Put (Almost) Anything on a Stamp

CONSUMERS will be able to print customized stamps again starting next week, but this time they won't be able to peel and paste Monica Lewinsky's image onto a letter.

On May 17, the U.S. Postal Service will begin the second stage of a test that started last fall in which customers can print personalized postage from their computers, using their own photos.

In the earlier test, the Postal Service's vendor for the project, Stamps.com, failed to reject a handful of postage images sent to it, including photos of Theodore J. Kaczynski, the man called the Unabomber; and Nicolae Ceausescu, the former Romanian dictator.

Now that Stamps.com has tightened its screening process, investors appear to be again warming to the idea of personalized stamps, perhaps giving the online postage industry an entry into a market that has proved much more elusive than executives had once hoped.

On news in late April of the Postal Service's impending test, shares of Stamps.com jumped from around $16 a share to nearly $20 - their highest level since early 2001. They continued to rise through early May. On Friday, the stock rose 11 cents, to $21.97, on the Nasdaq.

Justin Cable, an analyst with B. Riley & Company, an investment firm, said revenues from customized stamps might not justify that enthusiasm in the short term.

"Some investors are speculating that this will be a very huge opportunity, but it's still too early to tell," Mr. Cable said.

Stamps.com, which had about $2.3 million in sales of personalized postage as the sole vendor for last year's test, may eventually face other competition in the market. Pitney Bowes, which, among other things, provides postage meters to businesses, has a Web-based postage service that complies with the Postal Service's "PC Postage" requirements for authentication, security and payment.

Pitney Bowes would not say whether it would enter the next one-year trial. Endicia Internet Postage, a privately held company based in Palo Alto, Calif., also sells PC postage services and said it would likely start a consumer-oriented service.

The Postal Service handled about 97 billion pieces of first-class mail last year, according to Gerry McKiernan, a Postal Service spokesman.

That is down from 99 billion pieces in 2003 and 102 billion in 2002. The declines are a result, Mr. McKiernan said, of the rise in faxes and, particularly, e-mail messages.

"We don't see personalized postage as the savior," Mr. McKiernan said. "But if it gives it a little bump, that's all to the good."

Ken McBride, the chief executive of Stamps.com, whose core business is selling online postage services to small business and home-office customers, recently told investors that the company projected that it could record an additional $5 million in sales this year from the customized postage effort, bringing the company's projected fiscal year 2005 sales to $56 million, up from $38 million last year.

"Our core product doesn't appeal to the consumer, but this gives us an additional revenue stream and market that we don't currently tap into," Mr. McBride said.

For a subscription fee, customers receive a digital scale, shipping supplies and software that allows them to print postage and shipping labels from their computer.

(The postage is bar coded so it can be read and verified by Postal Service employees.)

After largely turning away from the consumer market after the dot-com bust, the first Postal Service test of customized stamps brought Stamps.com once again into the market, albeit with measured expectations. Mr. McBride said consumers were willing to pay the $16 fee to print customized postage, particularly for holiday greeting card mailings and invitations to weddings and other events.

Last year, Stamps.com charged $12 to $17 for a sheet of 20 stamps, depending on volume.

That is a steep premium above the $7.40 cents customers pay for the same number of 37-cent stamps at the post office. But for that fee, consumers can use any image they desire for postage, provided it does not feature a publicly known person or offensive or obscene imagery and cannot be construed as business advertising.

Stamps.com will also bar black-and-white images, in an effort to make it easier for screeners to weed out offensive images. (The Theodore Kaczynski stamp was made from a black-and-white picture taken when he was in college.)

Mr. McBride said the company "felt pretty good about" how it screened the 83,000 images it processed for last fall's trial. It will continue to rely on a team of employees to scan every image that comes into the company, but that team has been bolstered by employees who, he said, have enough expertise in world history and culture to identify more obscure public figures.

"It's part of why the product is a little more expensive," Mr. McBride said. "It's definitely a challenging aspect of this business."

Perhaps that is why, so far at least, no technology company has emerged with a lower-priced plan to take advantage of what would likely be huge consumer demand. Given the meteoric growth in picture-taking in the United States since inexpensive digital cameras and cellphone cameras hit the market, there is no shortage of people willing to share their likeness, or that of their loved ones.

But for now, at least, consumers will have to pay a premium to inflict their photos on others via the mail.

< This is disturbing. At first glance it's a great thing but consider the implications of letting the govt. determine what's OK. Why is a photo of Ted Kazinski banned? What if it was a relative trying to get his sentence commuted? You can bet they'll allow a cross but ban an upside down one. No matter how neat this is, it should have been axed from the get-go since they're unwilling to not censor. >