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Netcentives Inc. is a provider of Internet loyalty, direct marketing and promotion products and services used by Web sites to drive consumer behavior. 6,000,000 shares of common stock; all shares by the Company. $10 - $12 The offering is expected to take place on or about October 13, 1999. Netcentives believes that it is a leading provider of Internet loyalty, direct marketing and promotion products and services used to drive consumer behavior. Netcentives' flagship program, the ClickRewards Network, is a powerful online promotion and loyalty program that allows e-commerce sites to reward consumers with ClickMiles, a digital promotion currency, for making online purchases. The ClickRewards Network was launched in March 1998, and as of September 23, 1999, included over 2.0 million members who have earned, in the aggregate, over 310 million ClickMiles. Members include those who have either earned ClickMiles from participating merchants, enrolled in the ClickRewards program at our Web site or a third party Web site, participated in a sweepstakes in which ClickMiles are a prize, or joined the ClickRewards Network in any of the ways we regularly develop. The ClickRewards Network includes e-commerce companies from a broad range of industries. These e- commerce companies purchase ClickMiles from us and award them to consumers in order to convert browsers to buyers, increase average purchase size, drive repeat purchases and build loyalty to their sites. Representative companies in the ClickRewards Network include large, established Web sites who have been a part of the ClickRewards Network for an extended period of time and are ranked by Media Metrix as being among the top 500 advertising supported Web sites, such as barnesandnoble.com, E*TRADE, macys.com, OfficeMax.com and Preview Travel, as well as smaller, newer Web sites who have joined the ClickRewards Network more recently, such as Cooking.com, eBags, eNutrition, PlanetRx and ShopSports. Our technology allows consumers to earn rewards currency at the point of purchase on sites throughout the Web and to track and manage them in their own personal account at a central Web site. As of June 30, 1999, we had derived substantially all of our revenues from the ClickRewards Network and our technical consulting services. Utilizing the technology platform we have developed for the ClickRewards Network and our expertise with promotional products and services, we have expanded our product offerings to provide Custom Loyalty Networks. Custom Loyalty Networks are promotional programs for portals, companies with major brands and other Web sites with substantial membership that use a customized currency. The currency and network are branded with our customer's identity. We launched our first Custom Loyalty Network for Looksmart in July 1999 and have signed contracts to develop Loyalty Networks for the GO Network and Lycos that we expect to launch in the fourth quarter of 1999. We have also launched Enterprise Incentive Solutions programs with four corporate customers. These are programs through which corporations use ClickMiles to motivate and reward employees, partners and stakeholders. We have also begun to offer a broad array of complementary services to our ClickRewards merchants and Custom Loyalty and Enterprise Incentive customers. In addition to the technical consulting and development services we have historically offered through our Netcentives Professional Services organization, we have also begun to offer marketing, consulting, on- line advertising and sponsorship, joint marketing programs and e-mail direct marketing. We have exclusive agreements with eight major airlines for the use of their frequent flyer miles in points-based Internet promotions networks. These relationships allow consumers to redeem ClickMiles one-for-one for frequent flyer miles from American Airlines, British Airways (USA), Continental Airlines, Delta Air Lines, Northwest Airlines, TWA, United Airlines and US Airways. These exclusive agreements give our ClickRewards merchants the ability to attract and retain online shoppers using a compelling, relevant and differentiated rewards currency. They also give our merchants access to frequent flyer program members, a set of consumers that we believe has a demographic profile closely aligned with that of online consumers. According to Jupiter Communications, 41% of online consumers are also members of frequent flyer programs. 2 <PAGE> In addition to frequent flyer miles, ClickRewards and our other programs offer redemption options such as merchandise and other travel awards. In order to drive purchases at the merchant Web sites participating in the ClickRewards Network and to make our products more valuable to them, we actively recruit a consumer membership base for ClickRewards. Consumers participating in our ClickRewards and Custom Loyalty Networks can learn about offers and track and redeem their loyalty currencies at a centralized Web site for each network. In addition, for ClickRewards merchants and our Custom Loyalty Network customers we offer a variety of direct marketing services. These services include collecting information about consumers and their purchasing behavior, offering e-mail direct marketing using this information and managing merchant promotions. Risks Our business is subject to risks. In particular, we have incurred losses since our inception, including losses of $14.1 million in 1998 and $16.1 million for the first six months of 1999. Our accumulated deficit as of June 30, 1999 was $34.7 million, and we expect to continue to incur losses for the foreseeable future. Furthermore, we have a limited operating history and limited revenues from operations, and we operate in a highly competitive market. These risks, as well as others that are important to our business, are detailed in the Risk Factors section beginning on page 5. Inception Years Ended Six Months Ended (June 21, 1996) December 31, June 30, to December 31, ----------------- ----------------- 1996 1997 1998 1998 1999 --------------- ------- -------- ------- -------- <S> <C> <C> <C> <C> <C> Consolidated Statements of Operations Data: Total revenues......... -- $ 9 $ 647 $ 127 $ 3,021 Loss from operations... $ (273) (4,265) (14,408) (5,205) (16,596) Net loss............... (266) (4,180) (14,111) (5,131) (16,149) Basic and diluted net loss per share........ $(0.97) $ (5.70) $ (8.58) $ (3.68) $ (5.10) Shares used to compute basic and diluted net loss per share.... 273 734 1,644 1,396 3,167 | ||||||||||||
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