SAN FRANCISCO (04/11/2000) - Internet holding company CMGI Inc. said Monday that it had acquired 4.9 percent of Netcentives Inc. and would use the company's rewards-based online marketing system to promote CMGI properties. An executive said the deal marked CMGI's first move to strengthen its brand awareness among consumers.
CMGI acquired the stake in a stock-for-stock swap. The companies did not disclose the terms of the deal. Based on stock quotes at the end of day Monday, though, the deal was worth $43.2 million. Andover, Massachusetts-based CMGI will develop a branded online incentive system that gives points to Web surfers who visit sites in which it owns stakes, including AltaVista Company. Holders can redeem the points for airline tickets and merchandise through Netcentives.
Its wide range of holdings - from online auction site uBid.com to Internet marketing companies to portals and content sites like Lycos - have earned it a high profile among investors, but the average surfer is unaware of the CMGI brand. The company wants to increase its visibility so that, along with its capital, it can lend its name to sites in which it invests.
"This is a step in the direction that will provide more end-user branding for CMGI," says Bill White, the company's marketing VP. "We plan to do more consumer-facing branding in the next few months."
CMGI plans to use the new system to attract and retain visitors to Web sites run by the Internet companies in which it owns stakes. The company owns and operates 16 companies, and has made minority investments in 50 more. CMGI will offer its rewards program at reduced rates to each company in the network. Each network site that features the new program will offer incentives to induce visitors to visit other sites on the network.
The deal guarantees at least $10 million in revenues for Netcentives over the next three years. The San Francisco-based online marketing firm sells ClickRewards points to e-commerce companies, such as PlanetRx and Barnesandnoble.com. The companies then try to build site traffic and retain visitors by handing out the points. ClickRewards participants can redeem their points for frequent-flier miles and other merchandise. A host of companies compete with Netcentives, including Cybergold and MyPoints.
In trading Monday, Netcentives shares gained 16 percent, or $3.75, to close at $27.25. CMGI shares fell 10.5 percent, or $9.81, to close at $83.94 Monday.