Netcentives

» see netcentives.com as it lived, on the wayback machine

~ the obituary ~

Netcentives was founded in 1996 by Eric Tilenius and Elliot Ng, both MBA students at the time, and its product was a unit of account. ClickMiles went into testing in December 1997 and launched properly in March 1998 as ClickRewards: you shopped at a participating merchant, you earned ClickMiles, and you converted them into frequent flyer miles at American, British Airways, Continental, Delta, Northwest or US Airways. The pitch to merchants was that miles were the one loyalty currency Americans already respected.

It worked as a growth story. By the end of 1999 ClickRewards had nearly 2.5 million members, the company ran the Delta SkyMiles Shopping and United MileagePlus Shopping networks, and AOL took a stake. The October 1999 IPO sold 6 million shares and raised $72 million. Two acquisitions followed fast, MaxMiles in January 2000 and Post Communications in April 2000, the second of which turned Netcentives into an email marketing company as well as a loyalty one. Revenue reached $43 million in 2000.

The losses were not on the same scale as the revenue. Netcentives lost $184.7 million in 2000, then $41.6 million in the first quarter of 2001 on $17 million of revenue, then $284 million in the second quarter on $15 million. The stock went from about $80 at the end of 1999 to 69 cents by June 2001. Miles had to be bought from airlines in cash, so every mile a shopper earned was an invoice arriving at a company whose merchants were themselves going out of business.

The Chapter 11 petition is dated 9 October 2001 and covers the subsidiaries as well, with the trade press reporting it on the 10th. CEO Eric Larsen said the loyalty programs would keep running, an asset auction was set for November, and the email business found a buyer. As of 7 December 2001 Netcentives itself had ceased all operations and begun a wind-down that was expected to finish by the end of March 2002. The Chapter 11 case was not closed out as a liquidation until 21 December 2004, which is the date some databases carry as the ending and which is three years too late.

~ the case file ~

~ the currency problem ~

A loyalty scheme that pays in its own points can always print more. Netcentives chose to pay in someone else's, which is what made ClickMiles feel real and also what made the business arithmetic impossible. Airline miles are a liability the airline sells, so Netcentives was a wholesaler buying an expensive product and handing it out to build an audience it planned to monetize later.

The 2000 numbers show how that ends. $43 million came in and $184.7 million went out, in a year the company was still being described as a leader in its category.

~ the six airlines ~

ClickMiles only existed because six US carriers agreed to honor them, and that agreement is the whole reason the product stopped at the American border. In 1999 I was fifteen, dialing in at 33.6k on a line my parents paid for by the minute, and a mileage account on Northwest Airlines was not something anyone around me had or wanted. Turkish shopping online at the time meant bank transfer and a phone call to confirm.

The odd part is that the mechanic survived the company perfectly well. Airline shopping portals still work exactly like this, badge and all, a quarter of a century later. Netcentives built the plumbing and then paid retail for the miles flowing through it.

~ the last eight weeks ~

Between the filing and the shutdown there were roughly eight weeks in which ClickRewards was still live and still accruing. Members were earning a currency issued by a company in bankruptcy protection, with an auction scheduled that nobody could promise would include the program they were saving into.

~ the brand kept walking ~

ClickRewards came out of that auction owned by an entity called CRC, Inc. and carried on without the company that invented it. clickrewards.com was still serving a working storefront in 2006 and still answering in 2013, with American Airlines AAdvantage terms on the page and a copyright line reading 1998 to 2002, frozen at the year of the handover.

So the thing people remember outlived its maker by more than a decade while looking, in its footer, like it had stopped in 2002. Netcentives is the grave here. ClickRewards is the headstone somebody kept repainting.

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