Web Company Patents Online Ads With A Payoff

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August 24, 1998 (2:26 PM EDT)

Web Company Patents Online Ads With A Payoff

By John Borland,

A Berkeley, Calif.-based Web marketing company said Monday it has locked up legal rights for the practice of paying consumers for reading online advertisements.

CyberGold said it has received a U.S. patent that gives it broad rights over the process of rewarding online consumers for their attention. The patent could cover everything from Web ads with a payoff to online surveys and focus groups, company officials said.

If the patent proves to be as broad as company officials say, it could give them considerable control over a still-young type of online marketing.

"Our objective in obtaining this patent was not to stifle the market," said CyberGold president Nat Goldhaber. "We want to foster the practice of providing incentives online. Within limits, we are willing to license it out."

CyberGold's patent does not focus on any specific piece of programming. The wording covers cash payments or other incentives offered to read advertising on the Internet, on intranets, or in electronic mediums such as interactive TV, Goldhaber said.

The broad nature of the patent could include marketing campaigns different than CyberGold's Web-based business. Many online companies already reward consumers for joining e-mail lists, registering for an online service, or providing personal demographic data. These practices may be covered by CyberGold's patent, Goldhaber said.

However, the company's business model has been slow to resonate with U.S. consumers, analysts said.

"Micropayments and online cash aren't taking hold in North America," said Drew Ianni, an online advertising analyst with Jupiter Communications, in New York. "We haven't seen any positive case studies in [providing incentives for] online viewers to look at ads."

CyberGold will continue its current business model, aggregating advertisements from outside subscribers. But the company will also try to seek a cut of revenue from companies using its newly patented payoff model on the Web and in other electronic mediums, Goldhaber said.

"If there is something somebody can do better than we can, they should," Goldhaber said. "But we do want to get some royalties."

The patent can be challenged by companies that think the wording is too broad or who say CyberGold's idea is not unique enough to be patented.

The 3-year-old CyberGold was founded on the principle of paying Web surfers for reading online ads. The company's site rotates offers from outside businesses, offering users anywhere from a dime to $10 for reading ads and participating in surveys to subscribing to magazines online.

The privately held company has roughly 780,000 registered users in its databases, Goldhaber said. The company has slowly attracted the attention of large advertisers such as Disney and Reader's Digest, as well as Web-only companies such as Deal.com and NetMarket.

Goldhaber said his company will contact other online advertising companies about licensing the process. Some of these companies may already be infringing on CyberGold's patent protections, he added.