Netcentives Deal Pushes CMGI Toward Consumers' Consciousness

Companies such as ABC, IBM (IBM) and GE (GE) have embedded their names in America's consciousness. But is there room for CMGI (CMGI)?

Yes, says the Andover, Mass.-based company that has investments in roughly 70 different Internet companies and has seen its stock price zoom sevenfold since December 1998. The company announced a deal Monday that's the first step in building CMGI as a consumer brand, not just a name that's well known among Internet businesses and investors, says CMGI Executive Vice President Bill White.

Investors weren't immediately impressed, slashing CMGI shares by a tenth amid another Nasdaq mini-meltdown. And one branding expert says reaching the consumer is no small task for a company that isn't directly involved in making consumer products.

Frequent Highflier?

In the alliance announced Monday, CMGI is exchanging its stock for a 4.9% stake in Netcentives (NCNT), a company that operates loyalty programs -- sometimes referred to as frequent flyer programs -- for online firms such as America Online (AOL), Go.com (GO) and Lycos (LCOS). As part of the deal, CMGI is giving the nod to Netcentives to launch a new rewards program called "CMGI Points," which CMGI-affiliated companies will be able to dole out to customers as an encouragement to do business within the CMGI network of companies. CMGI, which has investments in such firms as Furniture.com and jewelry retailer Mondera.com, says it will launch the program in May, starting with the AltaVista site it controls.

CMGI stock fell more than 10% Monday, closing at 83 15/16, more than 48% off the stock's all-time high. Netcentives stock rose 16% to 27 1/4.

The primary goal of the Netcentives deal is to build traffic to CMGI companies by using the program to cross-promote the sites, says White. But by giving the online currency the CMGI name, White acknowledges that the company is making its first effort to promote CMGI as a consumer brand.

"What we're beginning to do is lay the groundwork for broader CMGI branding at the user and consumer level," White says. "Granted, it doesn't have the cachet today among end users that it does at the investor level, but we'd like to begin to extend it and build it in efficient ways like this."

Those Business Cards

CMGI is already trying to build its brand among firms that the company does business with, White says; the company has the firms point out the CMGI connection in business-to-business Web sites, in trade advertising and on business cards.

White says the company knows it can't build CMGI as a consumer brand just with a rewards program. But he won't say what other measures the company might take to popularize the CMGI name among consumers. He also says he doesn't want to suggest that the company is taking valuable money it could be spending on its companies for a consumer branding effort. "We don't have any interest in building a consumer brand for consumer brand's sake," he says.

CMGI's plan to build a consumer brand is a good idea, but it's a difficult thing to do, says David Placek, president of Lexicon Branding, a company that helps develop new brands for high-tech and consumer goods companies.

One company that failed in such an effort, says Placek, was the consumer-products firm Beatrice, which tried to establish the Beatrice brand among consumers several years ago. "Why do I care that some holding company is involved in making my orange juice?" Placek asks.

"The only way it can be done is to give consumers a reason why a CMGI endorsement is to their greater benefit," he says, so that the CMGI brand becomes something like the Good Housekeeping Seal of Approval. To do that, CMGI will have to have what he calls "conversations" with consumers -- through vehicles such as media coverage rather than corporate image advertising -- "to show what CMGI did to make Furniture.com more successful," he says.

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