Stamps.com 2005 Annual Report Download - page 24

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PhotoStamps
®
On May 17, 2005, the Company publicly launched its second market test of PhotoStamps, a new, patented form of postage that allows
consumers to turn digital photos, designs or images into valid U.S. postage. Popular categories of images used on PhotoStamps include family
and friends, pets, vacations, and celebrations. PhotoStamps is used as regular postage to send letters, postcards or packages. The product is
available via our separate website at www.photostamps.com. Customers upload a digital photograph or image file, customize the look and feel
by choosing one of ten different border colors to compliment the photos, select the value of postage, and place the order online. Each sheet
includes twenty individual PhotoStamps, and orders arrive via US Mail in a few business days.
Since the beginning of the second market test, PhotoStamps has been prominently featured in the national media: for example, in the
December 19, 2005 issue of BusinessWeek , PhotoStamps was named one of best products of 2005. From May to December 2005, we shipped
more than one half million sheets, or more than 10 million individual PhotoStamps.
Based on data available from the US Postal Service and our
own estimates, we believe that approximately 83% of all customized postage sold in the U.S. during 2005 was our PhotoStamps.
We are currently authorized to sell PhotoStamps for a one year market test that began May of 2005 and goes through May of 2006. We
have begun discussions with the Postal Service about the next steps for PhotoStamps and are encouraged by those discussions so far. In
addition, upper management of the US Postal Service has made several positive public statements about customized postage, and the US Postal
Service also mentioned the customized postage program as part of their 2006 to 2010 Strategic Transformation Plan which was published
during the third quarter of 2005. While we are hopeful that the USPS will ultimately approve the continuation of our PhotoStamps offering
following the end of this second test period, there are many risks related to this offering. See “Risks Related to our Industry” in the Risk
Factors section.
Supplies Store
With the launch of NetStamps in July 2002, we began selling NetStamps labels directly to our customers via our Supplies Store
(previously known as our “Online Store”) which is available to our customers from within our PC Postage software. The Stamps.com Supplies
Store has since expanded to sell themed NetStamps labels, shipping labels, other mailing labels, dedicated postage printers, OEM and private
label inkjet and laser toner cartridges, scales, and other mailing and shipping-focused office supplies. We plan to continue to increase the
breadth of products offered in our Supplies Store, in order to enhance convenience for our customers.
Branded Insurance
We offer Stamps.com branded insurance to our users so that they may insure their mail or packages in a fully integrated, online process
that eliminates any trips to the post office or the need to complete any special forms. We also offer official US Postal Service insurance
alongside our branded insurance product. Stamps.com Insurance is provided by Parcel Insurance Plan and underwritten by Fireman's Fund.
Recent Developments
During 2005, we focused on improving our core product software features and launching new products to generate incremental revenue
from our core customer base. With the new software features, we have continued to strengthen our recurring revenue stream by increasing our
customer base and attracting new customer segments. With the new product offerings we have been able to capture incremental revenue from
our existing customer base, while increasing customer efficiency and decreasing customer costs. In 2005, Stamps.com achieved record
revenues and full-year profitability.
In April 2005, we announced that PhotoStamps would be available under authorization of the US Postal Service for a second market test
which began on May 17, 2005 and which is expected to last one year. From the launch of the second test to December 31, 2005, we shipped
more than one half million sheets, or more than 10 million individual PhotoStamps.
In June 2005, we released version 5.0 of our PC Postage software featuring a redesigned user interface with simpler navigation and richer
web content. We also launched a beta version of our Stamps.com Enterprise, a product release that enables corporate customers to manage their
corporate-wide mailing and shipping expenses.
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