Summary
Chasing GOOG is pointless so MSFT is changing things up: wagering on shoring up intellectual property rights on hip, new consumer shopping models. MSFT needs to either compliment or compete with Yahoo. Jellyfish moves it in this direction. MSFT will need to overcome serious challenges to achieving full advertiser participation in an advertising model requiring significant back-office integration. Yet MSFT has its eye on the prize: satisfying advertisers' insatiable appetite for cost models that include a direct response (cost-per-acquisition/pay-per-action) element. This move counters Google's recent CPA Optimizer announcement/tool. Mercent, ChannelAdvisor and ChannelIntelligence become acquisition targets for anyone (MSFT included) promising advertisers the ability to "set it and forget it"--automate and optimize product and inventory-levels against pre-defined advertising cost goals. With eBay's Skype flop as a backdrop M&A action could start heating up.
Analysis
Chasing Google is pointless so Microsoft is betting on changing things up: wagering on shoring up intellectual property rights on hip, new consumer shopping models. In the case of Jellyfish.com it will own a hybridized advertising platform, albeit a complex and incomplete one.
In November, I interviewed CEO Brian Wiegand who summarized the value proposition well -- to advertisers and consumers. For consumers Jellyfish offers a fun, incentive-oriented shopping experience that combines a variety of proven, successful 2.0 business models. Think Ebates + Woot.com and on the advertiser-side, eBay's Shopping.com + Google's AdWords auction environment + Commission Junction's (VCLK) performance-based cost model (cost-per-action) with a twist of Google (auctioning off ads).
Sound complex? Youbetcha but in reality it's fairly simple if you take it piece by piece. Yet media and trades are offering confused analysis of what exactly MSFT is acquiring.
There is nothing 1.0 about Microsoft's new division. This is all about MSFT locking up intellectual property rights on something truly unique and defensible. Jellyfish.com's hybridized approach is at the core of the overall value proposition. Everything from its shopping comparison-like product presentation to incentive shopping environment to advertiser bidding (competitively on a cost-per-action revenue share) is... well, unique. It's valuable intellectual property.
As well, MSFT has its eye on the prize: satisfying advertisers' insatiable appetite for cost models that include a direct response (cost-per-acquisition/pay-per-action) element. This move counters Google's recent CPA Optimizer announcement/tool (a gutsy move that gives longer legs to the cost-per-click model that built the company).
That stated Jellyfish's model is a nearly impossible one to sell Web advertisers/merchants on -- without a set of Mercent-like product features and inventory-level automation. This involves giving advertisers the means to optimize their ads against advertiser-defined customer/order acquisition goals.
Sound familiar? (Google's CPA Optmizer)
Mercent, ChannelAdvisor and Channel Intelligence become acquisition targets for anyone (MSFT included) promising advertisers the ability to "set it and forget it" -- automate and optimize product and inventory-levels against pre-defined advertising cost goals. With eBay's Skype flop as a backdrop M&A action could start heating up.
