*Online Loyalty Points Provider Makes Major Move Offline

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MyPoints.com today made a significant move into the offline world by forming a strategic alliance with Catalina Marketing -- a move that analysts say that online loyalty points' providers must make.


The extensive deal, which included an equity swap, will include the use of MyPoints.com currency at the 13,100 supermarkets currently issuing coupons generated by the Catalina Marketing Network.


Online points providers must make the leap into the offline space in order to grow their businesses as well as the value of their currency, according to analysts. "Any loyalty program that exists only on the Internet is not even a partial loyalty solution because over 90 percent of retail activity is still taking place off of the Internet," said Richard Barlow, CEO of Frequency Marketing Inc., Cincinnati. "Consumers are still spending most of their dollars in the real world not the cyberworld. Unless a loyalty program can bridge that gap, there's a tremendous weakness in the program."


In all likelihood, this alliance is a sign of things to come in the online loyalty field, said industry analyst Randy Petersen, editor of InsideFlyer magazine, Colorado Springs, CO. "It used to be you started offline and moved online. Soon there will be no such thing as online and offline, other than which medium you choose to transact with."


Other deals have been struck between online and offline promotional entities, most notably the arrangement Netcentives made with American Airlines and AOL to create a marketing infrastructure that linked AOL Rewards with the airline's AAdvantage miles to create AOL AAdvantage miles.


There are rumors brewing that competitors will follow MyPoints.com's lead. "I'll be surprised if Netcentives doesn't make [another] announcement," said Petersen. "They are rumored to be chatting with [offline companies]."


Additionally an unnamed competitor is poised to announce a deal in the coming week.


According to Steven Markowitz, CEO of MyPoints.com, San Francisco, it will be difficult for others to vie with his company in the offline world. "Our competitors have focused on creating points for e-commerce sites," he said. "I'm not sure they have the vision or relationships to move into the offline world the way MyPoints.com has."


In addition to the Catalina partnership, the company announced a strategic alliance with NextCard on Monday. The ultimate consummation of this partnership will be the MyPoints MasterCard, which will be available in the second quarter. MyPoints members will earn points for all purchases made both online and offline using the card.


On Jan. 27, the site acquired the Alliance Development Group, a deal that will allow MyPoints.com to become the awards currency at all supermarkets owned by The Kroger Co. and Albertsons. "The supermarket is the linchpin for our clicks-and-mortar strategy," said Markowitz.


Barlow said he is skeptical about the combination of online points users and grocery shoppers. "I'm not entirely sure how many of those seven million [MyPoints members] are shopping diligently in the grocery store," he said. "They may not be the primary grocery shopper in the family."


Under the Catalina agreement, MyPoints.com will also become the preferred awards provider for SuperMarkets Online Inc. and its ValuPage service. The two will develop a co-branded coupon site that will provide incentives to join MyPoints.com as well as to use the service. ValuPage's Web Bucks will only be able to be converted into MyPoints.


MyPoints has piloted a number of other programs to further its reach. "MyPoints Offline!" is currently being tested in Sacramento. The program allows consumers to register up to five of their credit cards with MyPoints. The company then presents them with opportunities such as "shop at CVS between 7 p.m. and 8 p.m. and earn five points per dollar." When consumers do so, their MyPoints accounts are credited for the purchases. "MyPoints Dining!" is another new program allowing members to earn points if they eat at restaurants within the Transmedia network. The company also has an agreement with Sprint where users can earn five points for every dollar spent on long-distance service.
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