Stamps.com 2006 Annual Report Download - page 6

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to pursue partnerships like our existing partnerships with Apple, CafePress, Google (Picassa), Hewlett-Packard (Snapfish), Adobe and others.
These partnerships provide a cost effective way to manage acquisition costs through a revenue share or bounty arrangement that aligns the
interests of the partnership.
Third, we will continue to focus on growing our high volume business orders. During 2006 we developed a sales channel for high volume
PhotoStamps business orders that took orders for approximately $1 million in fiscal 2006 revenue. However, we believe the lack of pre-sort
discount rates continues to be a barrier to acceptance of the product to businesses. We are continuing to work on convincing the USPS that it
makes sense to add pre-sort rates to our PhotoStamps capabilities. We expect to continue to increase our efforts in the business area of
PhotoStamps in 2007, especially if the USPS authorizes some type of discounted rate.
Services and Products
We offer or have offered the following products and services to our customers:
•
PC Postage Service. Our U.S. Postal Service-approved PC Postage service enables users to print information-based indicia, or
electronic stamps, directly onto envelopes, plain paper, or labels using ordinary laser or inkjet printers. Our service currently supports
USPS classes including First-Class Mail®, Priority Mail®, Express Mail®, Parcel Post®, Media Mail®, Bound Printed Matter, and
international mail. Customers can also add USPS Special Services such as Delivery Confirmation™, Signature Confirmation™,
Registered Mail, Certified Mail, Insured Mail, Return Receipt, Collect on Delivery (“COD”) and Restricted Delivery to their mail
pieces. Our service requires only a standard PC, printer and Internet connection. Our free software can be downloaded from the
Internet or installed from a CD-ROM. After installing the software and completing the registration process, customers can purchase
and print postage 24 hours a day, seven days a week. When a customer purchases postage for use through our service, the customer
pays face value, and the funds are transferred directly from the customer’s account to the U.S. Postal Service’s account. The majority
of new customers currently signing up for our service pay a monthly convenience fee of $15.99. Our current customer mix includes
monthly convenience fees ranging from $4.49 to $24.99 or more based on individual pricing and promotions.
Stamps.com offers its customers three primary ways to print PC Postage. First, our NetStamps® feature and Photo NetStamps®
feature enables customers to print postage for any value and most classes of mail on NetStamps or Photo NetStamps labels. After they
are printed, NetStamps and Photo NetStamps can be used just like regular stamps. Second, our shipping feature tab allows customers
to print postage for packages on plain 8.5” x 11” paper or on special labels, and to add electronic Delivery or Signature Confirmation
at discounted prices. Third, our mailing feature tab is typically used to print the postage and address directly on envelopes or on other
types of mail or labels, in a single-step process that saves time and provides a professional look. Our PC Postage services also
incorporate address verification technology that verifies each destination address for mail sent using our service against a database of
all known addresses in the U.S. In addition, our PC Postage services have been designed to integrate into common small business and
productivity software applications such as word processing, contact and address management, and accounting and financial
applications.
•
PhotoStamps®. On May 17, 2006, we publicly launched our third market test of PhotoStamps, a patented form of postage that allows
consumers to turn digital photos, designs or images into valid U.S. postage. With this product, people can now create customized U.S.
postage using pictures of their children, pets, vacations, celebrations and more. PhotoStamps is used as regular postage to send letters,
postcards or packages. The product is available via our separately-marketed website at www.photostamps.com. Customers upload a
digital photograph or image file, customize the look and feel by choosing a border color to complement the photo, select the value of
postage, and place the order online. Each sheet includes 20 individual PhotoStamps, and orders arrive via U.S. Mail in a few business
days.
Since the beginning of the second market test on May 17, 2005, PhotoStamps has been prominently featured in the national media. For
example, in its December 19, 2005 issue, BusinessWeek named PhotoStamps one of the best products of 2005. From May 2005 to
December 2006, we shipped more than 1.5 million sheets, or more than 30 million individual PhotoStamps.
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