Netcentives Inc - Expansion

EXPANSION

While Click Rewards became increasingly popular, CEO Shell focused on expanding Netcentives' other offerings. In late 1998, the Panttaja Consulting Group Inc. was acquired and folded into the Netcentives Professional Services unit, which offered consulting services to e-commerce merchants. In May of 1999, the company also introduced its Enterprise Incentive Solutions program entitled ClickRewards@ Work. By using Netcentives' technology, enterprises were able to set up Web-enabled employee reward programs. Companies including Microsoft, Cisco Systems, and EventSource.com used the program to reward and motivate employees. In July, Netcentives also introduced its Custom Loyalty network through which businesses were able to set up customized incentive programs.

In October of 1999, Netcentives went public, offering 6 million shares and raising $72 million. By the end of the year, the Click Rewards program had nearly 2.5 million consumer members and 85 merchant members. The company also had secured a leading position among those in the promotional industry.

Netcentives entered the new millennium intent on continuing its growth. The firm made three key acquisitions during the year that were designed to bolster its product offerings. MaxMiles Inc., a producer of technology that enabled customers to view their reward and frequent flyer information online, was purchased in January 2000 in order to beef up Netcentives' technology platform. That purchase was followed by the March acquisition of UVN Holdings Inc., a leading collector of consumer shopping trend analysis. The deal also included an equity stake in Golden Retriever Systems, which provided information on 90 percent of U.S.-based payment card transactions. In April, Netcentives purchased Post Communications as part of its plans to combine its incentive programs with direct e-mail marketing.

The firm expanded through strategic alliances as well. In January of 2000, it teamed up with American Express to launch BlueLoot, an incentive program designed to reward American Express Blue credit card holders. That month, America Online (AOL) bought a stake in Netcentives. As part of the deal, Netcentives provided the infrastructure necessary to operate AOL AAdvantage, a frequent flyer program owned by AOL and American Airlines, and also created a rewards program for ICQ, AOL's Web-based chat community.

Netcentives also secured several lucrative contracts in 2000. E-marketing firm Coolsavings.com Inc. hired the firm to develop and operate a rewards program. In December, 3Com Corp. contracted the company to develop a customized incentive program to reward its business partners. Novell Inc. and CNN also chose Netcentives to operate their incentive programs. Revenue rose to $43 million, an increase of 447 percent over the previous year. However, despite its impressive revenue figures and powerful client list, Netcentives' stock price faltered. Shares trading at $80 at the end of 1999 fell to just $9 in April of 2000, and down to 69 cents in June 2001. Like many firms in the dot-com industry, Netcentives was hit hard by the slowing U.S. economy and a lack of investor confidence. At the same time, two key management figures left the firm unexpectedly. In May of 2001, Shell stepped down as chairman, and the firm's chief financial officer, Jack Longinotti, left to pursue other opportunities.

Nevertheless, Netcentives continued to provide products and services designed to optimize customer, partner, and employee relationships. With more than 4 million Click Rewards members and business relationships with more than 240 companies, Netcentives' management remained focused on future growth.