United, through its wholly owned NewVentures subsidiary, the arm that sets Internet strategy for the airline, has bought MyPoints.com for $112.5 million (EUR133 m).
MyPoints is an unprofitable $63.5 million (2000 sales) company that rewards its members with points, which they redeem for shopping and services of MyPoints` advertisers/partners.
MyPoints will become part of United`s NewVentures unit, which was started only seven months ago to help the airline capitalise on e-commerce opportunities. According to United, the airline did a little more than 15% of its business—$755 million—over the Web last year, up 89% from 1999. Now, United adds MyPoints` 16 million subscribers to its own database of 40 million frequent flyers. It`s unclear how many of MyPoints` subscribers are active participants in the service, but the company bills itself as the largest e-mail marketer and rewards programme on the Web. What`s also unclear is exactly how United will use MyPoints` proprietary technology to reach potential customers and get relevant travel and account information to existing frequent flyers. But MyPoints Chief Executive John Fullmer says the pair can reduce their customer acquisition costs by pooling resources and broaden the demographic guaranteed to advertisers. That is, if United NewVentures and MyPoints can prove there is not a lot of overlap between their subscriber lists.
But there is no denying that United will use MyPoints to plug holes. “One of the things that`s valuable is their expertise in technology and direct marketing,” says United spokesman Andy Plews.
United clearly thought there was value in MyPoints, paying $2.60 a share, a 63% premium over its last closing price, on June 1. MyPoints shares were up 60% in midafternoon trading today, to $2.56, which is down more than 80% from its 52-week high. United was down over 2% to $35.14.
In the short term, this deal means a lot more to investors in MyPoints than United. After all, a $112 million deal is nothing compared to its pending acquisition of US Airways. But in the long term, doing more business (and marketing) over the Web can help reduce overhead and boost profits. Some of these smaller companies have only become more attractive acquisition targets. There will be many more.
Jumping into one of the most troubled sectors of the Internet economy, the parent of United Airlines said yesterday that it would buy MyPoints.com, an online marketing company, in a deal valued at $105 million.
MyPoints runs a variety of programmes that gather information about consumers, both online and off, and uses it to sell products and services to them. But it has been shrinking rapidly as the Internet advertising market has hit hard times. Its revenue in the first quarter was $10 million, down from a peak of $18.7 million in the second quarter of 2000.
United is intent on building up its United NewVentures subsidiary, which operates the web site United.com and portions of its frequent-flier programme as well as holding United`s investments in several Internet travel companies. These include Priceline.com, Hotwire and Orbitz, an online travel agent it helped start that began operating yesterday.
United said it expected that MyPoints, which is based in San Francisco, would continue to operate under its current name and management. United will not merge its Mileage Plus frequent-flier program with the MyPoints` flagship rewards program, which gives users points when they read advertising e-mail or make purchases at certain merchants. The typical MyPoints user does not fly often enough to make airline miles valuable to them. But United will offer travel discounts as rewards for MyPoints points. The deal would also give United a broader array of technology and potential marketing deals that it could link to its frequent-flier program. American Airlines and AOL Time Warner have created a program that gives American AAdvantage miles for online purchases, using technology from Netcentives, an ailing competitor to MyPoints.