Stocks Fools Love
Net Perceptions, Inc.

By Paul Motter (TMF DotCom)
February 8, 2000

Trading at $55 1/16 as of February 7, 2000

If there is anything I love, it is cool technology. I also love making money. So, could I possibly love anything more than cool technology that helps make money?

Net Perceptions (Nasdaq: NETP) is, technically speaking, a developer and supplier of one-to-one personalization and real-time recommendation technology for websites. What does this mean in everyday language? Net Perceptions has the technology for e-commerce websites to meet and greet customers as they "walk in the door," ask them what they are looking for, intuitively ascertain their preferences by watching what parts of the "store" they click around in, and then to make personal recommendations based on all of the above. Net Perceptions also matches customer shopping patterns against previous shoppers who have shown the same inclinations.

And they do it all in real-time, meaning that beginning with the very first bits of information they can glean about you they start to narrow their focus, and the more they learn about you, the more they are able to create a one-on-one experience with you. One-to-one personalization -- can it get more warm and fuzzy than that?

Many of you have already experienced such personalization with Amazon.com (Nasdaq: AMZN) when they tell you what others like you have been buying. Well, Amazon had to develop that capability on its own, but Net Perceptions is making it (and much more) available to more websites with a proven solution and strategic alliances made with other leading-edge companies.

Net Perceptions already boasts more than 100 customers, including Egghead.com, Petsmart.com, CDnow, eToys, Bluefly, Micron, SkyMall, Tower Records, iVillage, and Ticketmaster Online. On January 5th, the company announced a strategic partnership with the George Soros/Paul Allen, backed by Interworld Corporation (Nasdaq: INTW). The partnership will combine InterWorld's Enterprise Commerce technology, which provides the ability to handle customer demographic databases and stock-keeping units (SKUs) throughout the retail organization, with Net Perceptions's data-mining and customer-preference data into one complete package.

This technology allows retail companies with Web presences to up-sell and cross-market to their online customers. It also allows these retailers to access customer preferences when a customer walks into one of the company's bricks and mortar retail locations and make real-time, real-world recommendations to him based on that information.

Net Perception's technology can also be used to target banner ads on websites according to a customer profile. It also provides direct marketing e-mail products to create personalized e-mail messages for each customer and call center software for customer service centers to have the same personalized selling advantages.

Net Perceptions likes to boast with the following quote: "During the first year, a suggestive selling strategy based on our technology can conservatively contribute 34% of total Web site sales revenue by (1) increasing the conversion of browsers to buyers by 2% each month, (2) increasing order size by 4%, beginning at $35 per average order, and (3) growing the percentage of orders from repeat customers from 30% to 35%." (Information from Jupiter Communications Online Intelligence research, June 1998)

Net Perceptions was incorporated in July 1996, and filed to become a public company in April of 1999. Like many Internet companies, its somewhat lofty current market cap is based on its growth prospects. The stock nearly doubled in January. Such a rapid advancement implies there are risks that the price could go lower. However, as a long-term buy-and-hold pick I believe Net Perceptions is a short-term gamble for long-term results.

The current First Call consensus for the company's growth rate is 50% per annum. In 1999, the company lost $0.63 a share, projections for 2001 have it losing $0.04 a share, and profitability is expected in 2002 with earnings of $0.60 a share. For the 9 months ended September 30, 1999, revenues totaled $8.8 million, up from $2.8 million a year before. Net loss totaled $9 million, up from $3.1 million. The float is a mere 3.7 million share, which means that volatility is highly likely.

In my opinion, the company has a leadership position in a high growth area -- e-commerce personalization based on tracking customer patterns. It has already created alliances to add their customer tracking technology to leading website personalization companies such as BroadVision (Nasdaq: BVSN), one of the best performing stocks of 1999, and InterWorld. Its customer base is growing daily as more e-commerce companies realize the importance of customer profiling and one-to-one marketing on the Web.

If the idea of one-to-one personalization sounds romantic to you, then you have to love Net Perceptions for its outstanding technology and leadership position.

Next: Alpha Industries, Incorporated »

Net Perceptions Company Information:
Trades on the Nasdaq under symbol NETP
Website: www.netperceptions.com

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