Jellyfish.com

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Jellyfish.com is a reverse auction online shopping site website. The Middleton, Wisconsin-based company was acquired by Microsoft in 2007. On May 22, 2008, Microsoft officially announced the cash back service as part of their Live Search group of tools.

It is the first website exclusively using "cost per action" for shopping, and the first to give ad revenues to customers, by means of rebates on purchases[1][2][3].

Contents

[edit] History

Jellyfish launched the first beta version of service in June 2006, after receiving an initial seed round of investment from its founders, Brian Wiegand and Mark McGuire, and Kegonsa Capital Partners[4].

In a press release, Kegonsa Capital Partners said that it acquired 25 percent of Jellyfish.com's stock for about $600,000 in February 2006, and made 15 times its seed investment with the deal[5].

On October 2006, Jellyfish raised 5 million dollar more on fundings. According ot their founders, Jellyfish has 1,000 retailers advertising more than 5 million products, from shoes to electronics to home appliances. It was expected to have 20 employees by the end of October 2006, at the Old Sauk Trails business park, on the Far West Side[4].

Kegonsa, a Fitchburg, Wisconsin group with 42 Wisconsin investors, led the second round of investment on October 2006,[6], with more than $1 million in October 2006 through the Kegonsa Co-Invest fund, for a total of $5 million [7][8]. The second round investors more than doubled their investment in less than a year[5].

In an interview in July 2007, Wiegand said Jellyfish had sold nearly $5 million worth of products, "everything from bicycles to shoes"[6].

McGuire explained that the name Jellyfish was chosen because they wanted to be completely transparent[9].

[edit] Microsoft Purchase

On October 2, 2007, Microsoft announced purchase of Jellyfish [10][5][6][11]. The estimated price for the buyout was said to be $50 million. The Jellyfish engine may be used as a part of Microsoft Live Search. [12]. Microsoft sees Jellyfish.com as a way to augment its e-commerce and search offerings[1][13].

“ We think the technology has some really interesting potential applications as we continue to invest heavily in shopping/commerce as a key vertical for Live Search, Alex Gounares, Microsoft corporate vice president for the Search & Advertising Platform Group, on a written statement[10][6] ”
“ Jellyfish has a fresh approach that distinguishes it from many other shopping comparison sites and in a way that resonates well with Microsoft's broader Live objectives. Microsoft could get stung or use the stinger on competitors[14]. ”

When bought by Microsoft, it had 26 employees[5].

[edit] CPA leader

Jellyfish.com was the Internet's first comparison shopping search engine to operate exclusively on a Cost Per Action (CPA) ad model[15].

[edit] How it works

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The company describes their site as a reverse-auction site, "like eBay in reverse"[11]. They call it "smack shopping".

Here's how it works:

“ Shoppers log onto the Web site and decide if they want to search for a specific product, browse by category or look at a particular store's merchandise. Each item contains two prices -- the amount you'll be charged, including tax and shipping, and the cost minus the share of Jellyfish's commission that you'll receive.

Those rebates go into an account for each shopper and can be accessed either in check form, once they reach $10, or deposited into PayPal, an electronic payment system owned by online auction site eBay.

"In our family, about 80 percent of our shopping -- all the way down to toilet paper -- is done online", Wiegand said. "I'm buying things I normally buy from stores I normally buy them from, and my wife's cash-back balance is over $100, just in the past 90 days."

Not only is the idea of sharing the commission new, so is the way retailers pay the search engine. Right now, if a consumer clicks on a retailer's ad, the retailer pays a fee whether a sale follows or not. The system is known as PPC, or price per click.

With Jellyfish, retailers only pay a fee if a shopper buys the product, and the fee is negotiable. Whichever store offers the highest percentage commission -- which translates into the lowest cost for the consumer -- gets the top ranking in the search results.

"We call it VPA, or value per action -- the amount of value you give to the customer to get a sale", Wiegand said[4].

 ”

[edit] Smack Shopping

The other main part of the site is smack shopping, where items are for sale and the price drops until someone buys the item:

“ An undisclosed quantity of a particular item (...) is put up for auction, starting at its regular price and falling in price every few seconds. Users watch the price fall, torn between letting it fall lower and buying the item at the current price before the mystery quantity is sold out. There's a forum for real time communication and the psychology sounds just nuts[16] ”

There are different shows for different types of items. The main show ("The Daily Smack") starts at noon central time and a number of random items are for sale during that time. Usually, each offer has multiple items, so more than one person can get a deal. During the other shows, however, there is often only one item available.

The website has a forum where users can discuss the current offers on real time. Depending on the show and time of day, there can be anywhere from 100 to 600 people on.

[edit] Business model

A retailer pays advertising fees to Jellyfish.com only when a shopper buys. Rather than the more traditional pay per click online marketing system, Jellyfish.com is based on a "Value Per Action" model, which is being tested by other search engines, including Google[5].

It's the first and only comparison shopping engine to share its advertising revenue directly with consumers[3]. The site offers rebates to customers from the advertisers' payments, which are offered not at the purchase moment, but later on, when advertisers have paid their ads[1][2].

Buyers get paid 50% of the ad revenue, this percentage being calculated before the expenses of the site[9].

Jellyfish shares some speculation among Microsoft thinkers that the current pay-per-click-focused advertising model may not be the optimal one[11], and wants to replace it with cost per action.

Dan Marriott, CEO, Pronto.com, at the Chelsey Interactive Local Media conference in Philadelphia in 1 December 2006, identified "new styles of services competing in the online comparison shopping space" and listed Jellyfish as having a separate style that he called "consumer incented"[17].

It plans to offer an alternative to cost-per-click (CPC) by allowing advertisers to bid directly to customers[3].

[edit] Patent

Jellyfish has a patent-pending form of online advertising that consists on returning part of the CPA fees back to consumers. It alleges that it creates inherent price savings for online shoppers and risk free sales for advertisers and calls it value-per-action advertising[3].

[edit] Live Search Cashback

Main article: Live Search Cashback

Live Search Cashback allow users to search for products from multiple vendors and find their prices. It offers money back for purchases made through the site. This service started in June 2006 [18] as part of Jellyfish.com and is integrated with Live Search in May 2008. Users now require to use Windows Live ID to sign in to their Cashback accounts instead of the previous Jellyfish.com account. Microsoft plans on using this to catch up to Google in the search market. [19]

[edit] See also

[edit] References

  1. ^ a b c PCWorld, "Microsoft Buys Jellyfish.com Shopping Site", retrieved March 18, 2008
  2. ^ a b Wall Street Journal, "Web Start-Up to Share Revenue From Advertisers With Shoppers", retrieved March 18, 2008
  3. ^ a b c d Information Week: "Startup Primed To Challenge Google CPC Ad Model", retrieved March 18, 2008
  4. ^ a b c Wisconsin State Journal, "Jellyfish.com Raises $5 Million In Funding", retrieved 13 March 2008
  5. ^ a b c d e Wisconsin State Journal: "Jellyfish goes big time", retrieved 13 March 2008
  6. ^ a b c d Wisconsin State Journal, "Microsoft Buys Online Shopper Jellyfish.com", retrieved 13 March 2008
  7. ^ American Ventures, "Jellyfish.com Secures $5 Million in Funding", retrieved 18 March 2008
  8. ^ Milwaukee Business Journal: "Madison Internet firm secures $5M in funding", retrieved 18 March 2008
  9. ^ a b SiliconValleyWatcher: "Jellyfish pioneers a new type of online business model", retrieved March 19, 2008
  10. ^ a b Official blog of Live Search team, "Microsoft acquires Jellyfish.com", retrieved 13 March 2008
  11. ^ a b c ZDNet, "Microsoft buys Jellyfish comparison-shopping search engine", retrieved March 18, 2008
  12. ^ Live Search: "Microsoft acquires Jellyfish.com", retrieved 13 March 2008
  13. ^ Infoworld, "Microsoft sees its acquisition of Web site Jellyfish.com as a way to augment its e-commerce and search offerings", retrieved March 18, 2008
  14. ^ e-Week's Microsoft Watch, "Jellyfish: Microsoft Goes Social Shopping", retrieved March 18, 2008
  15. ^ Bussines Wire: "Jellyfish.com Partners With Channel Intelligence", retrieved March 18, 2008
  16. ^ TechCrunch, "Jellyfish Smack: How Low Can You Watch Prices Fall?", retrieved March 18, 2008
  17. ^ ZDnet: "IAC's Pronto.com: Shopping for a winner", retrieved March 18, 2008
  18. ^ Washington Post, "BuzzWorthy: At This Auction Site, Prices (on Chickens, iPods, Etc.) Are Going, Going Down", retrieved 13 March 2008
  19. ^ BBC News, "Microsoft adds cashback search", retrieved 22 May 2008

[edit] External links