This past Friday, Jellyfish announced a $5 million private equity round of financing and the addition of retail industry veteran Ralph Dillon to our Board of Directors.

The funding will allow us to move forward aggressively with our vision of online advertising, and the belief that the customer should be a direct participant in the advertising value equation.  We may not execute perfectly over the next few years, but you can rest assured that all of us at Jellyfish will be working extremely hard on our campaign to drive great accountability and value from online advertising.   

We’ve been relatively quiet since our beta launch in late June, but we’ve been working on more than just this funding.  We have several major announcements planned for the upcoming weeks, all of which all oriented around building the concept of Value Per Action advertising and empowering the end consumer.  In fact, you may want to check the site around lunch time this week for a fun announcement and the addition of a new brand name here at Jellyfish.  You’ll be disappointed if you miss it.  Trust me.         

I’ve blogged quite a bit here about the shift in power taking place in advertising.  The traditional advertising model of pushing marketing messages through a few, controlled channels (tv, radio, magazines and other forms of traditional media) is undergoing rapid change.  Consumers, armed with technology to exclude interruptive ads (e.g., DVR’s, Satellite Radio, RSS feeds, and Pop-up Blockers) and an ever-increasing range of choices for their attention (e.g., how many of us substitute YouTube for television?) are taking more control over the advertising relationship. 

And how has the advertising industry responded?  Like a drug addict in a vicious cycle of addiction.  If one interruptive message isn’t working any more, let’s deliver two or three or four messages.  In other words, let’s spend huge sums of money creating new and more innovate ways to interrupt and potentially annoy consumers.  The USAToday ran a great article on this topic last week, Product Placement–you can’t escape it. 

The article describes this desperate cycle in great detail, and cites a list of really interesting supporting facts, including:

• The average city inhabitant is now bombarded with 3,000 to 5,000 ad messages per day, up from around 500 in the 1970’s
• Prime time television commercials on MTV increased 21% last year
• Out of home marketing (billboards to elevator ads) increased to $6.3 billion last year
• Conservative companies like P&G are putting ads inside public bathroom stalls
• Even school kids are being deluged as School Districts sell out to advertisers (including one district selling ads on the outside of its buses)

The solution to this addiction?  The article points to the new advertising buzzword of engagement.  Basically, put away your shotgun approach and spend more money to create value in your advertising, value that will engage the consumers you want to reach.  There a lots of ways to do this.  We are certainly working on this at Jellyfish (when you interact with advertising at Jellyfish it actually saves you extra money).  Others are doing it by creating more entertaining ads.  Lots more innovation is coming.  Let’s hope for all of us that we see more engagement and less advertising ad nauseam in the coming months and years or we may be reading ads on our toliet paper soon.

Brian Smith’s post at ComparisonEngines today has some very interesting news regarding Shopping.com’s upcoming test of a Cost Per Action advertising model at its popular comparison shopping site.

The move by Shopping.com is a small step in what I see as the inevitable march towards Cost Per Action advertising. 

But what makes this even more interesting is the way in which Shopping.com is making the transition from clicks to sales conversions.  Taking a page out of the Google Checkout playbook, Shopping.com is launching their CPA experiment within a Universal Shopping Cart in which Shopping will take control of the entire order process AND a large part of the end customer relationship.  Essentially, this universal cart would allow Shopping.com to become a new type of super retailer-a Shopping.com customer can add products from any merchant in the search engine into a single Shopping.com cart and purchase the products directly through Shopping.com without ever having to go to the retailer’s site.

Why would Shopping.com transition to CPA advertising in this way?  In addition to the benefits of CPA advertising in general, I see three specific benefits:

1. They solve the Pay Per Click search engine loyalty problem.  Currently, Shopping.com and other PPC engines have a difficult time creating loyalty with their existing customers because they lack a means to create a strong ongoing relationship.  By setting up a Universal Cart, Shopping.com can create a new user-friendly feature and establish a stronger, ongoing relationship with each customer.
2. They learn more about each customer.  Customers using the Universal Cart will not only store their own personal data with Shopping.com, they will also share their actual purchasing habits directly with the engine. 
3. They enable Cost Per Sale advertising without having to track sales at third party merchant sites.  This has been a big hurdle to the adoption of CPA advertising; intermediaries have been leery of relying on third party stores to track and report their conversions at the merchant point of sale.  Like Google Checkout, Shopping.com has sought to avoid this problem by taking control of the sale itself.  This provides them with a direct and powerful new way to record the sales they generate and in turn, maintain direct control of their revenue. 

But will retailers go for this?  Will they turn over their customer relationship to Shopping.com in this way in exchange for the accountability of Cost Per Sale advertising?  Brian Smith raises these concerns in his post, and many others have already discussed the push back Google Checkout has gotten for controlling the customer (see Greg Sterling’s post here for example).  It will be fascinating to watch this play out.  Frankly, I will be amazed to see a large number of retailers essentially agree to give up a big part of the customer ownership equation and transition into more of a product shipping/wholesaler entity and away from being a customer-centric retailer. 

There is an alternative way to set up CPA advertising that avoids the customer ownership dilemma being pushed by Google Checkout and now Shopping.com.  Namely, allow the end retailer to continue to control the order process and customer relationship and set up a mechanism to record converted sales at the merchant point of sale rather than taking over the sale itself.  This traditional method has been used for years in standard affiliate marketing and it is the method we use at Jellyfish.  I assume you can guess which method I think is better.  Time (and customer demand) will certainly tell whether retailers decide they are willing to cede ownership of the order/customer in exchange for the sale.