For Online Coffee Sales, Peet's Teams Up With Ad Agency Razorfish

Ad execs have long relied on truckloads of coffee to stoke their creativity. Now one agency is counting on a java company, Bay Area-based Peet’s Coffee & Tea, to help reinvent the industry’s jittery business model. Last month, Peet’s hired Razorfish, a global digital agency, to revamp its e-commerce business. But instead of working for a fee, Razorfish is earning a share of the profit from the rejiggered site—when and if it rises. “We’re all in,” says Pete Stein, Razorfish’s global chief executive officer. “None of our costs are paid for if profits don’t go up.”

The relationship between the cost of advertising and the resulting impact on revenue has always been tenuous. In recent years, as media buyers stopped paying the hefty commissions that once sustained Madison Avenue, ad agencies have had to adjust by charging fees for billable hours, and profit margins have shriveled.