Stamps.com 2007 Annual Report Download - page 8

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TABLE OF CONTENTS
The PhotoStamps Business
During 2007, our PhotoStamps business faced tougher overall economics. We continued to see a decline in the amount of
press coverage for PhotoStamps and a decline in word of mouth referrals as the “newness” of the product wore off. We also saw
a high rate of cancellation marks on PhotoStamps in the mail stream which we believe may have reduced the viral aspects of the
product. Finally, we saw intensified competition including aggressive pricing promotions by one of our competitors. Given this
more difficult business environment, we decided in 2007 to reduce our level of consumer-focused marketing spend to improve
our profitability outlook for the business.
In 2008, we plan to continue our reduced level of direct-to-site PhotoStamps marketing spend with a goal of keeping overall
cost per acquisition at a level that provides an attractive expected financial return. As a result of the planned reduction in
PhotoStamps consumer marketing spending, we expect lower PhotoStamps revenue but improved profitability in 2008.
Some of the major initiatives in our PhotoStamps business in 2008 include:
We also intend to consider alternative business strategies and models to grow the PhotoStamps business line.
Competition
Some of our current direct competitors in the PC Postage and Customized Postage categories include:
Endicia.com/Dymo. Endicia offers a software-based PC Postage service traditionally targeted at shipping-focused
customers, but more recently have offered a feature similar to our NetStamps feature called InstaPostage and a custom postage
offering under the brand name PictureItPostage. Endicia and its affiliate Dymo, a company that offers PC-compatible
professional label writers, offer the InstaPostage product (branded DymoStamps) through Dymo-branded professional label
writers. Customers must first purchase a high end Dymo labelwriter; they then purchase the InstaPostage labels from Endicia
without a monthly service fee. With the DymoStamps service, we believe Endicia and Dymo are targeting smaller customers
with a transaction model versus our subscription model, which tends to attract larger volume small business mailing &
to attract larger businesses. Based on data from International Data Corporation (IDC), we estimate that the new
capabilities in our multi-user service, plus our new multi-location capabilities that are expected to launch in 2008, could
increase our addressable market size by 33% compared to our prior small business addressable market that was primarily
one to five employees and home offices.
•
Market Our Corporate Enterprise Solution
. We plan to continue improving our efforts to target the corporate
enterprise customer segment of our PC postage business. We believe that we have successfully attracted a number of
corporate enterprise customers to our service over the past two years at a low cost per acquisition relative to the expected
lifetime value of those customers. We believe these customers continue to be attracted to us versus a traditional postage
meter based on our dramatically lower total cost of ownership and the greater visibility into individual employee activity.
In 2008, we plan to continue scaling up our enterprise sales & marketing efforts in a cost effective manner. Also, we plan
to hire additional salespersons so long as the cost per acquisition continues to remain attractive relative to the expected
lifetime value. During 2008, we plan to launch both Enterprise Version 1.0 (which will add more financial controls for
enterprise customers managing multiple locations) and Enterprise Version 2.0 (which will include improved enterprise
reporting and improved postage management tools).
• First, we plan to continue working on growing high volume business usage of PhotoStamps through our direct selling
and other efforts. Total orders through our high volume channel represented approximately $3.1 million for 2007, up
210% from 2006.
• Second, we plan to continue pursuing consumer distribution and retail partnerships like Adobe, HP/Snapfish, Apple,
Google/Picassa, and others. Partnerships can provide a cost effective way to manage acquisition cost through a revenue
share, bounty, or other arrangement that aligns the interests of the partnership.
5
TABLE OF CONTENTS
shipping customers. The DymoStamps software does not print shipping labels or print directly on enve-lopes — the other two
features our software supports.