Stamps.com 2007 Annual Report Download - page 23

Overview
Stamps.com® is the leading provider of Internet-based postage solutions. Customers use our service to mail and ship a
variety of mail pieces including postcards, envelopes, flats and packages, using a wide range of USPS mail classes including
First Class Mail®, Priority Mail®, Express Mail®, Media Mail®, Parcel Post®, and others. Our customers include home
businesses, small businesses, corporations and individuals. We were the first ever USPS-licensed vendor to offer PC Postage®
in a software-only business model in 1999. On August 10, 2004, we publicly launched a market test of PhotoStamps®, a new
form of postage that allows consumers to turn digital photos, designs or images into valid US postage. Any reference in this
document to the PC Postage business excludes our PhotoStamps business.
We were founded in September 1996 to investigate the feasibility of entering into the USPS’s Informa-tion-Based Indicia
Program and to initiate the certification process for our PC Postage service. In January 1998, we were incorporated in Delaware
as StampMaster, Inc., and thereafter changed our name to Stamps.com Inc. in December 1998. We completed our initial public
offering in June 1999. Our common stock is listed on the NASDAQ Stock Market under the symbol “STMP.”
Our principal executive offices are located at 12959 Coral Tree Place, Los Angeles, California, 90066, and our telephone
number is [phone].
Section 382 Update
Under Section 382 of the IRC, a change in ownership can occur whenever there is a shift in ownership by more than 50
percentage points by one or more 5% shareholders within a three-year period. When a change of ownership is triggered, our
NOLs may be impaired. We estimate that, as of December 31, 2007, we were approximately at 34% compared with the 50%
level that would trigger impairment of our NOLs. As part of our ongoing program to preserve future use of our NOLs, we
strongly urge anyone contemplating owning more than 800,000 of our shares to contact us before doing so.
Results of Operations
Years Ended December 31, 2007 and 2006
Total revenue for 2007 increased 1% to $85.8 million from $84.6 million in 2006. PC Postage subscriber related revenue,
including service revenue, product revenue and insurance revenue in 2007 was $67.0 million, an increase of 5% compared to
$64.0 million in 2006. PhotoStamps revenue in 2007 was $17.9 million, a decrease of 5% compared to $18.8 million in 2006.
The PC Postage marketing channels we use to acquire customers include partnerships, online advertising, affiliate channel,
direct mail, enhanced promotion online channel and others. In the enhanced promotion channel, we work with various
companies to advertise our service in various places across the Internet. This channel typically offers an additional promotion
directly to the customer by the partner in order to get the customer to try our service. Because our enhanced promotion channel is
characterized by higher customer attrition rates and lower customer acquisition costs than our other channels, we believe it is
more instructive to look at our enhanced promotion channel separately from our non-enhanced promotion channels.
We estimate that subscriber related revenue for customer acquired through our enhanced promotion channel for 2007 was
$9.5 million, a decrease of 8% from $10.3 million in 2006. We estimate that subscriber related revenue for customers acquired
through our non-enhanced promotion channels for 2007 was $57 million, an increase of 7% from $53.7 million in 2006. The
decrease in enhanced promotion subscriber revenue and increase in non-enhanced promotion revenue was attributable to a shift
in our marketing strategy and customer acquisition spending to focus on our non-enhanced promotion channels.
21
TABLE OF CONTENTS
We define paid customers as ones from whom we successfully collected service fees at least once during the quarter. The
following table sets forth the total number of paid customers originally acquired through our non-enhanced promotion channels
on a quarterly basis:
We believe that the increase in paid customers in 2007 was attributable to our increased customer acquisition spending. For
customers originally acquired through our non-enhanced promotion channels, our average subscriber related monthly revenue
Year First Quarter Second Quarter Third Quarter Fourth Quarter
2007
267,000
270,000
281,000
293,000
2006
268,000
261,000
251,000
258,000