Stamps.com: Maintaining a Leadership Position 481Milosevic, and the stained blue dress made
famous during President Bill Clinton’s
impeachment hearing. Stamps.com said it
had rejected approximately 9 percent of
83,000 images that were submitted during
the test due to issues of taste or copyright
infringement. While the USPS abruptly ter-
minated the test after just seven weeks, they
later announced that controversial images did
not disturb them as much as it seemed.
Nicholas F. Barranca, vice president of prod-
uct development for the Postal Service,
claimed “We don’t think that’s really our
role, as an arm of the federal government, to
get involved in censorship.” The post office
insisted they were more concerned about the
potential for fraud with the new stamps, and
worried that their machines were having
trouble recognizing the photo stamps as valid
postage.
In May 2005 the USPS authorized
Stamps.com to continue marketing photo
stamps in a one-year test program, followed
by a second one-year test, with a possible
extension for a third year (which would end
in May 2008). Two other vendors, Endicia
and Zazzle (a joint venture with Pitney
Bowes) are also involved in the test program.
Stamps.com currently markets its Photo-
stamps through a unique Web site
(www.photo.stamps.com). The current con-
tent restrictions published on that Web site
give the company the sole discretion to deter-
mine what is an appropriate image, and
authorize it to charge a $10 processing fee
for any image it rejects. The Stamps.com
policy further states that the company will
reject any images it considers to be obscene,
offensive, pornographic, deceptive, vulgar, or
violent, along with any image that depicts a
celebrity, politician, government leader, or
convicted criminal, or any image that
infringes on the copyright, trademark, or
other intellectual or moral right of any indi-
vidual or corporation. Technically, even an
innocuous family photo can be rejected for a
photo stamp if a person cannot prove that he
or she owns the rights to the photo. The
company also offers a library with the logos
of 32 NFL teams, 60 colleges and universi-
ties, selected NASCAR drivers, and photo-
graphs from designer Anne Geddes for cus-
tomers to use on their Photostamps. The
cost of the stamps, which are sold in sheets of
20 with varying postage amounts, is approx-
imately $10 over the value of the postage.
Despite the price and the restrictions, dig-
ital image stamps are popular with con-
sumers; Stamps.com reports it sold over 21
million photo stamps through February- The company is also a leader in this
business, reporting that they garnered 78
percent of the customized postage sold in the
third quarter of 2006.
Stamps.com is now hoping to expand its
marketing of Photostamps to businesses.
The company reports that 18 percent of its
photo stamp sales in the third quarter of
2006 were made to businesses. It appears to
be an attractive market; the USPS estimates
that businesses mail over 8.6 billion pieces of
first-class mail to consumers each year.
THE FIGHT TO STAY ON TOP
Stamps.com has performed well in the past
few years. Total revenue has grown from
$16.2 million in 2002, to $21.2 million in
2003, to $38.4 million in 2004 and $61.9
million in 2005, with estimated revenue of
$83.5 million in 2006. A company presenta-
tion from November 2006, posted on the
Stamps.com Web site, states it has a strong
financial position with $116 million in cash
and investments with no debt, and that it has
achieved a solid financial model with a stable
and predictable revenue model and good
growth prospects. Stamps.com also reports
it has a strong U. S. patent portfolio, with 53
patents issued and 77 pending. This strong
financial and technological position, along
with the company’s reputation and name
recognition, will definitely help it to stay on
top.
However, there are some areas for future
concern. Despite its leadership position in
PC postage and custom stamps, the compa-
ny is locked in battle against two tenacious