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Little Appeal for Online Stamp Sales


By all accounts, last week should have been a banner week for the Internet postage industry. With new rates from the Postal Service taking effect, waves of customers trudged to local post offices and stood in lines, waiting to buy 37-cent stamps and other updated postage. The huddled masses would seem to have been prime targets for Internet stamp providers, which allow customers to sit in the air-conditioned comfort of their homes and offices, pumping out new postage from inkjet printers.


But executives of the two leading Internet postage companies, and Pitney Bowes, acknowledge that their offerings lack consumer appeal, despite years of research and development, millions spent on marketing and hundreds of millions in capital investments.

Pitney Bowes has played down its ClickStamp product, leaving the door wide open for, which analysts said is the lone dot-com survivor in what was once a hotly contested Internet category. has not exactly pounced on the opportunity, but analysts said it could be showing more signs of life in the coming weeks, when it is expected to win approval from the Postal Service for a new product it hopes will attract many more customers.

"The company is starting to execute on their strategy, which means they might be able to start making some serious money," said Mike Crawford, an analyst with B. Riley & Company, an investment firm based in Los Angeles. has pinned some of its hopes on a new product called NetStamps, which allows users to buy postage online and print sheets of stamps. NetStamps has just completed a test of the service with the Postal Service. Otherwise, the online postage process remains little changed.

Customers must still download software to their PC's, and endure a lengthy registration process, to protect against fraud. Then they must feed envelopes into their printers to have specially coded stamps imprinted on them. Each piece of printed postage can be used only in conjunction with the specified recipient, and senders must mail the envelopes within 24 hours or the postage expires.

For all this, customers pay a membership fee of either $4.50 a month for light use or $16 for higher volumes of postage before paying anything for the postage itself. The service works best for small businesses, executives and analysts said, because such businesses frequently use mass mailings, and can ultimately save time using this process.

But for average consumers and small-business owners with postage needs beyond mass mailings, "this service is too burdensome," said Ken McBride, chief executive of

The supposed advantage of NetStamps, by contrast, is that customers will be able to avoid a long software download process.

Compared with the relatively large sofware file the old system requires users to store on their computers, the new process requires only that users buy special paper with security elements, like water marks, built in. This new approach, Mr. McBride said, will allow a user to "print a sheet of stamps, throw them in the drawer and use them when they need to," instead of logging on every time a person needs to mail a letter.

With this system, Mr. McBride said he expected an increase not only in the amount of postage customers buy each month, but in the number of customers as well. now has about 280,000, Mr. McBride said. "We have many more customers who've left us than we have current customers," he said. "And with this service, we're solving the No. 1 complaint of thse who left."

Investors have shown more tolerance for the company than for most other dot-coms. Shares of closed at $4.15 on Friday, down from the $5.22 reached in mid-May, but above their level through all of last year. The upturn is testimony to the improving prospects of a business that raised $455 million in public offerings in 1999, but then wasted much of it with a bloated staff and expensive marketing deals.

Mr. McBride has devoted much of the last 18 months to overhauling his management team, laying off workers and closing money-losing subsidiaries like EncrypTix, an online ticketing operation.

He also searched for loopholes in marketing contracts, like the three-year, $56 million deal signed with America Online in 1999, which included an escape clause if AOL's management changed. (When AOL bought Time Warner, paid AOL $1 million and washed its hands of the deal.)

But while the company reduced its cash-burn rate how much more is spent than taken in to nearly zero from the previous level of $12 million a month, the pace at which it rolled out product innovations approached zero, too. With NetStamps and other products ready to hit the market in coming months, "looks like it now has a viable business plan" Mr. Crawford, the analyst, said.

By introducing products that are easier to use, Mr. Crawford said, the company was more likely to put a dent into the market of small office, home office owners a market he estimated at 45 million Americans.

As for competition, Mr. Crawford said that there were four companies authorized by the Postal Service to offer online postage, but that Pitney Bowes is the only other company with a significant number of customers. "And Pitney isn't investing much into their ClickStamp product," he said.

Pitney Bowes executives say the company is not aggressively marketing the Internet postage service because it has a postage-meter product that it considers better for small-businesses. Pitney's meter "is as easy as putting on a stamp," said Neil Metviner, president of Pitney Bowes Direct, which handles the small-business market. "I don't believe it's that easy with Internet postage."

Mr. Metviner was aware of the impending changes from, but stopped short of calling them improvements. "The main things my customers are looking for are simplicity and saving time from going out to purchase something," he said.'s NetStamps product does not address those concerns, he said, because customers must still buy special paper.

While is understandably eager to have the Postal Service give a green light to the new service and prove its competitors wrong, the company is in an unusual position among dot-com players: it can wait if it must. The company's cost-cutting efforts worked so well last year that it had $192 million in cash at the end of March, up from $188 million in September. is in the process of buying back $20 million worth of stock, but Mr. Crawford, the analyst, said it has few other options for spending its cash, aside from offering a dividend to stock holders or purchasing another company.

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Stephanie Diani for The New York Times
Galen Sabean with stamps he printed at his home in Long Beach, Calif., by using the Web site. The company is trying to improve the convenience of purchasing stamps online.


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