Stamps.com 2009 Annual Report Download - page 11

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TABLE OF CONTENTS
We believe that our customers choose our PC Postage service over that of other PC Postage competitors because of our
superior user interface and our larger breadth of features. For example, we are the only PC Postage service that is tightly
integrated into the native capabilities of Microsoft Office for use with Office’s mailing capabilities such as mail merge or
envelope printing, we support more address books than any other PC Postage software, and we are the only company that offers
the additional customer choice of our Themed and Photo NetStamps labels. Based on USPS data and our own estimates, we
believe that as of the end of 2009 approximately 80% of all PC Postage subscription customers were our customers (excluding
estimated customers paying for postage on a pure transaction-based, no-monthly-fee plan).
Based on USPS data and on our own estimates, we believe that PhotoStamps is the category leader in USPS’s customized
postage program. 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 its competitors.
Other Competition . We also compete with traditional methods of accessing US postage, such as postage stamps, USPS
retail locations, and USPS 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 our customers choose our service over these methods of accessing
postage because of convenience and the availability of capabilities and features that are not available through these traditional
methods. We believe customers choose traditional methods over our solutions as a way to obtain postage without paying
additional fees above the face value of postage. In our high volume shipping solution we also compete with alternatives to the
US Postal service for package services such as FedEx and UPS.
Industry Overview
Business Market Size
Our PC Postage mailing and shipping service is currently targeted primarily at U.S. small offices, home offices, small
businesses and enterprises, and within these segments we target both mailers and shippers. We believe the number of businesses
that we can serve with our current products are as follows: (1) 14 million income-generating home offices; (2) 4.4 million single
location small businesses of 5 employees or less (typically using our single user Pro service); (3) 1.5 million single location
small businesses of 6 to 100 employees (typically using our Pro or our multi-user Premier service); (4) 2.1 million multi-location
small businesses, which represent 4.7 million separate locations; (5) 117,000 medium and large businesses over 100 employees,
which represent 1.3 million separate locations (typically using our Enterprise service). In total we estimate that there are 22
million businesses, which represent 26 million locations that are the primary target for our current service. In addition we believe
there are 24 million non-income generating home offices such as those used for corporate after-hours work or telecommuting,
and our solution is also applicable to that segment. We also have consumers that use our service.
US Mail Volume
According to the USPS Fiscal 2009 Annual Report, the total US Postal Service revenue was $68 billion during its fiscal year
ended September 30, 2009. Of this amount approximately $48 billion (94 billion pieces) was represented by mail classes that are
addressable using our current solution (First Class, Priority Mail, Express Mail, Media Mail, Parcel Post, international mail, and
special services). We believe that some portion of this $48 billion is a potential market for purchasing and printing postage using
PC Postage.
Based on the USPS Fiscal 2008 Household Diary study, consumer-to-consumer personal correspondence mail volume is
approximately 5.6 billion pieces per year (1.0 billion personal letters, 2.3 billion holiday greeting cards, 1.4 billion non-holiday
greeting cards, and 0.9 billion other). We also estimate that an additional 8.3 billion pieces per year are sent between businesses
and consumers as first class primary business advertising mail, and an additional 6.4 billion pieces per year are sent from
businesses to consumers as First Class correspondence mail. We believe that consumer-to-consumer and business-to-consumer
advertising mail are two potential markets for use of PhotoStamps.
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