United Online Buys MyPoints for $56M

ISP and online media company United Online, the parent of Classmates.com, has purchased loyalty player MyPoints.com from United Airlines (UAL) for $56 million in cash.

The deal follows Classmates.com’s acquisition last month of Opobox, which operates social networking site The Names Database, for approximately $10 million in cash.

MyPoints rewards its 1.4 million active members with points when they engage in e-commerce or advertising-related activity on the Web sites of marketers. Those points can later be redeemed for products and services. The company receives payment for each lead or customer acquisition. It also has an opt-in email database of 4.5 million members. In 2005, MyPoints brought in $38.4 million in revenues, reporting operating income of $2.4 million.

The loyalty operation has languished somewhat in recent years under the ownership of United Airlines, which has recently emerged from bankruptcy. UAL originally purchased MyPoints.com, which was then a standalone entity, for $113 million, in 2001.

“This business, MyPoints, needed a rightful home within a company that was 100 percent dedicated and focused on the Internet,” said Mark Goldston, chairman, CEO and president of United Online. “They agreed that it would be best served inside the confines of a pure internet company, which we are.”

United Online, which operates NetZero, Juno, Classmates.com, PhotoSite and FreeServers.com, hopes to recruit new MyPoints members across its network, incentivizing users with points to do things like create a profile or upload photos.

“We could use these points as a way to reward you for activities that we can really monetize,” said Goldston.

Goldston said he hoped incentivizing users would help increase loyalty and reduce churn. United Online has more than 50 million registered users, according to Goldston.

MyPoints has 100 employees and will continue its operations in San Francisco and Schaumburg, Ill.