Aptimus Plans Shift to Lead Generation

In a move that analysts said was not surprising, and probably prudent, Aptimus Inc., Seattle, said it will reorganize its business in 2001 to become less dependent on its revenues from e-mail marketing and put greater emphasis on its lead-generation business.

Analysts expect the online direct marketing network to generate total revenues of about $37 million for 2001. Aptimus said its reorganization should not affect that performance. For the third quarter of 2000 ended Sept. 30, the company reported revenues of $5.6 million. However, for the quarter, the last for which figures are available, Aptimus reported a net operating loss of $3.4 million.

The reason for the reorganization, said Timothy C. Choate, chairman/CEO of Aptimus, is to take better advantage of the networking capabilities it gained through the recent acquisition of cost-per-acquisition network XMarkstheSpot. Choate said that the acquisition gives Aptimus a six- to 12-month lead on developing technology to support its network strategy.

XMarkstheSpot delivers opt-in leads to both online and offline customers on a pay-for-performance basis. The company said its permission-marketing network mirrors that of Aptimus in that marketers acquire new customers, consumers are presented with offers and distribution partners share the cost-per-action results.

Aptimus changed its name in October from FreeShop.com Inc. and changed its strategy to a direct marketing network approach. The company offers online marketing solutions that enable marketers to provide consumers with relevant offers geared to their interests.

“We're going to a network model because that's a higher volume business for us,” Choate said. “Our network model is not only working, but we anticipate it ramping significantly during 2001 based on what we've learned to date.”

He said Aptimus now expects to generate 85 percent of its revenue, about $30 million, from lead generation, and 15 percent, or about $5 million, from e-mail marketing and banner advertising services.

Lead-generation revenue consists of fees received, normally on a per-inquiry basis, for delivery of leads to clients. Aptimus also derives a small portion of its lead-generation revenue from the rental of customer names and street addresses to third parties. Lead-generation pricing is based on the cost per lead and varies depending on the type of offer.

In a recent filing with the Securities and Exchange Commission, Aptimus said that its revenue growth “was primarily attributable to continued increases in the size of our e-mail newsletter list, an increase in the number of visits to our Web sites and an increase in the number of e-mails sent to each club member.”

Analysts earlier in the year projected that the company in 2001 would derive 60 percent of its revenues from e-mail and marketing services and 40 percent from lead generation.

Choate said even though Aptimus is lessening its dependence on e-mail marketing, the company is not giving up on that end of its business.

“While we remain optimistic about the future of e-mail marketing, which we believe is superior to traditional direct mail, we feel it is prudent in the short term to lower our projections for that revenue stream given market dynamics,” he said.

Dana Serman, an analyst at Lazard Freres LLC, agreed that e-mail marketing is here to stay. He said Aptimus, like many other companies, has gotten caught in the “dot-com squeeze” that has consolidated the industry and shrunken the pool of advertising dollars.

“There's not a lot of room for small e-mail players in this market,” Serman said. “The market is consolidating around a few leaders, like DoubleClick, 24/7 and Digital Impact.”

He also said that there are too many smaller companies providing e-mail marketing services and the market cannot support them all.

“It's intelligent of them to exploit another niche,” Serman said. “They are not facing easy times in the market right now.”

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