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THE CUTTING EDGE

Making a Killing With Kindness

Blue Mountain's Challenge Is to Cash in on Its Hugely Popular Online Greeting Cards While Staying True to Its 'Warm and Fuzzy' Roots

July 19, 1999|LESLIE HELM | TIMES STAFF WRITER

When Stephen and Susan Polis Schutz started Blue Mountain Arts three decades ago, their goal was to support their self-described hippie lifestyle by selling silk-screen posters and greeting cards that melded her love poetry with his pastels of silhouettes and sunsets. When they added a free online greeting card service a few years ago, it was merely on a whim.

The business of selling paper greeting cards had proved a modest counterculture success. But the growth of the online service astonished them.

Last Christmas it surpassed even Internet pioneer Amazon.com in traffic to become one of the hottest properties on the World Wide Web. Now the couple's Net-savvy and entrepreneurial son, Jared, is planning to turn what has remained a comparative mom-and-pop store into a block of high-grade Internet real estate.

Boulder, Colo.-based Blue Mountain Arts is spinning off its Internet operation (http://www.bluemountain.com) from the paper greeting card company so it can go public to help finance its development as an e-commerce powerhouse.

But the path ahead won't be as trouble-free as it has been thus far.

Almost unnoticed, the greeting card sector has grown into one of the busiest and most ruthlessly competitive in cyber-business. While traditional greeting card companies such as Hallmark (http://www.hallmark.com) and online providers such as Egreetings (http://www.egreetings.com) are beefing up their sites, powerful new contenders such as Amazon.com and Microsoft are joining the pack. Like Blue Mountain.com, all now offer electronic greeting cards that users can e-mail to friends and relatives for free.

What makes the online greeting card business so attractive is its almost viral ability to expand its customer base and the precision with which advertisers can target those customers.

The recipient of an online greeting card typically gets an e-mail notification that a card is waiting--but has to go to the greeting card company's Web site to view it. That means every card sent can potentially bring in a new customer.

Those sites, moreover, are a perfect way to sell targeted products. A romantic card might be packaged with a pitch for flowers or a box of chocolates, while a Father's Day card would suggest anything from socks to a set of golf clubs.

Those factors, combined with Blue Mountain's New Age corporate personality, helped make it one of the Internet's busiest sites. In the week ended July 11, the site had 2.6 million individual visitors. That put it in 11th place, ahead of Amazon.com and just behind the auction site EBay, according to Nielsen/NetRatings. In holiday months such as December, the site does even better.

But until now, it was scarcely a business. While the company focused on developing its computer system and network of digital artists to keep the customers coming, it brought in little revenue.

Now its owners face a quandary about how to "monetize" its robust traffic, in the Webspeak favored by Jared Schutz, while retaining the warm and fuzzy feeling that makes it attractive to so many visitors. Susan Polis Schutz's own description of Blue Mountain's mission is "helping people around the world communicate their deepest feelings."

"The toughest thing is balancing the capitalist interests without losing the spirit and feeling of Blue Mountain that made it successful," said Drew Ianni, an analyst with Jupiter Communications, a New York-based market researcher.

However, he added, the potential of the site is simply too large to remain untapped. "That family has one of the last truly independent [Internet] properties that could be valued in the billions of dollars."

Jared Schutz, who will step down as acting chief executive to become president under a new chief executive whose hiring will be announced soon, says he understands the danger of moving too aggressively to exploit the warm feelings associated with greeting cards to generate cold cash.

"We have to see what [customers] see as value-added as opposed to negative advertising," he says.

*

To be sure, Blue Mountain has always strived to merge the family's communal instincts with its genuine entrepreneurial character.

Jared came home from Princeton on vacation in 1994 and taught his 11-year-old brother how to program in HTML, the programming language used for building Web pages. Their father, who earned a physics PhD from Princeton, in turn learned the skill from his 11-year-old son and seized on it as another means of artistic expression. He developed online greeting cards as a way to keep in touch with Jared, who was tough to reach at school.

A year later, the family decided to host a free greeting card service on American Information Systems, the Internet service Jared had co-founded at school.

"We thought it would be cool to have free electronic greeting cards," said Jared, who credits his father with the idea.

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