Mark Boslet at Dow Jones wrote a great piece on this subject yesterday “Internet Cos, Advertisers Study Changing Online Ad Market.”

The first sentence of the article makes it clear the potential game changing nature of CPA:

 “A potential shift in how online advertising is sold and billed has advertisers and Internet companies scrambling to understand its full effects.”

My take away from the article is this: Pay Per Click advertising is too profitable for CPA to take over at present.  Sure CPA eliminates risk for advertisers, but why should intermediaries like Google, Yahoo! and MSN take more risk if they don’t have too?   

The current pay per click system may hang on as the dominant model for several years, but CPA is inevitable in my opinion.  Technology now makes it possible to deliver advertisers 100% accountability and certainty in their advertising.  This is an extremely powerful concept that eliminates a tremendous amount of waste from advertising; waste that could and should be reallocated to end consumers. 

At the end of the day, advertisers are in the business of selling products & services, not clicks.  The transition from the Gross National Click Economy online is coming and I hope Jellyfish and its new VPA advertising model leads the charge and moves this transition forward. 

The power of Woot.com.  For the uninitiated, Woot is a great online service that offers up a single deal each night at midnight.  The service was two years old yesterday and to celebrate they decided to sell- you guessed it -a Bag of “Random Crap.” 

I’m not sure exactly what was in each of these bags, but they offered up 4500 of them at $6 a pop ($1 plus $5 shipping) and they sold out last night in less than 2 minutes.  I think this speaks volumes for the power of a good deal and the ability to entertain people through commerce (ala QVC). 

I listened to a talk by John Bresee, the President and Co-founder of Backcountry.com, recently and he mentioned the Woot model and how they have emulated it at their deal site Steepandcheap.com to great success.  According to Bresee, the site was launched with a single e-mail to the Backcountry.com user base and has grown in a little over a year with zero marketing to a 14,000 Alexa rating (Woot’s Alexa rating is 780).  Not too shabby. 

I wonder if Woot has a data feed for their Bags O’ Crap so we can get them on Jellyfish             

Mike Shaw, the ABC President of Advertising Sales wants to develop technology to disable the fast forward button on DVR’s, forcing tv viewers to sit through commercials when viewing shows on their DVR’s like Tivo.  According to Mr. Shaw, people need to understand that “you can’t skip commercials.”   

Amazing.  Why are these guys using technology to try to force time-constrained consumers to watch untargeted ads?  Instead, let’s use technology to precisely target advertisements that actually have value to me as an individual.  Think, for example, about the potential of a partnership between Tivo and the networks that delivered targeted VPA (value per action) advertising to me based upon my viewing habits.     

The old model of cramming shotgun style ads down peoples’ throats is going to lose in the attention economy.  

As you might imagine, I read with great interest a summary of Google’s new payment service release today under the name Google Checkout. The benefits are pretty limited at this point and you can read great summaries of the service at Search Engine Journal, Search Engine Watch, TechCrunch, and SearchBlog, among many others.

Although Checkout may not be a PayPal Killer, I think the big take away is that Google will now be watching and collecting buying data from its Checkout customers and will have the ability to track user behavior from their first search to their final purchase. Elise Ackerman at the Mercury News summed this up nicely in her article today:

Since its birth more than five years ago, Google’s mighty Internet advertising machine has suffered from a major flaw. No matter how much information the Mountain View company collected from users of its popular search engine, it has no idea if, at the end of the day, people bought anything after searching for “Nike shoes” or “hip sunglasses” or “doggie sweaters” or “Toyota Prius.” That will change today, when Google launches its own payment service called Google Checkout.

Is this a bad thing? Forrester analyst Charlene Li predicts today “an eventual backlash” because “Google wants the monopoly on your information” and expressed concern that they “could fall into a situation where they’re the next Microsoft.” But I don’t think Google has current plans to do anything evil with this data (sorry, I couldn’t resist). What they will do is use it to extract more and more money from the advertisers trying to reach you. Again, Elise Ackerman sums this up nicely in her article:

If Google checkout is successful, the company could reap big rewards. The transaction data for each person who makes a purchase, combined with their search history, could lead to advertising that takes into account their favorite stores and preferred brands. The more targeted the advertising, the more advertisers are willing to pay.

Marshall Kirkpatrick in the post at TechCrunch, sings a similar tune, saying:

Maybe someday all of this data on my shopping habits will be used to better serve ads I’m interested in via Minority Report type billboards, Google Style.

Is this a fair trade off? I give Google all of my purchase data (what I buy, when I buy, how much I buy) and they use it to benefit me by: 1) offering me the convenience of Checkout; and 2) giving me more advertising that will be more targeted to things I’m potentially interested in (to quote Marshall Kirkpatrick “Minority Billboards”). And you know what Google gets? They get to jack up their ad rates, charging bigger dollars to the companies that have to pay to reach you because you might buy what they are selling. I’m pretty sure Google has done the math here and fully expects their increased ad rates to outweigh the cost of the Checkout service. And you, as the end consumer will have no idea what that increase will be because Google’s advertising market isn’t transparent.

At Jellyfish, we don’t think this is a fair trade off. Targeted ads are nice, but the ad’s Google will likely show you are from the advertisers that paid the most to get to you (Just because company X outbids Company Y to get in front of you at Google doesn’t mean that company X is the most relevant for your needs). And most importantly, you won’t benefit from the competition that is fueled by Google having access to your buying information (or what we would call your historical record of buying intentions).

At the end of the day, I think Google is doing some major free riding on the extreme value you create by allowing them to store and sell off the database of your buying intentions (e.g., your purchase history) to the highest bidding advertisers.

We intend to do this much differently at Jellyfish, because with our VPA advertising we always share back at least half of the advertising dollars that a merchant pays for your attention (both historical buying intention and present intention to buy when you search for a product at our site). Thus, anytime a merchant pays more to get your attention at Jellyfish, you will get a direct, tangible benefit in the form of lower prices. It’s the way we hope to show consumers that when it comes to their buying activity and attention, there is a better way.

I just read The Register’s interesting article today “Full-up Google choking on web spam?”

The article cites estimates that “robot-generated spam consists of anywhere between one-fifth and one-third of the Google index” and indicates that Google is “engaged in an arms race with search engine optimizers.” But I wonder, is this web spam actually bad for Google? And are Google (and Yahoo! for that matter) really out to get the SEO industry (like posts here and here indicate)? Do they really want to destroy SEO as a whole or even the worst kinds of SEO like web spam?

Maybe not. Google may take some action here and there, but I believe that they actually like a little mud in the main organic results for commercial terms. Why? Because less than stellar organic results (from practices like web spam) mean higher CTR’s on their paid links and more juice for their quarterly earnings.

The simple fact is that Google and Yahoo! want their paid links to be more relevant than their organic results on searches of a commercial nature. Saying Google/Yahoo wants to get rid of SEO is kind of like saying the National Hockey League wants to abolish fighting. They may say this publicly, but the right mix of fighting fills the seats and gets more people tuning in (e.g., makes more $). There is a saturation point where fighting detracts from the game, but the NHL has engineered their rules, fines, suspensions, etc. to create an optimal level of fighting.

Isn’t the same thing going on in the SERP’s? Doesn’t Google/Yahoo like these to be slightly irrelevant and haven’t they engineered a system that makes this so? The Register article today posted a really interesting comment from a webmaster regarding Google’s manipulation of its index: “At this rate, in a year the SERPS will be nothing but Amazon affiliates, Ebay auctions, and Wiki clones. Those sites don’t seem to be affected one bit by the supplemental hell, 301’s, and now deindexing.”

It would be over the top to say Google wants its organic results to be completely irrelevant (like the comment above suggests) and they certainly have every incentive to be fantastically relevant for non-commercial search terms (which they are). But a little irrelevance is good for paid links and paid links is how Google makes money.

SEO isn’t the bad guy here. They are simply playing in a system set up to create mud. Consider also how Google displays SEO optimized pages. A recent search on “printer cartridges” brought up these two paid links first, with a cleanly optimized title and marketing message:

The same search brought up the following two organic listings first:

Why do these organic links have such a muddy message? Because this is the way Google has engineered the system. Webmasters have to manipulate their sites in this manner to get listed. Which set of links would you rather click on? Which one makes Google money?At the end of the day, I come back to the following inherent problem: For commercial terms, Google and Yahoo! have a huge incentive to make their main search results less relevant than their paid search listings. Because the system rewards them for paid links, users have to put up with some mud in their main results. Shouldn’t we just accept that SERP’s on commercial terms will be a bit muddy because most if not all of the organic results are gamed? Is Google Base going to change this? Or maybe there is a better way.

Wonder whether Microsoft accomplished anything with their launch of Windows Live Shopping? Most of the community has attacked them for not supporting Firefox and for the poor use of AJAX.

But they do have an impressive database of products and merchants right? Not so, it seems. A little research on the site shows that Microsoft is continuing to simply serve up data from Pricegrabber and Shopzilla, albeit with a fancier front end. Couldn’t they at least build a shopping engine with their own advertisers?

Hopefully the next company to launch a comparision engine will come up with something more innovative.