We launched a new program today called the Smack Shopping Deal of the Day.  Here’s how it works:  Every weekday at 1pm EST, we will announce a new product offer on the site and kick off a cash back counter that increases the cash back savings every second until the product is sold out. 

Things were a bit hectic today and we had our share of first day bugs (the time zone problem has been fixed!), but overall the launch was a phenomenal success.  We ended up selling a bunch of iPods to folks with big cash back discounts.  You can see the results of the first day’s Smack deal here.  Starting tomorrow, we will also start to include more specifics on the Smack deal (including the total number sold and the top ten best cash back deals) after it closes for the day.     

The Deal of the Day is the first feature we are launching under the Smack Shopping brand name.  A “Smack” is a group of Jellyfish (like a flock of geese) and Smack Shopping at Jellyfish will help our shoppers find strength in numbers.  We also think it is a great way to communicate the powerful, dynamic nature of the Jellyfish cash back discount.  You can expect more Smack Shopping features from us in the upcoming weeks, so please stay tuned.

I hope you check back tomorrow at 1pm EST for the next Smack deal.   

It has been just over a week since the Beta launch of Jellyfish.com was announced in the Wall Street Journal and we’ve been extremely pleased with the great coverage and feedback we’ve received to date. You can review a summary of some of the Jellyfish media coverage here.

Many of the articles and blog posts highlighted the great potential of Value Per Action (VPA) Search Advertising to be a major disruptor to the Pay Per Click model. This was an important goal of our beta launch: get people talking about VPA and thinking about better ways to connect buyers and sellers online.

Our mission at Jellyfish is to bring consumers directly into the value created by the advertising auction for their buying attention, and many of the articles and posts recognized the huge potential this represents. I think Aneil Weber summed this up nicely with the following comments on Jellyfish:

This is the model that brings the buyers interest into the equation. Basically, by altering the commission to Jellyfish, retailers are essentially “bidding” for our business. Jellyfish makes it really easy to figure out which retailer is the cheapest based upon price and commission pay out. Instead of just bidding to get in front of our eyes, these retailers are bidding for our actual business via virtual negotiation.

This is the power we see in our VPA search advertising; the consumer directly benefits in lower pricing through a behind-the-scenes advertising auction that is risk free to retailers. With today’s report that advertisers are reducing spending because of PPC click fraud, this couldn’t be more timely in my opinion.

I also wanted to highlight and respond to some of the negative feedback and challenges to the Jellyfish model we’ve seen.

1. Cash back isn’t new, you guys aren’t anything revolutionary. I agree that cash back, deal sites, coupons, etc. have been around for some time. And we’ve never claimed at Jellyfish that the concept of cash back (ala eBates or FatWallet) is something we’ve invented. It isn’t. What we are trying to do is MUCH different and more radical than a simple cash back site that contains a directory of links to stores and static cash back percentages. The critical difference in the Jellyfish model is that we’ve incorporated cash back into a dynamic search marketplace, where stores compete for attention at a product level using cash back in much the same way they bid for attention at the Pay Per Click engines like Google, Yahoo! and Microsoft. Google started its PPC auction at .01/click and many of the keywords are orders of magnitude more expensive now. As that competition happens at Jellyfish, consumers will share at least 50% of the gains. This is much different than simple cash back affiliate marketing.
2. Your Search Functionality isn’t Great and You Have Limited Products.As I mentioned in my VPA post announcing Jellyfish, we wanted to be first to market with this concept and we made the decision (like many companies) to launch in beta with limited search functionality and products. I’ll continue to keep you updated on our progress, but we’ve already made substantial changes to our search features and are adding new products on a daily basis.
3. The Savings Aren’t That Substantial. See my answer to number 1. The bidding has just started. I’m very excited to see what retailers that are pulling back on their PPC advertising will do in our risk free channel.
4. Paying People is a Gimmick. People comparision shop online in large part to compare prices and find the best value. I personally don’t think that creating an advertising model that automatically lowers prices vis a vis other shopping search engines is a gimmick.
5. Retailers will Just Jack Up Their Prices and Commission Levels. I’ve seen this several times in blog comments, but this really isn’t possible. We sort results by net price which factors in both the store price and the total cost after our cash back. Thus, the old method of “let’s raise our prices and constantly kick out coupons” won’t work on Jellyfish. This is yet another difference from a simple cash back site.
6. Google, et al. will Copy You. Not necessarily a bad thing I agree with Om Malik that Google Checkout is simply Google’s first step to CPA, but I think changing how your company makes money is something that none of the major engines is going to do overnight and certainly not because of a start up like Jellyfish.
7. People are Lazy and You Won’t be able to Curb their Habits. This is our key challenge in my humble opinion. We are banking on the fact that when you have your credit card in your hand online, you are going to think of Jellyfish and wonder “why would I buy anywhere else?” But you’re right, Mr. Naysayer, without lots of people buying, Jellyfish will never reach the game changing status we hope to attain. I’ll certainly keep you updated on our progress.

We just flipped the switch on the Jellyfish.com beta search engine, opening it up to the outside world. It is an amazing feeling and I’m really proud to be working with such a great group of dedicated people. Alright, enough sappy talk, let’s get down to business.

Over the past few months, we have been talking a lot about problems with online advertising, particularly some of the misalignment of incentives and limitations of pay per click advertising. We’ve also talked a fair bit about the coming Attention Economy and how we hope to be a tipping point for consumers to realize how much value their attention has online.

When Brian and I set out to start Jellyfish, we saw a remarkable opportunity to create a powerful new value proposition by evolving the underlying revenue model for search: pay per click advertising. So many start-up companies today create a better mouse trap and then try to figure out how to attach a revenue model to it (typically by slapping up some advertisements on their site). We did the opposite; we developed a revenue model that provided us a compelling value proposition for our end customer. We aren’t aware of many start-ups that are doing this today (we would love to hear of others), which likely means we are either idiots or geniuses (I’m guessing you will tell us pretty quick). I’m not sure which one we are, but at least we are different.

If you’ve followed our thoughts in the Jellyfish blog, you are aware that we think we’ve come up with a new form of consumer-centric search advertising that:

• More efficiently connects buyers and sellers
• Eliminates Click Fraud
• Provides online merchants with a risk-free sales channel
• Makes advertising transparent and unbiased for consumers
• Maximizes the value of a customer’s intention to buy something online

The Pay Per Click Auction

Like many people, Brian and I have been impressed with the efficiency and power of the Pay Per Click advertising auction that takes place every day at Google, Yahoo!, MSN and the other major search engines. As John Battelle so eloquently detailed in The Search, this NASDAQ-like market does an amazing job of setting the maximum value on our intentions through advertising competition, which has allowed search engines to reap huge rewards.

But we saw a limitation in this advertising auction, namely, the fact that it doesn’t directly connect consumers to the monetary value being generated. This isn’t much of a limitation when you use the search engines to find information. In fact, we love using search engines for this purpose and think that they do a great job. But when you want to buy something online—when advertising is the focus of your search—we think this limitation creates a big opportunity. Why? Two reasons:

1. Limited Relevancy. The sponsored results are ranked with one primary goal in mind; to maximize the amount of click revenue the search engines make. The results you see are from the companies that write the best ad copy and pay the most to get in front of you. But are these listings showing you the best product choice for you? Is there a less expensive option, a product with better value, or a store that is more trusted? This is a secondary consideration. What matters most is that the search engine derives maximum click revenue. Isn’t this why paid search results have to be labeled as Sponsored?
2. Failure to Maximize the Return on Your Intent to Buy. A consumer with a present intent to buy something online is the gold of the Internet. The more search engines can connect your search and the data they collect on you to some buying motivation, the more money they can continue to extract from advertisers. Thus, when a consumer announces their intention to buy something at a search engine, the advertising auction works its magic and the search engine makes increasing sums of money, none of which ends up in the pocket of the end consumer.

Enter Jellyfish.

Introducing Value Per Action (VPA) Search Advertising

At Jellyfish, we want to pioneer a new form of search advertising we call Value Per Action. Instead of charging fees on the click, we charge our advertisers only when people actually buy, and we share at least half of this fee back with those buyers in a cash back account. In other words, we connect people directly to the value of the advertising market. Instead of measuring how much money WE make when you click, we measure how much value the advertiser is willing to pay YOU for your sale. With VPA, the advertising value of your attention becomes transparent (you see it in the form of cash back) and changes from annoying advertising into a new kind of currency (we call it buying currency) that lowers your end price.

And to help you get the maximum amount of savings when you buy, we are launching VPA in the same kind of advertising auction system used by the major search engines. But instead of ranking our results by the amount companies pay us in the form of hidden advertising fees, we rank results by the end price for a product, after our cash back. We think this will create a perfect retail marketplace because retailers will increase their VPA advertising rates (keeping pricing constant on their own sites) to get to the top of our rankings and the value of that advertising competition will flow directly to our users in the form of lower net prices. You can see a simple picture of this system on our site here.

The power of the VPA auction is this: The more stores compete for buying attention, the more end consumers save. In this way, we think we hope to create a system that delivers the maximum return on a consumer’s intention to buy, and they don’t have to do anything more than search they way they would at one of the existing comparison shopping engines.

And what does this do for retailers? It allows them to spend the same $1 of advertising on both search promotion (paying for higher rankings) and price promotion (dropping price to drive conversion) in a risk free channel where click fraud is impossible.

A Big Idea–In Beta

We think this could represent is a major shift in online advertising and help advertising evolve to continue to be relevant in a world where the end consumer has ever increasing choices and control over their attention. You can read our vision of online advertising on the site here. But we also recognize that we are a start-up company with a beta search engine. Like the first PPC auction that started bids a 1 cent/click, we have to start somewhere as well. We could have waited a lot longer to build a perfect site with lots more products, but that doesn’t make sense. We wanted to introduce the VPA concept and start the bidding and the conversation as soon as possible.

Day one on our beta site you will see roughly five million products from approximately 1,000 online retailers. You will be able to search for individual products, narrow searches by store, manufacturer, and price range, shop by store, compare products, and earn cash back on most everything you buy. Things won’t always work perfectly, but we hope you will be able to visualize the power of Jellyfish.com as stores start to compete in a VPA system.

What We Promise During Beta

We recognize that our site will have limitations and bugs like most beta launches. Here are the main things we will be working on tirelessly during our beta period to get ready for our full consumer launch this fall:

• Adding thousands of additonal retailers and millions of additonal products at Jellyfish.com
• Promoting VPA-product level bidding and store competition
• Creating enhanced search functionality
• Expanding the tools to narrow your search results
• Launching better product review, merchant review, relevancy systems that leverage consumer buying data

We recognize that our site is far from perfect and we appreciate your patience while we move through our beta period. We also really look forward to your feedback and comments, both positive and negative, as we bring Jellyfish.com to market.

It is official: Jellyfish.com will open to the public on Monday, June 26th.

It is time to pull back the curtain and introduce what we hope will be a major shift towards a more transparent and consumer-centric form of search advertising. The site certainly isn’t going to be everything we want it to be day one, but the Jellyfish concept will be on full display. And besides, our team needs to go home and sleep sometime this month.

Thanks to everyone in the blogosphere that has been paying attention to our pre-launch ideas (especially the great posts and commentary by Brian Smith, Garrett French, Ed Batista and Scott Karp). The blogosphere really helps level the playing field and allows interesting ideas to percolate to the surface regardless of whether those ideas come from Silicon Valley or Madison Wisconsin. And if you need additional evidence as to how blogs are changing things, check out this post from Adam Trachtenberg, an eBay technical evangelist who apparently overheard Brian and I talking about Jellyfish at the San Francisco airport late last night. Thanks for the link to Jellyfish Adam! You can’t make this stuff up.

We really look forward to hearing your feedback next week post-launch.

We have officially entered the pre-launch vortex: that surreal time just before a start up company goes live and everyone is a bit frantic. Time changes, sleep changes, everything changes.

If you have been there before, you know what I’m talking about. This analogy is over used, but it feels a bit like when my wife tapped me on the shoulder one night and told me she was in labor for the first time. You aren’t sure what is going to happen, you just know your world is changing: fast. You may not sleep much for awhile and you’d better be ready to adapt fast or you’re going to be in trouble buddy. (Note to Maddie: you are more important than a company, but I like the analogy)

Jellyfish is launching in the next several days and our team is in the vortex. We will announce the exact launch date very soon. In the meantime, forgive me for not posting much. Someone is tapping me on the shoulder . . ..