Much has already been written about Google’s news last week that they are opening up “Pay Per Action” advertising opportunities within their AdSense network (Google Post here).  After digesting the news and the blogosphere discussion, I have the following observations:

This Won’t Change the World Overnight

• Google has a huge cash cow to protect in its Cost Per Click revenue model.  But CPC advertising suffers from some growing problems (e.g., click fraud and search engine spam that will ultimately diminish its power)   Thus, Google is forced to move towards CPA advertising (which helps eliminate these problems), but I’m sure that Google’s moves will be slow and methodical.  This news is a case in point: the new CPA system is being rolled out in beta and is limited to its AdSense network of third party publisher sites (where click fraud and spam are at their worst).  But how quickly will advertisers, and most importantly third party publishers, move towards the model?
• Bad actors in the Adsense system are not going to adopt CPA unless there is an equal opportunity to defraud the CPA model within AdSense.  If a publisher has built a network of click optimized sites, or developed click fraud practices that allow it to fly under the radar, I doubt that that publisher is going to jump at the Google CPA option.  A number of comments in the TechCrunch post highlight the fact that Google’s CPA system will allow a number of different kind of actions short of an actual sale that might create new kinds of “Action Fraud.”  So if the scammers do move over, it won’t help advertisers or consumers.  This is just one reason why Google is also pushing its Checkout product to control the shopping cart and measure conversions with precision. 
• Legitimate third party publishers are being asked by Google to assume a significant amount of additional risk.  With CPC, publishers control the revenue generating activity (the click) on their own site; with CPA, that activity moves over to the end advertiser.  For publishers to jump in, they are going to have to see significantly higher advertising rates and a highly integrated relationship between advertiser and publisher that helps the publisher qualify traffic for conversions.  Google’s CPC system has thrived on a low touch, automated system.  Again, several of the TechCrunch post comments highlight this disconnect.  Google will need a long term, sustained effort to convince publishers that this added risk is worth it.  I suspect this will take several years.      

Google’s CPA System Will Create Some Benefits for Advertisers and Consumers

• Jellyfish was the first comparison shopping engine to adopt a 100% Cost Per Action ad model, so we are happy to see a giant like Google help to push mainstream adoption of CPA.  As Google’s CPA system gains traction with legitimate publishers, the scam publishers may start to be isolated in the CPC system.  If this happens, Google’s AdSense model may reach a tipping point where CPC rates start to drop because the quality publishers are no longer subsidizing the scammers.  This will help make the Internet a better place (To this point I disagree with Scott Karp’s conclusion that Google’s CPA network will create direct response hell online.  It is easy to dupe users into clicking on things, you have to deliver value to them to get them to sign up for a service, order a product, etc.)   

Consumers Still Aren’t Getting the Full Value of their Attention with Traditional CPA

• This is why Google’s news ultimately lands with a thud.  If we assume Google is wildly successful with their CPA model, it may help elimiate the search engine spam and click optimized sites that frustrate untold online consumers.  This is a good thing for consumers but it doesn’t go nearly far enough to deliver consumers the true value of their attention online (see my post on Buying Attention here).  At Jellyfish we take Cost Per Action one step further to create Value Per Action, which directly rewards consumers for making purchase decisions on our site.  In the Jellyfish VPA model, as advertisers bid higher and higher rates to reach buying consumers, the end consumers share directly in that competition for their attention through greater savings.  This won’t happen in Google’s CPA system.  As advertisers compete for CPA opportunities and bid up CPA rates, Google and third party publishers will make more money, but the end consumer will still be completely disconnected from this significant value creation.  Ultimately, this makes Google’s CPA moves of marginal benefit to online consumers.           

Since our launch in June of 2006, Jellyfish has been working hard to drive adoption of a new form of online advertising we call Value Per Action that eliminates the waste from traditional advertising and transforms it into added customer savings (you can read about VPA here and our vision of advertising here). 

With Jellyfish taking the high road against traditional forms of biased, interruptive advertising, many questioned how we were going to attract customers and generate awareness for our brand and our shopping search engine.  Not a bad question and one we asked ourselves many times.  Television ads, billboards, and even Google keywords were out of the question.  But what was left? 

The answer for Jellyfish has been something we call Smack Shopping.  The Internet’s first live shopping game show, Smack Shopping combines the fun of a game show with the fantastic deals generated by the Jellyfish cash back auction.  Smack shows run every business day at 12 CST and include multiple Smack Auctions where a limited quantity of products are offered for sale at increasing cash discounts.  Participants have the chance to buy the hottest online products at remarkable discounts, play games for prizes and interact with a virtual community of other Smack shoppers (a Smack by definition is a group of Jellyfish).

To our knowledge, Smack Shopping is the first game show broadcast live to an online audience that actively participates in the event.  There are other companies working on streaming video plus chat, see for example Pete Cashmore’s discussion of Lycos Cinema here and the much anticipated launch of Joost here, but Smack Shopping does more than view pre-assembled video.           

Fueled by Jellyfish cash back, the game and the entertainment is actually advertising, but I doubt any of our users would view it as such.  It’s a customer acquisition strategy that is consistent with the Jellyfish promise.  Instead of spending money interrupting people with traditional advertising, Jellyfish is using advertising dollars to create compelling game show like content that consumers seek out and invite into their lives.  And it is working.  From the beta launch of Smack Shopping on November 1 until today, Jellyfish has grown its user base over 5X, with Smack Shows regularly engaging 10’s of thousands of online shoppers for an hour or more of fun every day.   

Advertising as content.  It is a trend we are going to see more of as consumers gain more control over where they devote their attention and advertising seeks out new ways to be relevant.  We view Smack Shopping as permission-based, engaging advertising at its best. 

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.

Like many people, I think the Attention Economy (discussed here and here and here is a big thing). Why is it big? Because technology makes your attention a quantifiable asset of ever-increasing value. You have access to more and more information from a diversity of sources (attention scarcity) and you also have tremendous control over what you pay attention to (including not paying attention to advertising as I mention here). What’s more, technology allows others to record and quantify this precious asset in powerful new ways.

Access to your attention (both your historical attention profile as well as your dynamic “here and now” attention) is the precious currency that every company on the Internet is seeking. It will continue to become more valuable as new companies compete for it. The Internet will always provide us with an unbelievable number of options, but it won’t give you more than 24 hours in a day.

Online companies that figure ways to control/broker/protect/enhance your attention will reap huge rewards. John Hagel has a great post on this idea here, in which he states that people will seek out infomediaries that provide ever increasing returns on their attention. And the folks at Attentiontrust.org write about this all the time.

You may be thinking, if this is true, why don’t people think about their attention as a form of currency? In the future I think we will. But let’s face it; this is complicated stuff (it is for me anyway). Making it more complicated, a lot of the recent discussion about attention has centered on the concept of getting attention online as a new form of self-worth. Esther Dyson recently commented on this here and others have chimed in (see this post for example, “I can be Googled, therefore I am”).

I’d like to stay away from this more esoteric discussion. Although important, I don’t think we will get to this level in the attention economy until we show the mainstream how their attention currency can help them obtain more pragmatic benefits. (Andy Lark makes a similar point in his blog here). What kinds of pragmatic benefits am I talking about? For starters, how about the delivery of increased relevance and direct monetary value.

This is what Jellyfish is all about. Our mission is to provide consumers with an easy way to obtain maximum benefit from the most valuable form of attention they provide online: their buying attention. From this frame of reference, attention is better referred to as intention; the intent to do something. Both the present intent of an online consumer to buy some product or service and their historical record of buying intentions is the gold of the Internet. Buying intention is to Internet companies what crude oil is to Saudi Arabia: it is the underlying resource that funds everything. Before talking specifically about how Jellyfish wants to help you leverage this intention, let’s explore the primary way your intentions are being tapped by search and content providers online today, namely, to sell advertising.

Advertising and the Database of Intentions. Credit to John Battelle and his seminal post on the Database of Intentions here for recognizing that Search Engines collect individuals’ intentions on a massive scale and profit from those intentions through advertising. Google, to name one intermediary, has already made billions by connecting the intentions of its users to advertising (e.g., millions of people type their intentions into that magic search box every day and Google’s Adwords program auctions off those intentions to the highest bidder). The more these intentions can be tied to commercial (buying) intent, the more money Google and the other big engines make. In this way, Google makes money because it is a marketplace of intentions (see post here on Google as a market).

Thus, advertising subsidizes the true value proposition of Google and the other major search engines, which is to try to connect you to the world’s information. Similarly, advertising subsidizes all kinds of other content provided online, from blogs to the latest Web 2.0 companies. This isn’t new. Media has sold your attention to advertising for a long time. It is the bargain you have struck: I’ll put up with advertising on my television so I can watch this football game without any extra charges. Thus, there is a very established marketplace for your attention. It’s called advertising.

This isn’t necessarily a bad thing. For example, I love Google and Yahoo! when I want to find something (like the text of the Bill of Rights or fuel mileage on the Toyota Prius) because I can get a great return on my intent to find that information. The advertising doesn’t mess anything up because it isn’t the focus of this kind of search. It is more of a necessary evil so I can use the engine for “free.”

But what about when I have my credit card out and want to buy something? Do I get the best return on this kind of intention? Is there an intermediary that does for buying what Google has done for general search? I don’t think so. Why? Because these kinds of searches are primarily about advertising (connecting buyers and sellers) and the existing online advertising models (CPM, PPC) fail to align incentives properly between the consumer, the advertiser and the intermediary connecting them. The existing advertising models are all about the intermediary. The system is set up to maximize the intermediary’s return on my intention, often at my expense.

When I enter an “intent to buy” search today, the current advertising model creates a misalignment both in terms of the relevance of my search results as well as the distribution of $’s generated by those searches. Here is how: Let’s say I want to buy a coffee maker. When I type in this search at Google or any other intermediary (Yahoo! or Shopping.com, for example) the intermediary works hard to put the companies in front of me that have agreed to pay the most for my intention in the form of advertising fees. Thus, the more the intermediary is able to collect about me (my zip code, clickstream, etc.) and the more I use it to find things to buy, the more money it can continue to extract from the advertisers for access to me. The current system is misaligned because the search engine puts the company with the highest advertising costs in front of me (which creates the need for higher prices) with little regard to whether this is the best choice for my particular needs (relevance). As I have mentioned before, it reminds me of the mistrust we have for commissioned sales people that try to sell me the product or service that garners them the highest commission. Most of the value created by my buying intention is flowing to the intermediary in the form of advertising fees that primarily benefit the intermediary at the expense of the buyer and seller. To make it worse, this advertising system is hidden from me in that I have no idea why a particular advertisement was put as a top result and what it cost that company to get in front of me. Is this the best use of my intention data for either the buyer or the seller?

You can start to find discussions about this across the blogosphere. For example compare Robert Scoble’s post here about the use of attention data to create more and more advertising value for intermediaries with this Blogation post here, which argues that Google is keeping increasing amounts of information on its clients and advertisers alike to further its profit at expense of everyone else involved.

I think we will soon reach a tipping point where consumers are going to realize that when it comes to their buying intentions, search intermediaries like Google/Yahoo/MSN (and a host of vertical engines) are keeping too much value for themselves (advertising $’s) without delivering a corresponding increase of value to the consumers participating in this system.

At Jellyfish, we want to be this tipping point. We think the way to do so is to fix the underlying advertising model to align the incentives of all three parties involved in a sale (buyer, seller and intermediary). The advertising market does a good job of maximizing the value your intention (GYM have PPC auctions that do this everyday); it just hasn’t done such a good job of fairly allocating that value among the key stakeholders. In our marketplace, we plan to allow the existing advertising system to set a value on your intent to buy, but that value (e.g., your intention currency) will flow to you, to the advertiser, and to us only when we do a good job of using that intent (and your historical buying intentions) to connect you to the product or service that is right for you. This will happen seamlessly and without you even thinking about it in terms of driving a maximum return on your buying intention. In the transparent marketplace at Jellyfish, advertising will transform into intention currency and that currency will be used to efficiently match buyers and sellers.

And this is the way we think the attention economy will start to catch on for the masses: By integrating its core concepts into an easy to use application that has direct, tangible benefits to the end consumer and advertiser alike. The average consumer may not think about it as intention currency, but we hope the increased value to that consumer will ensure that she continues to come back each time she has intent to buy something online as opposed to just an intent to search for information.