Stamps.com 2005 Annual Report Download - page 8

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Competition
The following is a summary of our current direct competitors in the PC Postage and Customized Postage categories:
Endicia.com . Endicia.com is a small, private U.S. company that launched a software-based PC Postage service commercially in 2000.
The company also sometimes goes by the names Envelope Manager Software, or PSI Inc. In May 2005, Endicia also launched a custom
postage offering under the brand name “PictureItPostage.”
Pitney Bowes, Inc. Pitney Bowes is the current market leader in the U.S. traditional postage meter business, with revenues of
approximately $5.5 billion in fiscal 2005. Pitney Bowes launched a software-based PC Postage product called ClickStamp Online in April
2000. In the third quarter of 2004, Pitney Bowes appeared to discontinue marketing ClickStamp Online at the monthly fee of $4.99, and to
begin marketing an entirely new PC Postage offering by the name of ShipStream for a monthly fee of $18.99. During 2004, Pitney Bowes also
began offering an Internet-based service for printing a single label for use in shipping a package that does not require a monthly subscription
fee. In July 2005, Pitney Bowes introduced a custom postage offering through a partnership with Zazzle.com, Inc., a small, private US
company that specializes in custom products.
We also compete with traditional postage meters, such as those offered by Pitney Bowes. We believe that customers choose the
Stamps.com PC Postage service over traditional postage meters primarily to save money. We also believe that Stamps.com’s PC Postage
service offers superior capabilities to postage meters in certain areas, such as the ability to integrate tightly with small business productivity
applications, and the ability to easily monitor and track USPS packages.
We also compete with traditional methods of accessing U.S. postage, such as postage stamps, U.S. Postal Service retail locations, and U.S.
Postal Service online services such as Click-N-Ship. All of these methods are typically available with no additional markup over the face value
of postage. We believe that customers choose our service over these methods of accessing postage as a matter of convenience because of the
breadth of the services we offer.
We believe that customers choose Stamps.com’s PC Postage service over that of other PC Postage competitors because of our more
complete and sophisticated overall service offering. Stamps.com is the only PC Postage service that is tightly integrated into Microsoft Office
for use with Office’s mailing capabilities such as mail merge or envelope printing, and Stamps.com supports more address books than any
other PC Postage service. Based on US Postal Service data and our own estimates, we believe that as of the end of 2005 85% of all PC Postage
subscription customers were Stamps.com customers.
We believe that PhotoStamps is also the category leader for customized postage. Based on US Postal Service data and on our own
estimates, we believe that approximately 83% of all customized postage sold in the US during 2005 was PhotoStamps. When compared to
competitive offerings, we think PhotoStamps offers the best product and overall customer experience in the industry.
PhotoStamps was also the
first commercially available customized postage product and we believe it has the best brand recognition among all of the competitive
products.
Overall, we may not be able to maintain a competitive position against current or future competitors as they enter the markets in which we
compete. This is particularly true with respect to competitors such as Pitney Bowes, which has greater financial, marketing, service, support,
technical, and other resources than we do. Failure to maintain a competitive position within the market could seriously harm our business,
financial condition and results of operations. If we are unable to compete successfully, particularly against large, traditional providers of
postage products like Pitney Bowes, our revenues and operating results will suffer.
Industry Overview
Growth of Internet Commerce
Stamps.com’s core mailing and shipping service is currently targeted primarily to U.S. small offices, home offices and small businesses.
The small office, home office and small business market represent a large and growing customer segment. According to reports from market
research firm International Data Corporation (“IDC”),
there were a combined 47 million small businesses and home offices in the United States
in 2005. For 2005, IDC estimated that small businesses with less than 100 employees numbered 8.1 million of which 84% had fewer than 10
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