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Online greeting cards are life of Net party

The industry, which lets people send animated greetings and party invitations online, is making a small comeback and sparking renewed interest from investors.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
4 min read
Online cards are helping holiday revelers celebrate the season.

In the past at this time of year, consumers sent electronic greetings mainly to wish friends and family a happy holidays, but the public has found a new use for e-cards: party invitations.

"We're expecting 10 times our normal traffic loads going into Christmas," Jared Schutz, executive director of Blue Mountain Arts, said in an interview.

This surge in holiday traffic has helped the e-greeting card industry make a small comeback and spark renewed interest from investors. An example of this could come later this week if San Francisco-based Egreetings goes public as expected. The growth in email and NBC's and Paul Allen's Vulcan Ventures investment in Egreetings have analysts predicting the stock could fetch a high price.

In addition, Evite.com, a start-up that lets customers send invitations online, two weeks ago attracted $30 million in second-round financing.

The renewed interest in the e-greetings market follows long-held skepticism about its viability. Because e-greetings are free, critics have doubted that online card companies could become profitable selling little more than advertising space.

This notion was particularly heightened after Excite@Home paid a whopping $780 million for e-greeting card leader Blue Mountain Arts. Some analysts questioned how Excite could ever see a profit from a company that had few revenue streams.

Others took aim at the cards themselves, contending that online greetings lack the emotional punch of paper cards.

"The paper card communicates a more human quality," Zona Research analyst Clay Ryder said. "It shows that the person took time to shop, write a message and mail the thing. It takes little effort to send a card over the Internet."

Blue Mountain's Schutz concedes that consumers still prefer to send paper cards for certain occasions and events, such as wedding invitations or to express condolences.

"Electronic cards are mostly additive to people's card-sending habits," Schutz said in an interview. "More and more people are sending them, but there are still a lot of paper cards sold and that will continue."

Amid the criticism, card sites have continued to draw floods of visitors. Blue Mountain, AmericanGreetings and Egreetings are among the top 100 sites on the Web, according to Internet research group PC Data Online. Last month, all three marked double-digit increases in the percentage of new users, said PC Data analyst Sean Wargo.

"We're seeing large growth throughout the industry," Wargo said.

Whether e-greetings are free or not, the oodles of customers that flock to these sites are enough for many companies to invest in this market. Cutthroat competition and high customer acquisition costs are driving factors in the rush to buy into this business.

CNET TV: Egreetings IPO forecast
CNET TV: Egreetings IPO forecast
Egreetings' public offering this week will be a strong indicator of the demand. The company plans to raise up to $60 million, based on the high-end of its $8 to $10 range and the 6 million shares it will sell.

Egreetings generated $1.5 million in revenues for the nine-month period ending Sept. 30, up from $182,000 during the same period in 1998. Its losses widened to $22 million during the period, compared with $5.2 million the previous year.

The company is facing tough competition from Blue Mountain and American Greetings, which filed in August to go public sometime later this year. Yahoo and Amazon have also developed their own e-greeting services to draw more users.

Like paper cards, e-cards feature photos, drawings or designs; but unlike traditional cards, they can be animated and play music. For instance, a customer can send a card featuring animated Christmas carolers or children dancing around a Menorah. Once a card is chosen and it's sent the company notifies the card's recipient via email to fetch the card at a Web address.

E-invitations work much the same way. Internet giants Yahoo and Amazon, as well as a crop of new online event and party-planning companies including Mambo.com and Evites.com, offer numerous designs for users to choose. However, e-invitations offer varying ways for guests to electronically RSVP to the sender.

A party host can learn how many guests and which ones will attend almost immediately--an important service for those short of time. Monica Lee, a San Francisco-based professional party-planner, said that she was under a tight deadline when she sent out invitations to an event that the hosts were charging admission to. Lee distributed Mambo online invitations to the those on the guest list and in a matter of hours, the RSVP's allowed her to estimate how much money the event would take in.

Mambo.com vice president of marketing Kim Kapoor believes the company's e-invitations add a special element.

"A regular email does not express any personality whatsoever," she said. "People receive emails everyday from those they want to receive them from and from those they don't. We offer a little pizzazz."

For instance, along with creative designs and moving characters on the cards, you can find an official "Austin Powers Shagfest" invitation at Evite. Instead of asking if guests will be attending, recipients of this e-vite are asked if they would like to "groove" with the hosts.

Evite and Mambo also offer other special features. Guests invited to events that charge for admission can pay at Mambo.com. And at Evite, if a customer so chooses, the company will create a Web page on its site that allows invitees to view the guest list.

"Many times, when people can see who's coming, it helps build anticipation," said Evites' chief executive officer Josh Silverman. "People want to know who's going to the party."