Aptimus Closes FreeShop.com, Axes 70% to Focus on Technology
In its second dreary announcement in less than a week, the company said it's abandoning its flagship site and will likely cut 2001 guidance during a postponed earnings report next month.
Online direct marketing and technology player Aptimus said Tuesday evening that it’s now officially just a technology company, after cutting 70 percent of its staff and announcing plans to close the consumer-focused Web sites it operates.
The Seattle-based company said its new iteration — as a direct marketing infrastructure provider — would focus all of its resources on building out its eponymous, offer-serving network.
This means that during the course of the next several months, Aptimus will discontinue all activities related to its consumer Web sites, including FreeShop.com, Desteo.com, and CatalogSite.com. It is not known how many of the 150 positions it eliminated since the beginning of the year were from these areas, although the firm said it is now only employs about 60.
The move follows the firm’s decision in November to change its name from FreeShop.com and to increase its focus on its lead-generation, cost-per-action network business, which enables publishers to carry marketers’ context-targeted promotions and offers on their sites.
Company executives said Tuesday that the barely six-month old network business is of greater value to clients than its own Web sites, and has greater growth and profitability potential.
“Our network strategy has shown significant promise since its initial launch last August,” said Aptimus president and chief executive Tim Choate. “During this same period, site-based advertising products such as banners, boxes and newsletters have suffered. For Aptimus, this industry-wide problem has made a strategy that includes our site business difficult to support.”
Aptimus said that within three months of its launch, the Aptimus Network was producing more than 100,000 orders daily. But in November, Aptimus acquired San Francisco-based XMarkstheSpot Inc. to enhance its offer product with dynamic offer-serving technology. That $2.5 million cash-and-stock acquisition necessitated a halting of Aptimus’ network expansion while the technology was integrated.
Now, Aptimus executives said the firm has begun to rebuild its network momentum after the acquisition, and added that the company has unnamed major online and traditional direct marketers expressing “great interest” in Aptimus’ network strategy and technology solution.
In conjunction with the staff cuts and restructuring, Aptimus also said it has “significantly” reduced marketing and advertising expenses, since most of those served to promote its Web sites.
The company anticipates that these reductions, combined with the layoffs, will help reduce operating costs to less than $3 million per quarter. That figure, however, does not include payoffs to publishers. Aptimus has never broken out its publisher payments separately, although its expenses in third quarter were $5.8 million. During that period, it earned $5.6 million in revenues and posted a pro forma net loss of $3.4 million, or $0.22 per share. (Additional costs, such as cost-of-revenue and accounting charges, contributed to the net loss.)
Aptimus said it also has revamped its sales strategy, putting more emphasis on regional sales teams in New York, Atlanta and San Francisco, rather than basing sales efforts out of its Seattle headquarters. The firm said the move would allow its sales staff to focus on large-scale clients.
Despite what could be a long-term payoff, the restructuring will take its toll on near-term returns, with lower revenue expected for 2001. According to Thompson Financial/First Call estimates, Wall Street predicted that the firm would post a loss of $0.20 per share for the fourth quarter of 2000, and $0.90 for the year.
The company said it would be postponing its fourth-quarter and full-year 2000 earnings call from Wednesday until March 2, to assess the restructuring’s effects on future guidance.
However, the firm said it still expects to achieve profitability this year, and that it has enough cash and marketable securities — about $25 million by the end of 2000 — to reach that point.
The announcement is the second piece of bad news for Aptimus in as many weeks. Friday, the company said that it had decided not to recognize a large chunk of revenue for fourth-quarter, and said that it would report a greater-than-expected loss as a result. It did not give guidance as to just how great a loss investors should expect.
