Creditcards.com

For most people, credit card means money. For others it means debt. CreditCards.com has turned into a bazaar where one can compare and apply for credit cards. Given that the whole of US runs on credit cards, citizens are flooded with loads of offers. Significant resources are devoted to marketing the cards to new and existing cardholders. An overview of such initiative gives us an idea as to just how useful this site is in terms of cost savings. Synovate's Mail Monitor® says only 0.3% of U.S. consumers succumbed to temptations out of 6 billion direct mail credit card offers that were mailed in the year 2005. Internet has become the alternate marketing strategy to generate business. Internet now represents a small portion of the total marketing expenditures by credit card issuers. TNS Media Intelligence says approximately $106.5 million was spent on the Internet marketing credit cards to U.S. consumers. With the outsourcing wave focused on reducing costs, Internet will offer a cost effective marketing channel.

CreditCards.com Inc is in the business of online credit card activities. Essentially provides a vast database of all kinds of credit cards like low interest cards, balance transfer cards, instant approval cards, reward credit cards, cash back cards, business card, student credit card, prepaid & debit cards, charge cards, and specials. For the discerning customer it has a listing based on issuer as well. Two significant goals are achieved- one, consumers can compare and search for credit cards online and issuers find an online medium for customer acquisition. Credit card issuers can now solicit and receive credit card applications and save money in comparison to expenditures in offline solicitation. Each time an application is completed or approved, the website earns money from the card issuers or from their affiliate marketing agents. And because of this consumers are not charged by the website. This incidentally happens to be the company's business model.

Economists now state that after sub prime mess, credit card mess is next. This has caused the credit card issuers to tighten the preliminary screening, increase the interest charged and reduce credit limit. This might have a short term effect on the growth of CreditCards.com. Since credit card is a global phenomenon, the company is now evaluating various geographic market to increase its revenues. But the relationship it has with the card issuers seems to be fragile. If the website fails to attract the right kind of crowd, then the reputation is hampered leading to loss of business. In this era of dot com business search engine ranking is another strategy all companies need to stay focused on and if this falters, it might lead to loss of website traffic. The industry as a whole might enter a phase of recession. These are some of the fears the company should shudder with and hence the stock, after listing. The business is interesting, considering the card issuers themselves maintain their websites. And when i browsed the site, i found it informative and a useful tool to search and compare cards. Competition is limited at the moment, and the company will definitely see a period of growth and slack which anyway is part of all business lore.

An MBA from HBS, a vetern from Bloomberg and Citibank, Elisabeth DeMarse, heads the company as president and CEO. Christopher J. Speltz is VP and CFO was with Societe Generale and Comerica Bank before taking charge at CreditCards.com. Jeff Whitmire takes care of Operations. He was with Capstar Broadcasting and Ernst & Young LLP.

CreditCards.com proposes to issue 10,725,000 of its common stock in the price range of $13- $15 and expects to use the proceeds to clear debts of approximately $79 million and use the rest for capital expenditure. When i read the risk factors in their SEC filings, the company seems to be clear on how they intend to utilize the money, but was unclear on how they intend to grow the business to generate revenues. I suggest caution before investment is made. And since all the credit card companies and the card issuers have their own website selling their product, traffic to creditcards website will be skewed. The company needs to think of some earth shattering product/ services to remain in focus for the next decade.