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Marketer cuts into demand for online savings coupons

In 1994, Pittsburgher Jason Wolfe was flat on his back recovering from spinal surgery when he came up with an idea to sell coupons.

Wolfe, founder and chief executive of DirectResponse Technologies Inc., a Greentree-based direct-marketing company, originally thought about producing coupons to stuff into rented videotapes.

Today, Wolfe's company -- which began in 1994 with one employee and an initial investment of $100 -- has grown into a multimillion-dollar company, mainly by offering coupons over the Internet and by providing other full-service direct-marketing and technology services. Now, he employs 35 nationwide.

"We have more than 2,000 coupons," boasted Wolfe, noting the difference between his Internet site and the dozens of other coupon sites that have sprung up on the Internet. "We have advertisers bid to be included in our coupon mix. We have a keyword for the product, and you click on it to redeem it for the product."

Wolfe said Mycoupons.com is one of the most visited coupon sites on the Internet, with some of the most loyal subscribers, according to Nielsen/Netrating, with more than 15 million page views per month. In addition, he has expanded the offerings of the company to focus more on direct marketing and producing software that will allow companies to track their own Web site offerings.

Direct Response Technologies consists of several divisions, in addition to MyCoupons.com:

  • DirectLeads/DirectClicks, an online advertising network with more than 10,000 affiliate partners delivering over a half-billion advertisements and more than 2 million paid advertising clicks per month;

  • DirectCertificates, an online gift certificate Web site featuring certificates from GNC, Sunglass Hut, Omaha Steaks, Red Lobster, Ponderosa, Steak and Ale, and The Sharper Image;

  • DirectNewsletters, a newsletter publication that claims more than 90 million subscribers; and

  • DirectTrack, an affiliate software tracking program used by more than 100 merchants.

    "We see most of our growth coming in the technology sector," Wolfe said. "We plan to become more of an infrastructure company, where we play in the background more."

    "I've been doing this for eight years now," Wolfe said. "If we keep growing at this growth rate -- we grew 32 percent last year, and added 32 employees -- who knows where we will be?"

    According to the Direct Marketing Association, in 2001, more than 270 billion paper coupons were distributed in the United States, a thousand for each man, woman and child in America. Only 4 billion of them were redeemed -- a redemption rate of 1.4 percent. Contrast that with only 220 million online coupons distributed, with 56 percent (or 123.2 million) of them being redeemed.

    "Internet coupons are more likely to be used," said Christina Duffney, with the Direct Marketing Association. "Once a shopper expends the time to look for them on line, they are more likely to use them," she said.

    Wolfe said his company has weathered the slow economy well.

    "Strangely, with the national economy down, we were growing. Now, in 2001, we lost money and had to lay off some people. But over the life of the company, I would say that we have had a 10 to 15 percent growth rate," he said.

    "Coupon use tends to grow as the economy tightened," Duffney said, noting that as retail sales stalled at Christmas, retailers offered more coupons. "They tend to offer an incentive to consumers," she said. "They usually get the consumer to try something they normally wouldn't try."

    Wolfe said he has been able to finance most of his company's growth from increasing sales and profitability, and he secured additional growth funding from internet.com Venture Fund.

    "A lot of marketers are also turning to online marketing right now," Duffney said, "because of the economy. You can do an e-mail campaign cheaper than direct mail or telephone. Each medium is still valuable. We see more instances of people taking the time to find out who your target market is and then take a multichannel approach."

    Wolfe's company soon will expand to Beulah, N.D., opening an office there with 10 customer service employees to start.

    "I said to myself, 'North Dakota?'" said Wolfe. "But I worked with their department of commerce and they made an interesting pitch. So I put out 30 request for proposals and of the 30, 17 cities there wanted us," he said.

    "I met with the mayors of six towns that we figured were the best of those, and we picked the best package," Wolfe continued. "It is a rural town, but that made it more attractive. It reminded me a lot of Pittsburgh, with solid citizens who have a good work ethic, who you can trust, who when you shake their hand, you know you have an honest deal."

    Wolfe said that he didn't get that kind of response from Pennsylvania or Pittsburgh, and he laments that the city's proposed payroll preparation tax will further sour the business environment.