Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Jellyfish pioneers a new type of online business model

Posted by Tom Foremski - August 3, 2006

I just got out of a meeting with Jellyfish, a shopping engine with a unique business model that bypasses the pay-per-click based economy of most commercial sites. If the Jellyfish approach works, it could go a long way to cutting down on the deluge of advertising and spamming.

It also addresses some aspects of the "attention economy" that Steve Gillmor, Doc Searls, and others have been discussing.

"The Internet experience is becoming diminished by all the efforts to gain pay-per-click revenue. We have a value per action model that is based on final sale, and I think over the next five years the Internet will move to that kind of sales-based model," says Mark McGuire, co-founder and president of Jellyfish.

"We share 50 percent of our revenues with shoppers," says Mr McGuire "Shoppers see a list of prices from retailers, their final cost and how much rebate they will get from us." (On a $180 digital camera shoppers can get a rebate of about $5.)

Retailers only pay Jellyfish when a sale is made, which makes it risk-free for the more than 1,000 retailers on the site. An advantage of this type of reward system is that it cannot be gamed as in the pay-per-click model where an auction and search engine placement determine retailer costs.

Jellyfish relies on uploads of data from the retailers rather than crawling sites, such as Become.com, Froogle, and other sites. This type of data is cleaner and easy to organise. And the behavioral data it collects is used to provide repeat visitors with a more targeted shopping experience. And they share in the value of that behavioral data through rebates from Jellyfish.

I asked if the revenue split is after expenses. "No, it is top line revenue. That's why we chose the name Jellyfish, we want to be completely transparent. You get half of what we receive and we will pay it out as cash as soon as it reaches $10."

This is a fascinating business model because it rewards customer loyalty plus the behavioral data collected could result in exposure to fewer, but highly targeted ads; and the customer shares in the sales commissions--that's a double value to users.

I'd love to try out this type of approach in helping to monetise journalism. For example, if a type of Jellyfish version of Google AdSense were used, the producer of a news story with Jellyfish ads next to it could share in the final sales revenues.

Those revenues should be much better than the pay-per-click revenues AdSense shares with web sites, and it could also result in fewer ads needed to support the costs of content production.

Jellyfish launched as a beta in June, and Mr McGuire says there are some interesting initiatives coming out in the next few months, that will try to build on the "value per action" business model.

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