Amazon to Charge Nextcard for Right to Reach its UsersA pact announced yesterday between Amazon.com Inc. and online credit issuer NextCard Inc. is an example of how Amazon can transform its massive base of registered shoppers into a non-retail revenue stream by charging other companies for the right to access its customers.
The Seattle e-retailing behemoth gave NextCard exclusive rights to market a co-branded Visa card through Amazon's shopping site beginning in early 2000. In return, NextCard, San Francisco, agreed to pay Amazon as much as $150 million in fees over five years.
Amazon's standing position has been that it doesn't want to sell its customer list to outside marketers. But with 13 million registered shoppers, the company's compiled database is a serious asset in its own right. Amazon can extract big payments from other e-commerce concerns that want to reach that audience, and the NextCard deal is a sure sign it intends to do just that.
The $150 million would nicely bolster revenue for Amazon, which had total sales of $610 million in 1998. NextCard might pay less depending on how many new accounts it lands through the deal. The two firms set "confidential account goals," according to Dan Springer, NextCard chief marketing officer.
Neither firm discussed how or where in the www.amazon.com site NextCard will court consumers. Reports said last week that NextCard hopes to sign up between 1 percent and 2 percent of Amazon's shoppers.
"We think that the alliance of Amazon.com with NextCard creates one of the most powerful online shopping partnerships," said NextCard CEO Jeremy Lent, whose firm competes online with the likes of Bank One Corp.'s First USA unit.
The deal marks the fourth - and by far the largest - co-branding agreement NextCard has struck on the Web. The firm has similar pacts with United Features Syndicate's Dilbert cartoon, online rating guide BizRate.com, and virtual golf store Chipshot.com.
Amazon's customers are an exceptionally appealing commodity in the eyes of NextCard, said Springer. "Amazon.com has the Web's most attractive and loyal customer base, and one we believe is ideally suited for the NextCard. By signing this agreement, NextCard has secured a powerful distribution partner for the product," he said.
Amazon also said it will pay $22.5 million for a warrant giving it the right to buy up to 4.4 million shares of NextCard common stock, or roughly 9.9 percent of the company. The term on the warrants is three years.
NextCard said its customers spend an average of five times more online than other credit card holders. Features on the firm's "first true Internet Visa" include 8-second online credit approval, instant credit lines for qualifiers and Web access to account information. The card can be used offline as well.