The latest company to capitalize on the promise of promotional marketing online may have the best model yet. Industry analysts and an impressive list of customers say Netcentives, a San Francisco company that announces its launch today, has a good chance to set the standard for the Web's promotional currency with its ClickRewards.
Netcentives has one advantage over the dozens of programs, including BonusMail, offering incentive currencies: It has secured from six major airlines three- to five-year exclusive agreements to trade their frequent flier miles online.
However, the exclusivity of one of those deals, with American Airlines, is in question. Schaumburg, Ill.-based MotivationNet just inked similar agreements with American and United for its MyPoints currency. MotivationNet has already purchased American miles for its subscribers to buy with MyPoints.
EXCLUSIVITY IN QUESTION
When told about the deal, Bruce Chemmel, president of AAdvantage Marketing Programs, a division of American Airlines, said, "Under the terms of our current agreement, if they [MotivationNet] are doing the same thing as Netcentives, then we can't do business with them [MotivationNet]."
The Netcentives service, set to launch in November, will allow sites to reward surfers for activities--such as purchasing products, registering with the site's database, or viewing ad offers. Users can then redeem their accumulated ClickRewards Points for a variety of goods and services, including their favorite brand of frequent flier miles.
Participating airlines, which include American Airlines, British Airways, Continental Airlines, Delta Air Lines, Northwest Airlines and US Airways, will allow one ClickRewards Point to be exchanged for one frequent flier mile. The carriers combined represent 80% of roughly 52 million frequent flier members in the country.
Sites planning to issue ClickRewards Points include CNET's BuyDirect; the Internet Shopping Network's First Auction; and GolfWeb. Deals with search engines, and sports, entertainment and financial services sites are also in the works.
"I think Netcentives is in a great position because of airlines," said David Marshak, VP-director of Best Practices in Electronic Commerce at the computer industry researcher firm Patricia Seybold Group. "Their idea is very well thought out. The overlap between frequent fliers and people online is very high."
Randy Petersen, president of Frequent Flyer Services, an 11-year-old consultancy specializing in airline incentive programs, advised Netcentives on its business plan. He said the start-up has achieved quite a coup with the airline deals it has brokered.
MULTIPLE AIRLINE BRANDS
"To be able to offer multiple brands of miles is tough to do in the real world, let alone the digital world. . . . The amazing one is American Airlines, which doesn't do much exclusivity whatsoever," Mr. Petersen said. "I think as much as anything, it's the industry giving its blessing to their business plan."
Mr. Chemmel agreed. "We don't enter into agreements like this lightly. We think [Netcentive's] online promotion model is clearly the best we've seen. They've got a number of Web sites that we think are going to put us in the very best position to expand our brand on the Internet."
Netcentives' other partners include Frankel & Co., Chicago, and Highway One Communications, San Francisco, promotional marketing agencies that will recommend the program to their clients, said Netcentives President-CEO West Shell III.
Copyright September 1997, Crain Communications Inc.