FairMarket was founded in 1997 and set out to compete with online auction giant eBay. After shifting its strategy several times, FairMarket says it has found a winning plan: provide technology and services to leading brands and agencies to run auction-style rewards programs and other online promotions. And rather than competing with eBay, FairMarket now runs eBay's loyalty marketing programs exclusively.

"Auctions are good for promotions because they're good for hard-to get items," said Todd Piett, Director of Marketing for FairMarket. One client, Dr Pepper/Seven Up, auctioned off the first 31 cases of its new soda dnL (picture the 7UP logo, upside down) before the soda was available to the public. Another client, Continental Airlines, auctioned off box seat tickets to Cleveland Indians games and other unique items.

The auction format benefits companies because of the participation element, Tiett explained. Visitors to the loyalty sites can be drawn in with low starting bids, just as on other online auction sites. A consumer visiting the BagelBites.com site may bid on an item like a television set for 50 points, which is offered inside one package of BagelBites. Naturally the consumer must purchase more packages of BagelBites to acquire more points. And the additional points don't cost the company any additional money.

In non-auction rewards programs, companies set up levels so consumers acquiring a certain level of points are guaranteed a prize. For companies that don't do accurate forecasting upfront, it can be a costly program. This "prize exposure" means the more the successful the program, the more it costs the company.

With the auction format, there are a fixed number of goods, say 20 television sets. Users accumulate additional points in order to bid the "price" of the TV higher.

Piett said clients also collect data from program participants that can help them with product features and help tweak future campaigns.

FairMarket has several programs set to launch in the spring and summer, busy months for reward programs. Kellogg is using FairMarket to test programs on KelloggKash.com through the end of the year. And this week, Dr Pepper/Seven Up Inc. and Warner Bros. Records Inc. announced they are joining forces for a special summer promotion, also powered by FairMarket. As part of the LiquidLoot promotion, consumers will be able to collect points from specially marked soft drink products and bid on music-oriented merchandise in an online auction-style promotion at LiquidLoot.com.

FairMarket believes powering auction-style marketing programs for brands will be a winning strategy based on the performance of the programs it has helped run so far, including a program for Burger King, its first foray into rewards programs. And since eBay invested $2 million in FairMarket 1 year ago, you can bet they are counting on it too.