Future of MyPoints Tied to Success of Classmates

November 3, 2007 · 0 comments

In mid-August, United Online announced that it was spinning off its Media segment, which consists of Classmates.com and MyPoints, into their own independent company with their own stock. United Online will keep controlling interest, but they’ll be allowing investors to buy into the company (an IPO).
Classmates makes money by selling premium subscriptions, which allow members to contact former classmates. Only problem is, Facebook and MySpace do this for free. At the moment, Classmates is making money — their financials released in October showed a 37% growth in income… but how long can this be sustained with other free sites providing similar services? And with MyPoints lumped in with Classmates in this new company, what will happen to MyPoints when (notice I don’t say “if”) Classmates tanks?
Here’s what some analysts and investors have to say about Classmates Media’s future:
“[Classmates] is fundamentally a joke now due to Facebook and Myspace. It has competitors that have a superior product, yet do not charge any money and the consumers know this.” The author goes on, “Classmates billing and email practices are a bit shady…many people are upset that were automatically rebilled when they did not wish to do so. This method of making money will only work so long, and will likely result in chargebacks.” Source: ClassmatesSucks.net (an investor blog)
Classmates IPO Least Likely to Succeed,” is the title of an article by a stock analyst on TheStreet.com. Some of his rationale is that, again, Classmates charges for what can be found for free on other sites, that MyPoints’ profits are helping to boost the group’s bottom line while it’s not clear how they are otherwise any kind of strategic fit with one another, and that web analytics show Classmates.com’s traffic is down while Facebook is up over 100%.
Another analyst, this time at SeekingAlpha.com, writes, “United Online’s Classmates.com To Go Public, Then Implode.” He says, “…I predict, a large portion of the current paid subscriber base will fall away as people over the age of 30 discover/migrate to Facebook. Once you’ve found someone it is easy to keep them, and there’s no need to continue with a Classmates account.” He continues, “Try as they might, Classmates.com just isn’t Facebook or MySpace. They had their chance and missed the opportunity.”
So, the experts aren’t enthused about the success of the new Classmates Media. Where does that leave members of MyPoints?
In the SEC filing for the Classmates Media spinoff, United Online talks about MyPoints: “Our MyPoints loyalty marketing business faces competition for members from several other loyalty programs that offer competitive online products and services, including Ebates, Upromise and ThankYou Network. We also face competition from offline loyalty rewards programs that have a significant online presence, such as those operated by credit card, airline and hotel companies.”
United Online should be worried, very worried, about that competition. As my 2007 Shopping Rebates Comparison analysis showed, MyPoints was DEAD LAST in comparison to 20 other rewards programs’ shopping rates. How the site is even still in business is beyond me.
MyPoints members, the program has dodged a bullet many times over its rocky history, but this may really be the beginning of the end.

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