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MyPoints.com: Rewarding Shareholders

Simply put, MyPoints.com (MYPT) specializes in a business that makes lots of sense on the Net. Basically, it is a supercharged rewards program. You sign-up for the service and answer a long questionnaire, which determines your preferences. Mypoints.com then periodically e-mails you various offers. If you visit the sites, you get points. You can then use the points to buy goods -- such as gift certificates for restaurants or books or videos. Simple as that.

Yes, there are a variety of competitors, such as Netcentives (NCNT) and CyberGold (CGLD) . However, Mypoints.com appears to be a leader in the space. According to PC Data Online, Mypoints.com was ranked the most popular promotional site.

So what's the point of Mypoints? The company is collecting valuable information on the behavior of Net users. That is, users are willing to part with their personal information. Interestingly enough, Mypoints.com does not sell specific information on members; rather, it processes the information and determines patterns. And companies like this -- as they can better create new products, as well as market them. In the highly competitive environment of the Net, having such information can be a key to success.

So far, Mypoints.com has been generating impressive results. Sales growth has been strong. While Wall Street estimates forecasted $2.9 million in sales, Mypoints.com instead reported sales of $7 million. But looking deeper, there is much more. The average revenue per member increased 61 percent from $1.41 to $2.27 from the prior quarter. There was also a 16 percent increase in the advertising rates -- as the advertising client base grew 30 percent to 224.

I expect the growth to continue, as companies find Mypoints.com to be an effective marketing channel. In fact, it appears that the holiday season was particularly successful, as the company announced that it achieved five million members, which was a 21 percent increase from the third quarter. Between October and November, the company averaged 6.7 million transactions per month, a 46 percent increase over the monthly average in the prior quarter (a transaction is any point-earning action by a member).

With such numbers and leadership, the company will likely continue to ride the momentum. Even at current valuations, the stock looks attractive.