MyPoints Owners: “Significant Expected Underperformance”

I got a chance today to glance through the 10-Q quarterly report for United Online, MyPoints’ parent company, that was actually filed last month. There was an interesting notation way down on page 25 about disappointing performance for the MyPoints program: “updated projections for 2010…indicated significant expected underperformance compared to previously-forecasted results for 2010.”
As a result, the company re-allocated $49.1 million, 20% of MyPoints’ value, to “goodwill.” Goodwill is defined as “the amount paid for a company over book value.” Or to put it another way, their assets are now worth $49.1 million less than what they had been worth on the books.
Ouch.
There’s another interesting thing about this, and that’s the word “expected.” Expected underperformance. United Online isn’t expecting MyPoints to do well — they have internal information that leads them to believe that MyPoints is going to do poorly, even moreso than their presumably uninspired forecast for 2010. Perhaps indicators have been trending downward, maybe they’ve lost some key accounts, rumor has it that MyPoints lost some personnel at the VP level…whether they bailed or were booted, who knows.
If you look at the overall performance of United Online (that’s pages 29 and 30), it’s sinking like a rock — the only thing even half-way holding its ground is its FTD division, and although their sales are increasing, their expenses are increasing even MORE — so their overall income is dropping. And, if you sneak a peek down at page 44, it says that there are “significant limitations on our ability to use cash flows generated by the FTD segment for the benefit of [the other two segments.]”
United Online’s other two segments are Classmates Media (the “underperforming” MyPoints + Classmates.com which gets revenue from PAID accounts…and who pays for that when you can connect with former classmates on Facebook for free?) and their Communications segment (which is paid dialup internet service…yes, can you believe they’re still trying to make money off that?).
How bad must YOU suck for your crappy parent company to say you suck? Pot, meet kettle.
United Online tried to sell off MyPoints, bundled with Classmates and called Classmates Media, three years ago and changed their mind at the last minute when they saw they wouldn’t get what the unit was worth. This $49.1 million goodwill allocation, two years LATER, is a pretty big admission of “Oh, man, we are so upside-down with this MyPoints company…”
That is, in my humble opinion. (Lawyers, go away.)
“I’m a member of MyPoints. What does all this mean to me?”
There are a couple of things MyPoints can do to help their financial situation. First, they may drop the number of points they pay for shopping, surveys, and signups. Fourth quarter starts next week, and as we all know, that’s when people shop. By letting members accumulate fewer points, that drops their debt. (Points that we members hold constitute Accounts Payable, a debt, to them.)
I’d also bet that they’re going to implement a pretty substantial devaluing of points — in other words, they may increase the number of points needed for redemption. They MAY hold off until after the holidays to do it, because if they do it now, they run the risk that members will shop elsewhere.
The worst risk you run as an online shopper using a rewards program is shopping through a program that gives you points instead of cash back. At the time that you shop, you’re thinking, “I’m getting 5 points per dollar at this store, I’m spending $100, that will get me 500 points or a third of the way to X reward.” But after you shop, and before you redeem, the rewards program can go, “Uh-uh-uh! That reward doesn’t cost 1500 points anymore… it’s now 2000. Sorry, buddy!”
And just like that, your shopping reward just got devalued…after you earned it.
Yes, I’m getting back up on THAT soapbox again.
When you shop through websites that provide a percentage cash back, your shopping reward can’t be devalued. You know when you place that order that you’re earning x% in CASH. The worst risk you’re running is that the program might increase the minimum requirement to cash out, and I gotta tell ya, in over a decade of using rewards programs, I haven’t seen that happen ONCE, although I’ve seen programs DROP the minimum to cash out several times.
When you get past the mental hurdle of thinking of cashback percent as a fraction of a whole, and points as being a whole balance that you can see quickly growing into the hundreds and thousands in your account, you realize that the cashback shopping rewards are REAL CASH. The points are like little question marks floating around in the sky: what are they worth now? (It depends on which reward program you’re using — points are worth different amounts at different rewards programs. It depends on which redemption you’re aiming for…and at what denomination — you may get a better value by saving up for a bigger denomination of the same merchant’s gift card.)
And the bigger question is, what are those points going to be worth when you’re ready to cash out?
I’ll conclude with an observation I make every year when I do my annual ranking of shopping rewards rates: points programs are at the bottom of the list. Do the math and you’ll see that I’m right.
My advice: Click on the emails for points. Cash out as soon as you can, so you’ll know they won’t up the cost for a bigger reward before you can reach it. But when it comes to shopping…go with something concrete, a cashback site, where you know what you’re earning and where you’ll almost always earn a better shopping rate.
Cash is king.
If you’re not a member of MyPoints and would like to sign up, please use my affiliate link here. Please heed my advice in this post, however! Avoid it for shopping and cash out as soon as you reach the minimum payout.

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