Jellyfish advertising model.  There has been a flood of new shopping search engines over the past several months, but to my knowledge, Jellyfish is the only shopping search provider that is doing the hard work of building its own Cost Per Action advertising platform.  (Please correct me if there are others).  Granted, there are a handful of shopping engines that utilize affiliate providers such as Linkshare to integrate CPA advertising into their mix, but these big affiliate providers have illiquid commission structures (typically a standard store-wide commission rate for any sale).  

Why are we building our own CPA ad platform?  It’s a key part of our long range vision for a more consumer friendly version of CPA advertising that we call Value Per Action, or VPA.  Retailers in the Jellyfish system can adjust their advertising rates on a global store level, product category level or at the individual SKU-level for each product.  This makes perfect sense, as retailers may be willing to pay more or less in CPA ad fees for a sale depending upon the product being sold.  

Probably the best way to consider the advantages of this platform is to compare the Jellyfish model to Google’s remarkably successful Cost Per Click keyword ad platform.  Through competition, Google has created a liquid marketplace of Cost Per Click ad rates on millions of keywords.  Every day, online retailers compete with each other to achieve higher rankings on keyword searches by agreeing to pay Google more for each click, creating higher and higher advertising fees for Google.  Over the past several years, the true market rate for a click on keywords such as ”nikon digital camera,” ”mp3 player” and millions more have been set by this efficient system.   

With the Jellyfish CPA ad platform, online retailers bid not on keywords, but on the actual products they sell that match up in our shopping search engine.  The more stores are willing to pay for a successful sale, the higher they go on our rankings.  But here is where our unique model creates a more consumer friendly version of CPA:  In our VPA model, we always share back at least half of those advertising fees with the end consumer.  Thus, as retailers compete for search ranking by increasing their CPA commissions, BOTH Jellyfish and the end consumer benefit directly from that competition.  It’s a liquid CPA marketplace that creates lower prices for end consumers.  (you can read a full description of VPA here)  

For Jellyfish to see this vision through, we need two things: 1) lots of people buying products through our site; and 2) lots of quality retailers taking advantage of our risk-free CPA model to compete for those sales.  Channel Intelligence is a tremendous partner to help us achieve goal number 2.  CI customers include nearly 200 of the world’s best known retail brands, all of which now have direct access to the Jellyfish platform.  We look forward to helping CI and its clients take full advantage of the accountability and precision of Jellyfish shopping engine.                      

Joe Marchese had a great post yesterday regarding the “build it and they will come” ad revenue strategy of most Web 2.0 start ups (e.g., build traffic and the advertisers will come).  I totally agree with Joe that if advertising is going to be your primary revenue stream, it should not be an afterthought; it should be a central part of your strategy.  

We’ve taken this lesson to heart at Jellyfish.  Our Smack Shopping Show was created to make advertising an integrated part of the show content rather than an interruption.  In fact, Smack Shopping is one big advertisment, but end users view it as entertainment.   I attended the recent OMMA show Joe mentions in his post and much of the discussion was centered on this theme.  We think this kind of engaging advertising will be a big part of the future of advertising on the web. 

The challenge for companies like ours is scale.  It is the classic chicken and egg challenge that many Web 2.0 start ups face in trying to convince major advertisers that experimenting with new advertising formats and smaller, more engaged audiences is the future.  It hasn’t been easy, but Jellyfish is finding initial success with several advertisers.  We’ll be working hard in the upcoming months to show that starting with a sound advertising revenue model is a great recipe for success.   

Starting today, Fox network will start running short animated clips about a taxi driver named Oleg during its commercial breaks.  (Wall Street Journal article here).  Will Oleg be entertaining enough to get folks to ease off that DVR button?  I doubt it, but I love seeing traditional media starting to work to catch up with the enhanced power that consumers have to tune out advertising. 

As we’ve been saying at Jellyfish for some time, you need to give consumers a reason to engage with your advertising, not just figure out new ways to interrupt them.  We’ve tried to stand behind that belief with both Smack Shopping (advertising transformed into entertainment) and our main Jellyfish.com search (advertising transformed into cash back savings). 

As the WSJ article indicates, this isn’t the first or the last effort by the major networks to get viewers to pay more attention to their advertisements.  I think the future success of these efforts will depend on whether the initiative is just a slick way to trick viewers into figuring out what the new content is (unsustainable) versus whether it is content that actually delivers viewers some value.  Unfortunately, the Fox effort seems to be more of the former.  From the WSJ article, a Fox representative is quoted as saying “It’s something that pops up that is unexpected and the viewer says ‘What the hell is that?’  It may keep them around for a while longer.”  Yes, the viewer may stop once and watch, but if Oleg isn’t that funny or entertaining, don’t expect that viewer to stop again (or watch the rest of the commercial break, for that matter). 

Oleg, you have a tough job.  Good luck being funny enough to get me to put down my Tivo remote.

The Wall St Journal had some coverage yesterday of the current Ask.com advertising campaign in the UK, where Google dominates with around 75% market share.  Ask.com has created a multi-channel campaign in which they try to create an underground movement to challenge Google’s “Information Monopoly.”  You can check out the website here.     

Unique strategy, to say the least.  It did get me talking about Ask.com, but I don’t think Jellyfish will be taking out ads anytime soon showing how much online shopping is done at Shopping.com, Shopzilla, or PriceGrabber :-)  Stop the Pay Per Click Madness!  Good luck with that one Ask.com.     

Brian Quinton at MultiChannel Merchant published a great article yesterday on the Google CPA beta test (article here).  In addition to some of the same observations I have made previously (here), Brian highlights a few additional potential limitations to Google’s CPA initiatives that I think are worth mentioning.  These include:

• Advertiser Concerns Over Sharing Transaction Data with Google.  Several ad industry experts quoted in the article highlight this as a concern, especially for large clients.  Because Google often controls such a large share of their online advertising wallet (non-CPA based), the advertisers don’t want Google to know their actual ROI on that advertising, out of fear that this will lead to higher rates, more competitors, etc.
• Double Counting Conversions.  Conversions may take place days or even weeks after a user clicks on a Google CPA ad and picks up a Google tracking code.  But what happens if that same user also accessed another tracking link from a third party affiliate network for the same offer prior to the actual conversion?  The result is that the advertiser may get charged CPA ad fees from both Google and another CPA network for the same action.  This is one of the things that I love about the Jellyfish model, since our customers have a built in incentive (through cash back savings), to ensure that they utilize the Jellyfish CPA link immediately prior to their purchase, creating less likelihood of a double counting issue.  

The article is worth the read for anyone following Google’s CPA test.