Startup Primed To Challenge Google CPC Ad Model

Jellyfish.com will offer an alternative to cost-per-click advertising by opening an online marketplace where advertisers can bid directly to customers for their attention and patronage.

Google's bubble may be about to burst. Though search engines continue to make a tidy sum selling clicks, the advertisers buying those clicks have no choice but to gamble: Only a small portion of online ad click-throughs result in sales and about 14% of clicks on average aim to defraud the advertiser.

On Monday, shopping search engine Jellyfish.com will begin to woo advertisers with what it claims is a better mousetrap: It will offer an alternative to cost-per-click (CPC) advertising by opening an online marketplace for advertisers to bid directly to customers for their attention and patronage. The company, which closed initial seed funding from undisclosed investors earlier this year, plans to give the customer half the ad revenue it collects from the advertiser upon making a sale.

The result is that Jellyfish users can get products for less because half the marketing dollars spent by advertisers go directly their customers instead of to a third party. At the time of this article, the cash returned can result in discounts of up to 24%, according to the company. This number will rise and fall daily as merchants bid for consumers' business.

Users can collect their cash once products can no longer be returned, in order to prevent abuse of the system.

The name "Jellyfish," says president Mark McGuire, reflects the company's intent to bring transparency to the ad market.

Google's recent actions suggest that it's aware of the problems posed by the CPC model: Google recently acknowledged that it's testing cost-per-action ads (CPA).

CPA advertising pioneers like Snap.com have long touted the advantages of the CPA model, such as the elimination of click fraud. But adoption has been slow.

EBay's recent move into CPA advertising with its AdContext system should make CPA ads more popular, luring publishers with the prospect of collecting a cut from auction sales made as a result of an ad.

But Jellyfish's patent-pending plan to kick CPA fees back to consumers seems certain to pique user interest. The company calls its approach value-per-action advertising.

Merchants are already lining up to bid for shoppers' attention with low prices and high cash-back payments. Jellyfish has more than 1,000 advertisers signed up so far, with more than 5 million listed products.

"ShoeMall.com is all about making shoe shopping fun and fast, and using a partner like Jellyfish helps us give back to the customers," says Adrienne Hartman, Internet and new business manager at Internet retailer ShoeMall.

Hartman notes that Jellyfish's model lets her company offer a lower price than would be possible with CPC advertising. "Since Jellyfish only gets paid when I make a sale, I get a better return on my marketing dollars," she says.

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