The parent company of MyPoints.com, United Online, had a webcast last week to discuss their third quarter financial results. And while they tried to put a positive spin on it — MyPoints’ revenues grew in Q3 compared to the prior quarter, which is pretty unusual (usually it does worse in the third quarter than the second) — the numbers tell the tale: the income from operations for their unit, which includes Classmates.com, dropped from $16.9M in the third quarter of last year, to $11.8M in Q3 of this year. Ouch.
In discussing the strategy of the Classmates Media unit (Classmates.com + MyPoints) both in a lovely presentation and in their Q3 2010 Earnings Conference Call last week, the company explained their new “nostalgia” approach to Classmates.com: they’re busy uploading yearbooks to the site and brainstorming ways of bringing in income besides charging for accounts, by playing on folks’ sentimentality — sponsor an “old movies” section! Sell music from their generation! And so forth.
But where does MyPoints fit into this? The answer is…it doesn’t.
This fact was brought out by a caller in the Q&A segment of their webcast, who asked, “In terms of MyPoints, how relevant is MyPoints’ business to Classmates’ business going forward? I mean, are you seeing added interest from potential buyers for that particular business…considering how the Groupon space in the internet is now the hottest space right now? Obviously MyPoints has access to a list of emails that are interested in getting good deals.”
United Online CEO Mark Goldston‘s reply was lengthy but showed it was something he had indeed put a good bit of thought into. His response:
That’s a really good question. Three years ago, we had fully intended to try to find a way to integrate MyPoints and Classmates. Today, with the new nostalgia positioning, that really doesn’t make a lot of sense…
Having said that, the category, and you mentioned Groupon and others, that they are in, categorically, has been percolating and many people think is on the verge of really booming… If you notice the last quarter, the quarter that we’ve just reported today, on MyPoints there was some marked improvement in that business versus what it had been doing in the first half of the year and we were very detailed on previous calls saying that business was having its challenges. That business has started to turn around. And it’s got nice momentum…
If the groundswell that Groupon is helping to fuel in that category continues, then we LIKE where this business is positioned, MyPoints, it’s an independent business, it really does not need to be integrated into Classmates, and there’s all kinds of things that we could potentially do with it.
In terms of whether people are or are not interested in buying it, obviously that’s not something we could discuss. Our job is to create shareholder value, so if we can make that business bigger and better and more profitable, then whether it’s part of United Online or to your comment, whether other people were to approach you, you just have a more valuable asset…
The Groupon Effect should be, logically, a very good thing for the MyPoints business over the next 24 months. We definitely believe that.
Here we go again, folks…another owner talking about the potential for selling off MyPoints.
I think the “next 24 months” thing was thrown in as a red herring. If they feel they can get some value out of MyPoints because of the increased interest in online coupons and deals, I’m pretty sure they’re not going to look at a calendar and go, “Nope, can’t sell, Mark said ’24 months’ in that conference call, so… we’ll call ya back then.”
Here’s my prediction: Third quarter revenues were up at MyPoints. Fourth quarter will be up because, duh, it’s the holiday shopping season. Next February or March when Q4 financials are released, they’ll try to spin this as a trend — “MyPoints has years of experience marketing to bargain hunters and millions of email addresses to show for it and two strong quarters so, gentlemen, start your bidding!” And they’ll want to get those offers in pretty quickly, because the first quarter always tanks after the holidays. And who knows how long “the Groupon effect” will last. The interest is there NOW, sell it while it’s sellable.
How will this affect MyPoints members? My Magic 8-Ball says, “Cannot predict now.” But, and I know I run this one point into the ground, MyPoints pays members POINTS for shopping, not cash back. Points can be devalued any time after you earn them. United Online is talking about the possibility of selling the company. Who knows what a new owner might choose to do with the points in people’s accounts. Increase the number to cash out? Get rid of gift cards and only give you entries into prize drawings?
When you’re choosing which rewards program to use for shopping this holiday season or at ANY time, why would you go with MyPoints? Their shopping rates are horrid enough, but when you tack on the added uncertainty about the program’s future ownership, and the variable nature of points in general…?
You’re not risking losing anything but time by clicking MyPoints emails, completing surveys, playing Spin’n'Win, and answering polls… but when it comes to shopping? Cash is king.
For more history on the program, see my archive of posts related to MyPoints.