It seems that few understand what’s really going on behind Microsoft’s (MSFT) acquisition of Jellyfish.com.  Analysts are poo-pooing it as “not a ‘game changer’” as Microsoft’s Steve Ballmer suggested the company would be offering up.  Not so fast, David Hallerman of eMarketer.  Google understands the game is about to change and is moving.  MSFT is paying attention and is locking up intellectual property in this move—one that combines multiple, successful and innovative digital shopping models.

According to Sam Harrelson (CostPerNews.com, Revenews.com), he sees

“... the Jellyfish.com acquisition as another sign that Microsoft is aiming more for the merchant/retail segment of online advertising rather than the shotgun approach of Google (GOOG) with AdSense and Yahoo’s (YHOO) with its publisher network.  Instead of focusing on context, they seem to be coming at the online advertising space from a very ‘vertical-minded’ approach.”

I agree.  As well, they’re attacking in a very deliberate manner with a fundamentally different approach to Web advertising and media. 

MSFT’s approach is and will continue to be much different than GOOG’s or YHOO’s—who have relied for too long on highly “open” and, in fact, vulnerable (to systematic gaming by third party affiliates) advertising platforms.  Of course, this has enriched each company—wildly so—but for how long? The writing is all over the wall (i.e. FTC probing VCLK’s use of incentivized marketing, mounting class action lawsuits aimed at GOOG and YHOO’s traffic ‘quality’ claims as compared to what they deliver).

What’s next for Web advertising?  NOT what we’ve seen and MSFT is all over this notion.  They’re bring more structure to the table—less chaos wherein third party affiliates feed them. Web advertising is becoming more deliberate… it’s being tamed and reigned in.

Advertisers have been slow to wake up to the “slop” that passes for ROI and return on ad spend. They’re beginning to measure and what they’re seeing is not pretty.

The “it’s not a game changer” conclusion relies on things not changing much in terms of how the Web gets monetized.  Even Google understands what’s coming next—a slow-down in pay-per-click ad model spending.

Proof’s in the puddin: Look no further than Google’s:

1) Launching a cost-per-action ("pay-per-action") ad model
2) Launching a tool allowing advertisers to manage (automate placement of) pay-per-click ads against a pre-defined cost-per-action

Google understands the game is about to change and is moving.  Is anyone paying attention?  MSFT is and they’re locking up intellectual property in this move—one that combines multiple, successful and innovative digital shopping models.

Jellyfish takes a best of breed approach and “mashes them up” to the amusement of consumers: 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).

It all ads up to valuable IP that Google, in theory, cannot access.

“Large-scale business adoption of Enterprise 2.0 infrastructure applications, such as Skype, will only occur when these new technologies can survive comparison with established utilities. Society has demanded that basic services—water, phone, electricity, roads, and so on—must adhere to certain levels of reliability and availability. 

Likewise, business users expect their software infrastructure to provide high reliability, especially in mission-critical domains… Such high-profile failures make consumers and businesses wary of adopting Enterprise 2.0 tools.”

Michael Krigsman

“The real point is leverage.  Google is using YouTube as an enormous amplifier of market power.  While big media is still searching for leverage at the core, Google is mastering edge leverage.

Of course, then this leverage can go on to redefine the business models of players along the value chain—in Google’s favour.

One way to do so is by forcing a rights shift upon players with largely obsolete business models, built on older, hugely inefficient kinds of property rights.

That’s Google’s strategy—it’s about edge leverage creating enormous amounts of space for new strategic moves in a industry bereft of any kind of strategic imagination.”

Umair Haque
BubbleGeneration.com

“Google is an online advertising company that has plans to become a software company. Microsoft is a software company that has plans to become an online advertising company.

They’re both much better than the other in their current area of strength at the moment, but they’re both looking a little uninteresting in that area as the other catches up in exciting ways.

They both have a lot of money to get where they want to be.”

Jason Kelly

“In a NYT story on Publicis’s alignment around digital ad production, CEO Maurice Levy tells the Times that Google, MSN and Yahoo ‘will have to make a choice between being a medium or being an ad agency, and I believe that their interest will be to be a medium.’

In fact, they don’t have to make that choice at all, and each of those companies already is a huge ad agency as well as media network. This is most blatantly the case with Microsoft, which will shortly acquire one of the world’s largest digital agency networks. But Yahoo is also diving deep into digital ad production, most notably with its recent SmartAds product, which can marry creative assets to a database of segmented offers to create and serve hundreds or thousands of versions of an ad on the fly.”

Zachary Rodgers

My Valueclick (VCLK) acquisition checklist for MediaWhiz Holdings, Inc. is rounded out:

1) Former DoubleClick executive in place as CEO (and former DoubleClickPerformics founder, James Crouthamel recently appointed to ValueClick’s board)

2) A text link-based (TextLinkAds) ad platform in place at MediaWhiz—ready to duke it out with Google’s (GOOG) forthcoming PPA text link network

3) Commission Junction eBay (EBAY) revenues declining due to search being taken in house (would be great to buy a bunch of FULLY AUTOMATED auction publishers at this point)

4) Today AuctionAds is being brought into the highly diversified MediaWhiz family

Okay… so how is ValueClick going to lay off of this one?  As I see it, they’ll pick up MediaWhiz before the end of 2007.  If they don’t someone else will (namely, a privately held lead generation company looking to further diversify in hopes of an IPO… a company like QuinStreet or AllStarDirectories or perhaps Infilearn).  Or they’ll be rolled up just as Venture Direct was this week via Plattform Holdings.

Besides, it’s rather trendy to buy up your own distribution lately (Linkshare + Traffic Strategies, ValueClick + Mezimedia, heck even Google + Doubleclick!) and it makes sense from that perspective too.  Why continue to do business with MediaWhiz when you can just own ‘em?  Just like ValueClick acquired FastClick, WebClients, etc. etc. they’ll acquire MediaWhiz.  They are forced to, in fact.  MediaWhiz is simply too diversified.  They’re a perfect target and there will be competition for them as the online ad industry continues to roll itself up. 

Says lead generation insider and Weekly Insight audio program regular Lee Gientke, “With the Internet land-grab in full swing—Microsoft (MSFT) grabbing Aquantive, ValueClick grabbing MeziMeida, Google grabbing DoubleClick—there has been a deafening silence from eBay.”

According to Gientke, a business development pro over at online lead marketplace Leadpoint.com, revenues at eBay have been slowing and yet there has been a remarkable silence from that side of the Valley.  He ponders (and I can’t help but do the same) if they will wake up and make a grab for MediaWhiz themselves… for at its heart is a customer acquisition company that has the potential to spruce up some of eBay’s earnings.

Gientke seems to believe that they may also be interested in owning the distribution—to pump up eBay’s auction numbers but also to bolster eBay’s other investments.  Color me riveted!

As I see it, if Valueclick acquires Mediawhiz it can take back a lot of that revenue lost to eBay taking search affiliates out of its Commission Junction unit’s hands and into their own.  As I see it, Valueclick can also accomplish something it has failed to accomplish in the recent past—add scale to its affiliate marketing platform.  It can do so with the technology created by AuctionAds.  To what extent could Valueclick leverage this technology?  They could push Commission Junction advertiser offers (most of them) out to that publisher base (AuctionAds’) in a highly controlled environment.  This is exactly what Valueclick failed to accomplish with its recent CJ Unit’s “Link Management Initiative” which was rebuked by publishers.

Tragically, Valueclick (like so many other large, technically stagnant / backward affiliate marketing companies) will innovate through yet another instance of buying out a relatively small business—in this case a rather crude affiliate publisher, Jeremy Shoemaker) with a cult-like following of ”get rich quick and overnight“ affiliate-marketing wannabes. 

What do you think?  Is Experian going to sit this one out?

On how Google is leveraging its network of AdSense publishers to slowly-but-surely wean itself off of the same affiliates who fed them by setting up to compete…

“Instead of doing the obvious, such as inserting CPA ads on properties that would seem to cost them nothing, like Google.com, they use their publishers. Using the publishers, they gather data across disparate data points, with an indeterminate opportunity cost, as opposed to their main page that provides only one data point and has a much larger cost.

Once they figure out the metrics then, if they want to, they can move up the chain. This small test might seem like just another publisher release, but this could truly end up being the smallest big step towards the future of CPA and Google.”

Editor, DMConfidential