Company Taps into College Scene – Part II

[email protected] addressed vertical portals and Student Advantage’s opportunity within the space in Part I. For Part II, [email protected] had an exclusive interview with Student Advantage, Chairman, President and CEO, Raymond Sozzi, Jr.

[email protected]: Can you give us an idea of what Student Advantage has been about since 1992?

Sozzi: Absolutely. STAD’s core mission was specific to a marketplace, college students, but it was general in terms of the breadth of services and the role we wanted to play in that marketplace. Very simply, our core mission was really to enhance the higher education experience.

Now you didn’t really hear me talk about offline/online, or being an infomediary/portal. The business plan that went into play seven years ago was media independent, so to speak. It was about establishing a relationship, aggregating people and community, building affinity with that community and acting as an aggregation point for services and information that were uniquely relevant to that audience.

[email protected]: And the membership program was this “aggregation point.”

Sozzi: Exactly.

[email protected]: A strong membership base within an information business. Seems like an ideal Internet play.

Sozzi: Well, you talk about businesses that were made for the Internet… it’s tough to find a better example than Student Advantage. What the Internet gives you is an unbelievably efficient way to communicate with people, to house information and to make that information readily accessible. The Internet fosters a tremendous amount of interactivity with a membership base. It was really a gift for us. There is no better development that could have happened for Student Advantage as a business than the Internet.

[email protected]: Can you shed some light with regard to STAD’s offline vs. online strategies?

Sozzi: Sure. The membership program wasnt necessarily an offline product vs. an online product, except that seven years ago, we were communicating through traditional media. We were producing newsletters, sending out direct mail, and a lot of people were calling our in-bound telemarketing lines. So our reach to consumers was in print, telephone and face-to-face.

[email protected]: The Internet has obviously changed that.

Sozzi: The membership program itself has evolved in such a way where now the majority of our renewals are done electronically. Students can enroll conveniently at StudentAdvantage.com, instead of the traditional mail or phone. Students no longer have to call our customer service lines for membership information. It can all be housed at StudentAdvantage.com, convenient for members and obviously much more cost effective for us.

[email protected]: So we’ve seen an evolution with regard to the membership program.

Sozzi: We wanted Student Advantage to be to the college market what AAA is to automobile owners and what the AARP is to the senior citizen community; an institutional product, brand and resource that is really the standard for that particular demographic.

Our goal is to have nearly every college student, if not every college student, become a Student Advantage member because its truly an institutional product and resource. The evolution really started on the commerce side as students were joining for access to our exclusive discounts.

[email protected]: I assume STAD is able to leverage its membership base in order to negotiate these exclusive discounts.

Sozzi: Exactly, and there are really two dynamics. One of them is “hey, we’ve got a lot of people who spend a lot of money, and we can either direct them to you or to someone else.” In that sense, we’re really playing a role of an agent and advocate on the behalf of our membership base. The dynam

ic from the corporate perspective is unique. For example: Amtrak was offering a discount to the general college student community prior to partnering with STAD. They offered the same discount (15 percent) and you could simply show up with your college ID and get access to that discount. There were two problems with that model for Amtrak: 1) by simply allowing students to show an ID when they’re purchasing their ticket, all you really do is cannibalize existing revenue, unless you spend a ton of money driving new customers to take the train. So all you’re really doing is losing money. 2) They know nothing about “Luke” when he shows up and displays his college ID. They don’t really know what school you go to, whether you’re a freshman or a senior, and whether this is your first time taking the train, or maybe you take it five times per semester.

[email protected]: So STAD is saving their corporate partners’ money while bringing them new business.

Sozzi: What STAD brings its corporate partners is a tremendous marketing channel, where we drive incremental new users to our partners. The other thing is we bring a very sophisticated database marketing program to our corporate partners. Usage is tracked not on an aggregate level but literally down to each individual user. So you walk into Amtrak and make your ticket purchase by giving them your 10-digit Student Advantage ID number. You can see how we’re able to build significant profiles of our members.

[email protected]: And the Internet is the next step in this database evolution.

Sozzi: We’re able to now combine demographic information; your home address, your school, school address, year of graduation, email and phone number etc., with online behavioral data (i.e. what you looked at when you were on our site) and we’re combining that with purchasing data we receive from our offline and online partners.

[email protected]: STAD becomes a direct marketer’s best friend.

Sozzi: The targeting capabilities that we have when combined with some of the technology that an Engage or DoubleClick bring to the table, is extraordinary.

[email protected]: Here is where I see STAD’s value from an investor’s viewpoint. A big reason I consider STAD a sleeper.

Sozzi: That is one of the clearest examples where we have not aggressively shared plans with the marketplace and people are just beginning to have an appreciation of the database marketing capabilities that Student Advantage offers.

[email protected]: Another advantage has to be STAD’s 1-2 offline/online media punch.

Sozzi: The convergence model we talked about is no longer taboo. A year or two ago, people thought that pure Internet was hip and sexy and anything offline was extra baggage for a company. Now people are seeing the advantages of the combination of offline/online outreach, channels, media and more importantly, data collection.

[email protected]: By the end of 1999, 90 percent (or roughly 15 million college students) will be online. How many will become STAD members and where will new user growth come from with such high levels of penetration already?

Sozzi: Our membership base is quickly approaching the 1.5 million mark and the important thing to realize is that those are active members, signed up for the existing school year. That is not an aggregate total of everyone signed up in the last seven years. We literally wipe the database clean and start fresh every school year.

I really believe that we can achieve a greater penetration than either AARP or AAA. Why? Because we’re already seeing penetrations well in excess of 50 percent at the schools where we are focusing the majority of our marketing dollars. In theory, Student Advantage could very well end up with a membership base in excess of 10 million.

[email protected]: And the financial model?

Sozzi: It’s overwhelm

ing with commerce, advertising and subscriptions. The metric that we’re beginning to follow is revenue-per-member and we’re starting to see significant year-over-year increases. There is obviously tremendous potential for us to take a pretty big stake in the transactions that our members are making.

[email protected]: Not to mention the value of such a significant user base.

Sozzi: Absolutely, and I think our base is particularly attractive because they have an unprecedented level of Internet access and they’re the most sophisticated users on the Net. People are really beginning to recognize our ability to capture and own the college market in this country and potentially abroad. A big business in itself, but at the end of the day that may simply be the foundation upon which Student Advantage is building an entire consumer communications platform where we don’t necessarily even say goodbye to students when they graduate. We can provide them with the “post-graduate” Student Advantage.

[email protected]: As a young analyst, I’ve seen and experienced the exploitation of the college market by large corporations. Can you give us an idea of STAD’s credibility and commitment to this community?

Sozzi: Well, I think there a number of things you can point to. One is our longevity. We’re not a recent dot-com, come-out-of-nowhere company. We’ve been in business for seven years. Another important thing to look at is the length and breadth of the sponsorships we have. Amtrak signed its first agreement with us three years ago and they just renewed for a four-year term. Also, having schools like Notre Dame outsource their hosting, maintenance, and their electronic rights for commerce and broadcasting to STAD, obviously speaks to our legitimacy. And to now have schools that are purchasing memberships from Student Advantage so that they can enroll their student body as a gift from them, is about as big as an endorsement as you can get.

[email protected]: Could you paint a picture of STAD’s different channels of revenue and how we might see those channels expand?

Sozzi: There are two revenues that we report. The subscription stream and the “other” revenue stream. Our other revenue stream is really comprised of commerce revenues, pure media (offline/online) and then media sponsorships and marketing services. The most rapidly expanding is our commerce stream. It goes back to our revenue model at Student Advantage, which is commerce-driven and a function of revenue-per-member.

[email protected]: What I like about your membership program is investors never have to worry about a free model. Unlike Internet access, which is a commodity, food and clothes etc. will always cost something and you’re adding value there.

Sozzi: Exactly right. You can almost expand the revenue base exponentially because not only are you continuously adding new members and growing that base, but as you deepen the relationship with each of those members, your revenue-per-member number goes up.

News Around the Web