The explosion of information and opportunity that is the Internet has
forged a double-edged sword for businesses.
On the plus side, a company can quickly and economically reach millions
of potential customers through its own Web site and through banner ads
and hyperlinks strategically placed on innumerable other sites in
cyberspace.
On the minus side, so can every other company. This creates a wealth of
choices for consumers, and a huge challenge for Web entities trying to
retain customers and build repeat business.
Enter companies like MyPoints.com, which provides online direct
marketing and loyalty programs for cyber-merchants combating churn and
itchy mouse fingers.
The San Francisco-based company, known until last month as Intellipost,
filed an IPO last Thursday to raise $69 million. MyPoints.com plans to
trade on Nasdaq under the ticker symbol MYPT. Underwriters are
BancBoston Robertson Stephens, Bear Stearns, Salomon Smith Barney and
Wit Capital.
MyPoints.com claims to have a database of 2 million customers who have
filled out profiles detailing their interests. By filling out the
surveys, customers – or members – agree to allow MyPoints.com to e-mail
them product and service pitches on behalf of client advertisers.
Sounds like an invitation to be spammed, but the payoff for customers is
that when they click on these “BonusMail” ads, they can accumulate
reward points that can be redeemed for gifts. Among the 200-plus
companies working with MyPoints.com are Barnes & Noble, Disney, eBay,
Macy’s, Nissan, Sprint and Tower Records.
Advertisers pay MyPoints.com a fee based on ads delivered, generated
leads and completed online transactions. In return, MyPoints.com
provides them customer acquisition and retention tools.
Given the current uncertainty among online businesses about the value of
banner ads, this direct marketing approach may become more popular.
MyPoints.com cites a forecast by Forrester Research that direct
marketing could comprise up to half of total online ad dollars by 2001.
Last year, Forrester reports, direct marketing made up 21 percent of online ad
spending.
If you accept projections from Forrester and other research firms that
online advertising expenditures will run from $5 billion to $10.5
billion within four years, then MyPoints.com has achieved a critical
prerequisite for a successful company – it’s squarely in a large market.
This increases the odds that the company can grow into profitability,
and it will need to, for MyPoints.com has accumulated $11.2 million in
debt since its inception in November 1996. Revenue in 1998 – the
company’s first full year of commercial operation – was $1.29 million.
MyPoints.com’s greatest competitive threat comes not from similar
companies such as CyberGold and Netcentives, but from portals and
uber-etailers such as Amazon.com, which has shown a voracious appetite
for multiple revenue streams.
While its target market and strategy are a sound combination,
MyPoints.com is very much an early-stage company. To build revenue
momentum, it must rapidly establish the MyPoints brand. Since it’s
essentially starting from ground zero, that’s a tall order.
