Mark McGuire, president of Jellyfish.com, which gives back to customers a percentage of its advertising revenue, said the online company will remain in Madison. It also will continue to operate as a stand-alone entity and retain its 26 employees.
Both McGuire and CEO Brian Wiegand, who has launched three start-up companies, will remain with Jellyfish.com.
McGuire said a key to the deal is the company’s continued presence in Madison. “We’re excited about keeping our base of operations in Madison,” he said. “There has been a lot of talk about us growing right here.”
Jellyfish.com is pioneering the Value Per Action (VPA) Internet advertising model, which it characterizes as a “Robin Hood-like search engine” that takes a percentage of the revenue customers generate through their buying habits and gives back 50 percent of it.
For Microsoft, the deal is the latest piece of a strategy to chip away at Google’s dominance of online advertising. Microsoft CEO Steve Ballmer has said publicly that up to 25 percent of the company’s revenue in the next four to 10 years could be generated from advertising. In the fiscal year that ended June 30, the Redmond, Wash. software giant reported net revenues of $51.1 billion, a 15 percent increase over the previous fiscal year, and net income of $14 billion, a 12 percent jump.
The Microsoft Live Search team said the Jellyfish.com platform technology “has some interesting potential applications” as Microsoft continues to heavily invest in shopping and commerce as a component of Live Search, the Microsoft Internet search engine. In May, Microsoft paid $6 billion to acquire aQuantive, a digital marketing company based nearby in Seattle.
For Jellyfish.com, the acquisition is an opportunity to expand access to Microsoft’s customer base, grow its revenue, and add new capabilities. McGuire said details of those growth plans would be discussed in the forthcoming weeks and months.
“We’re still in very early stages of our [growth] discussions with Microsoft,” said McGuire, who declined to disclose the privately held company’s recent quarterly revenue performance.
McGuire also declined to confirm the acquisition price, but one source told WTN that Microsoft paid $50 million for the the Madison company. The deal, which according to McGuire faces no regulatory hurdles, will provide an earlier-than-expected return for investors who deployed venture capital to Jellyfish.com. In October of 2006, the company accepted $5 million in funding from Kegonsa Capital Partners and Clyde Street Investments.
Investors appear to have reacted somewhat negatively to the deal. Shares of Microsoft stock, which stood at $29.70 at the close of trading on Oct. 2, had declined 38 cents to $29.32 as of 2:45 p.m. Central Standard Time.
Betting on a new model
In VPA, Jellyfish.com believes it has invented a new and better form of Internet advertising to rival price-per-click advertising, which currently is the most prevalent online advertising model. With Jellyfish.com, Internet shoppers compare the prices of products from online stores, and the company refunds part of the revenue to customers that buy through its website. It’s a model that Microsoft may emulate in its high-stakes duel with Google.