FTD.com 2006 Annual Report Download - page 8

Loyalty Marketing Services
Our MyPoints loyalty marketing service provides retailers an efficient means to reach a targeted online audience while providing consumers
a compelling way to earn rewards while shopping and engaging in other online activities. MyPoints provides advertisers and retailers online
direct marketing solutions such as rewards-based Web shopping, targeted emails based on self-reported and behavioral data, and online surveys
that pre-qualify its members for targeted offers. MyPoints’ members are rewarded with points for clicking or shopping through MyPoints’
emails, for shopping through the MyPoints Web site, and for completing surveys. The points are then redeemable for gift cards and other
benefits with various partners. Hundreds of major brands have used MyPoints to market their products and services.
Our strategy for our loyalty marketing services is to increase the number of users by generating additional awareness regarding its benefits
and to encourage utilization of the service as an online shopping portal. Our strategy is also to increase the number of major advertisers on our
service.
Loyalty Marketing Industry Background
Online loyalty marketing is a relatively new market and is based on the loyalty programs that the airlines began offering in the early 1980s.
These programs are generally based on a points system where consumers are provided benefits in the form of redeemable points for purchasing
products and services from specified vendors. There are only a limited number of companies that have designed points-based loyalty rewards
program specifically for Internet-related activities. It is estimated that revenues from online advertising will grow to more than $25 billion in
2010, an increase of nearly 60%, when compared with 2005. The growth of online advertising may provide a significant opportunity for online
loyalty rewards programs.
SOURCES OF REVENUE
We generate revenue from billable services and online advertising transactions.
Billable Services Revenues
In general, we charge our pay accounts in advance of providing a service, which results in the deferral of billable services revenue to the
period in which the services are provided. We have experimented with a variety of pricing plans, both in connection with offers extended to
some of our existing accounts and through external marketing channels. We intend to continue testing a variety of pricing plans in the future to
determine their impact on profitability, pay account acquisition, conversion rates of free accounts to pay accounts and retention rates. We intend
to regularly evaluate the desirability and effectiveness of our pricing plans and may, in the future, make changes to these plans. We may also
offer additional fee-based products and services as well as a wide range of discounted metered plans and promotions, such as one or more free
months of service or discounted rates for an initial period or an extended commitment.
Advertising Revenues
We provide advertising solutions to marketers with both brand and direct response objectives through a full suite of display, search, email
and text-link opportunities across our various properties. We also use targeting technologies and site integrations in order to provide effective
solutions.
We designate the initial Web site displayed to users of our access services during an Internet session. This Web site, or “start page,”
displays sponsored links to a variety of content, products and services, including Internet search. We also display a toolbar on access users’
screens throughout their online access sessions that is generally visible regardless of the particular Web site they visit. The toolbar contains
Internet search functionality and a variety of buttons, icons and drop-down menus. We generate revenues
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