Markets a Double [Daily Double] March 9, 2000 Markets a Double

By Rick Aristotle Munarriz (TMF Edible)
March 9, 2000 Inc.
Ticker: (Nasdaq: LFMN)
Phone: 703-707-8261
Price (3/8/2000): $90 1/8

How Did It Double?
Are you among LifeMinders' millions? If so, odds are you weren't one a year ago. Back then was just cutting its newborn teeth. Sure, the company had been founded back in August 1996, but it wasn't until 1999 when the master plan jelled. The company that would evolve into the leading online marketer was working its way up to just 300,000 members last March.

An ambitious marketing campaign, complete with aggressive payouts to affiliates for landing more users, and word of mouth referrals from existing members grew the company in a hurry. By the end of June the company claimed 2.3 million subscribers. By year's end the tally was up to 7 million. And, earlier this month, LifeMinders announced that the 10 million threshold had been crossed.

In November, LifeMinders went public selling 4.2 million shares at $14. The surge in signups has been matched by impressive upticks in the share price.

A simple service everyone seems to want. A small company does good. It's something out of a feel-good movie, isn't it? George Bailey raises a toast to Clarence. It's a Wonderful

Business Description
The service is free. Users register their names and e-mail addresses and then personalize the service through preference settings. Dentist appointments? Fido's birthday? Kiss a Fool Week? Every week LifeMinders sends out a mailing customized to the user's selections.

The company then tacks on select tips and sponsor deals from more than 200 advertisers, broken up into 16 different categories like Family, Health, and Personal Finance. Users can sign up directly through company's website or get paid in the process by going through referral sites like iGain and Spedia.

Financial Facts

Income Statement
12-month sales: $14.0 million
12-month income: ($32.8 million
12-month EPS: ($1.61)
Profit Margin: N/A
Market Cap: $1829.5 million

Balance Sheet
Cash: $55.5 million
Current Assets: $70.8 million
Current Liabilities: $10.2 million
Long-term Debt: $0.1 million

Price-to-earnings: N/A
Price-to-sales: 130.7

How Could You Have Found This Double?
While LifeMinders never closed below its IPO price, it didn't take off at first either. Two weeks into the stock's public life it could still have been had in the teens. For data munchers, that was a late November opportunity that brought new meaning to Thanksgiving.

LifeMinders, as well as fellow online marketer MyPoints (Nasdaq: MYPT), were about to soar in the the months to come, but the huge membership growth had preceded that. Nothing is ever easy in the market, but the bonus is there for the taking when there is a gap between improving fundamentals and an eventual stock move to price in the growth. came public shortly after signing up its 5 millionth e-mail subscriber. Seven months earlier the membership rolls ran only to 300,000. In a market that rewards eyeball acquisitions and market share growth over profitability, the gains were almost unavoidable.

Where to From Here?
What to do with all these leads? LifeMinders knows. It launched a Business-to-Business (B2B) service where it can serve its advertisers with private label online marketing. Its Opt-In program is also generating decent sales beyond its original advertising intake. LifeMinders simply offers its new members the option to sign up with sponsor programs, and if they do, LifeMinders gets a commission. And since success feeds success, it's likely that a company that was able to line up more than 10 million subscribers is also not going to suffer in hunting down new ad accounts. Incidentally, it doubled its fleet of advertisers this past quarter alone.

While it's a bit misleading, it's amazing to consider that LifeMinders now has half as many subscribers as America Online (NYSE: AOL). Of course, there is a major difference between weekly mailings and the ability to hit a subscriber every moment she spends online. But that is why one is a $125 billion company and the other is just around $2 billion in market capitalization.

There are concerns naturally. The next 10 million users may not come as easy. And, even if they do, the membership growth rate itself will slow. Landing so many subscribers hasn't been cheap either. While the company reported jaw-dropping gross margins of 94% in the December quarter, it will be a long time before that trickles down to the bottom line. The company is spending three times as much in marketing and administrative costs as it is ringing up in all its creative pursuits for revenues.

But if the company is able to retain its users, the expenses incurred now will prove to be money well spent in the long run. And isn't that how Clarence earned his wings?

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