Web Sites' Discovery

As Web sites strive to be
flashy and addictive, the drug
of choice of some is . . .
money.

A few online retailers, video
portals and gaming sites are
offering cash or cost savings
in a bid to make up ground
against Web giants such as
YouTube and Amazon.com.
E-tailer Jellyfish.com, video
site Metacafe and game site
Weblo are among the startups
using dough as a lure to snag the attention of more online users.

Success will be tough, but lessons might have been learned from the past. This
time around, e-tailers seem to be tweaking their promotions to their audience,
says Peter Kim, a Forrester Researcher analyst. That's something many failed to
do "in the last dot-com boom and bust," he said.

Offering financial incentives can work, "but it has to be tied into good content
through a good experience," Kim said.

The firms have different ways of providing financial incentives.

Madison, Wis.-based Jellyfish.com is an e-tail site, where users can search for
products and get a list of links and ads from its participating merchants. But then, if
a Jellyfish user ends up buying a product from that merchant, Jellyfish will return
to the buyer a portion of the price, generally 3% or more.

How can it do this? Basically, it gives its users a kickback from the ad revenue
Jellyfish gets from its participating vendors.

"It's been incredibly successful for a number of reasons the addictiveness, the
retention, the amount of users it has attracted," said Brian Wiegand, chief
executive and co-founder of Jellyfish.com.

The company says its users on average visit the site 18 times a month and spend
50 minutes there. "That's an eternity when you think about Internet time,"
said. Forrester's Kim agrees that both figures are high.

The site launched last year, and in October announced it had received $5 million
in funding from private equity firms Clyde Street Investments and Kegonsa Capital
Partners. Clyde Street principal Ralph Dillon, former CEO and chairman of Cost
Plus Imports, joined Jellyfish's board.

In November, Jellyfish has added a gaming element to its site. It's a regular
feature it calls Smack Shopping. Several times a day the site will auction a random
item at a continually falling price. Users can guess what the final price will be. The
winner gets to "spin" an electronic wheel to win prizes that have included $1,000 in
cash and a Nintendo Wii video game player.

"Smack Shopping is really using advertising to create fun, to create
entertainment," said Mark McGuire, Jellyfish's president and other co-founder.
"Over the next couple years more and more creative kinds of advertising are going
to be invented and brought to the mainstream that sort of invites consumers in."
The company says Smack Shopping has sold more than 1,000 goods at a 44%
average discount.

Jellyfish also reaching out to Web communities such as MySpace and blogs,
letting users of those sites know about its Smack Shopping and other "shopping
events."

For 4-year-old YouTube rival Metacafe, the money lure goes to the amateur
makers of videos that prove to be popular. Its producer rewards program awards
$5 for each 1,000 clicks a video gets, assuming the video adheres to a few
company rules. The company says one person has made more than $26,000 this
way. Its home page lists the weekly top earners.

With more than 24 million unique monthly visitors, Metacafe is a leading video site.
The company, with offices in Israel and Palo Alto, Calif., has secured $20 million in
funding, mostly from big-name venture firms Accel Partners and Benchmark
Capital.

"We're growing because we have a great audience and great content," said Erick
Hachenburg, CEO of Metacafe. "We're seeing revenue growing month over
month, quarter over quarter. And advertisers want to be associated with great
content. Producer Rewards provides the incentive to have more great content, so
it's been very successful for us."

Hachenburg says the site's traffic rose 26% in March vs. a year earlier, which he
partly credits to the release of the site's "Caf Confidential" competition. It offered a
$1,500 shopping spree to clothing retailer American Apparel for the best video.
Weblo is also using a gaming element, and the chance to earn money, to try to
build an audience that will click on the ads placed on the site. The 6-month-old
startup is building a site where people pay real money for virtual real estate and
then try to attract visitors to that real estate.

The site, which describes itself as "monopoly on steroids," will share some ad
revenue with some members of its community.

"We're paying people to be part of the community," said Sean Morrow, Weblo's
director of marketing.

The site's sales include its virtual state of California, which it says netted $53,000.
Morrow said people use their Weblo sites as places to blog, provide links, make
profiles, anything that might generate traffic. But the key to financial rewards is to
get people to click ads, not just look at them.
"We're moving to an era of online advertising that's moving to actions, not just
page views," Forrester's Kim said. "In the greater scheme of marketing, marketers
need to be more accountable for their spending and where their leads come from
and how efficient their leads are."
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