Excite@Home has agreed to buy web-based greeting card company Bluemountain.com for $780m in cash and stock. Bluemountain.com has an estimated 9 million monthly users, and Excite@Home executives want to use that traffic to generate new users for the Excite.com portal and for the @Home consumer broadband service. Excite@Home will issue 11 million shares, valued at $430m, and will hand over $350m in cash. It will also assume all outstanding employee options. The partners hope to close the transaction before the end of the year. But that’s not all: Bluemountain.com expects to see significant growth over the holiday season, which is typically its busiest time of year. If the company achieves its targets, it could earn as much as $270m worth of extra Excite@Home shares, bringing its on-paper valuation to over $1bn – not bad for greeting cards.
As a matter of fact, Bluemountain.com is The Blair Witch Project of the internet, having reached the top of the charts on word of mouth alone. Media Metrix rates the site as the 14th most trafficked on the web, not to mention the third busiest e- commerce destination after Amazon.com and eBay Inc. The site handles one million transactions per day, yet Bluemountain.com has hardly advertised its services at all. Perhaps more than any other site on the web, Bluemountain.com has done an incredible job of creating viral growth around occasion-driven commerce, explained Excite@Home president George Bell; they are the undisputed leader in the greeting card space. Simply on the strength of the appeal of their content, without any marketing or distribution relationships, Bluemountain.com has become one of the most popular sites on the web.
Apparently Bluemountain.com’s users have been asking for email, calendaring services, online address books and so on. Not only can Excite@Home provide these services through Excite.com, it can also use the information thus gleaned to generate more revenue. For example, if a user records her mother’s birthday in her Excite.com calendar, the service can prompt that user to send her mother a Bluemountain.com greeting card on the appropriate day. Soon, the company hopes to add the option to sell flowers and chocolates. Excite@Home has struck three separate distribution agreements, one with Proflowers.com, another with Dan’s Chocolates, a former Bluemountain.com subsidiary, and the third with Lucidity Inc. The three will pay Excite@Home a combined minimum of $34m in ad fees over the next three years.
As for @Home, the company says the acquisition will expose millions of users to the benefits of a rich media experience that could be enhanced by broadband. Bluemountain.com users are generally older and more experienced than the common run of web surfers (they spend more money online, as well) making them highly attractive targets for residential broadband internet access sales efforts. A recent survey by Mercer Management Consulting found that people with high-speed internet connections make twice as many online purchases as those with low-speed dial- up modems. The aim is to create a virtuous circle of ever- accelerating e-commerce. The more people send greetings cards, the more flowers and chocolates they add, the more other services they use to remind them to send cards and flowers and chocolates, the more attractive broadband becomes – and the more greeting cards they will send. At least, that’s the theory.
