Stamps.com 2003 Annual Report Download - page 10

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Table of Contents
The PC Postage industry currently contains two other USPS approved vendors. Based on available data, we believe that as of the end of
2003 we had approximately 85% of the total number of PC Postage customers.
The following is a summary of our current PC Postage competitors:
We believe there is a regulatory barrier for new vendors entering the PC Postage market as a result of the USPS certification process which
took us approximately two and a half years to complete. We also believe we have competitive advantages in the PC Postage space which
include the wide range of features available in our service, our technology, our customer base and our broad intellectual property portfolio.
Our Strategy
We have gone through several shifts in strategy since our inception. From 1996 to 1999, our focus was on developing the technology for our
PC Postage service and receiving approval from the USPS to launch our service. Having successfully launched our service in October 1999 and
having raised significant capital during 1999, the focus shifted to growth and entering new markets. From October 1999 to October 2000, we
embarked on an ambitious growth plan that included entry into the multi-
carrier shipping market via the acquisition of iShip.com and entry into
the secure ticketing market via the creation and financing of a separate subsidiary, EncrypTix. Due to this aggressive expansion and lower-
than-expected revenue growth, financial losses increased dramatically. In October 2000, incumbent top management departed and we shifted
our focus to reducing losses, our cash burn rate, and on improving the economics of our core PC Postage service. During 2001, we sold our
iShip business to UPS, stopped pursuing International markets, and shut down our EncrypTix subsidiary. By the end of 2001, we stabilized our
business and significantly reduced our financial losses and monthly operating expenses. During 2002, our focus shifted to improving the
software for our core PC Postage service offering. We scaled back our marketing expenses and concentrated on adding new features to our
software, including the Netstamps and the Shipping Label features. By the end of 2002, our service more effectively met the needs of our
customers and provided significantly greater value. During the first half of 2003, we went through a process of testing all our marketing
initiatives under the new product economics. During the second half of 2003, we began increasing our marketing activity under our most
effective programs.
Our current strategy is focused on growing our PC Postage business in our target small office, home office market. First, we plan to cost-
effectively growing our customer base with a focus on the more profitable $15.99 per month power plan customers. Second, we plan to
optimize our pricing and promotional offers for new customers. Third, we plan to continue to invest in, and optimize the performance of, our
current marketing channels. Fourth, we plan to add new features to our software. Finally, we plan to add new consumables and peripherals for
sale in our online store.
Our Marketing
While our service attracts a broad range of customers, our current marketing efforts are primarily focused on attracting small and home-
based businesses. We market our service in several ways, including the following:
4
•
Envelope Manager
. Envelope Manager is a small, private US based company that launched a software-based PC Postage service in
2000.
•
Pitney Bowes, Inc.
Pitney Bowes is the current market leader in the traditional postage meter business and had approximately
$4.5 billion in revenues in 2003. Pitney Bowes launched a software
-
based PC Postage service in 2000.
•
Online Partnerships. We work with strategic partners to leverage their website traffic, customer base or other distribution in order to
acquire customers for our service. These partnerships provide prospective customers the opportunity to either download our software
from the partner
’
s website or to click
-
through to our website where they can sign
-
up for the Stamps.com service.
•
Software- or Hardware-based Partnerships. We may include a copy of our free software on a partner’s CD-ROM that gets
distributed to their existing or prospective customers, or we may include our software