Netcentives Inc - Early History

EARLY HISTORY

Netcentives Inc. was the brainchild of Ng, a former Microsoft Corp. employee and Harvard Business School student, and Tilenius, who attended Stanford Business School and had worked for both Oracle Corp. and Intuit Inc. In 1995, Tilenius and Ng began developing ideas for an Internet start-up company and zeroed in on the idea of creating an Internet rewards program similar to the rewards programs used by major airlines. In April of that year, the partners read an article in The Wall Street Journal that claimed frequent flyer miles were becoming the "second national currency." In an October 1998 Business 2.0 article, Tilenius stated: "seeing that article set off a roller coaster of emotions. We were scared to death that someone else would beat us to it."

In June of 1996, Netcentives was incorporated and the duo immediately began promoting their idea to venture capitalists. By November, Information Technology Ventures had invested in the firm; a second round of financing followed in September of the next year. Tilenius and Ng then chose West Shell III, a seasoned marketing executive, to head up the new company. Testing of the rewards program, called Click Rewards, began in December 1997 and the site was officially launched in March of 1998.

The Click Rewards program was set up to reward online shoppers and to foster brand loyalty. As part of the program, Netcentives purchased frequent flyer miles from airline companies and then sold the miles to e-merchants such as 1-800-Flowers and Barnesand-Noble.com. Those merchants then used the miles to entice online shoppers. The shoppers earned Click-Miles for making online purchases and used the ClickRewards Web site to redeem the ClickMiles for airline tickets, as well as other merchandise. By the time the program was launched, Netcentives had secured exclusive supplier agreements with American Airlines, British Airways, Continental Airlines, Delta Air Lines, Marriott Hotels and Resorts, Northwest Airlines, US Airways, and Westin Hotels & Resorts. Its merchant network included Broderbund Software, Burke Marketing Research, CNET Direct's BUYDIRECT, Golfweb, Macy's, Wells Fargo, and Yahoo!.

During December of 1998, merchants in the Click Rewards network secured more than $50 million in sales. By early 1999, nearly 655,000 consumers had become ClickRewards members. At that time, the network's merchant base had grown to 50 companies and Netcentives had awarded close to 1 million frequent flyer miles. The success of the start-up was due in part to the innovative management style of Tilenius and Ng. Wanting their executive staff to have the best possible management advice, the pair gave out extra shares of Netcentives to the staff. The executives could then give the shares to the mentor of their choice, in exchange for five hours per month of confidential business advice. The six-month program proved to be successful for both the executives and the company. Mentors from Visa, Intuit, and Wells Fargo were so impressed with the program that they signed up for Netcentives' services.