Less than a year after introducing the PhotoStamps program, which allows consumers to make their own stamps online with family photos, Stamps.com Inc. convinced Congress to change federal law allowing businesses to do the same.

After establishing its own Political Action Committee and mounting an effective lobbying campaign, Stamps.com has overturned a 19th century law that outlawed company logos and advertisements on postage.

What’s next?

How about Nike’s newest sneaker, Sprint’s new logo or a Viagra stamp? Corporate logos and product placements could adorn the humble 39-cent postage stamp by mid-year.

The U.S. Postal Service still has to change its regulations before companies can place logos on postage stamps, but now that Congress has passed the bill and President Bush signed it in January, there seems to be little objection from the Postal Service.

“We find it adds value to the mail,” said Nick Barranca, head of product development for the Postal Service. His division handles any new postal products and makes policy recommendations to the Post Master General. “We’re seeing a lot of interest from the large company side,” Barranca added.

The rule change could be a windfall for the three companies certified by the Postal Service to produce the personalized stamps: L.A.-based Stamps.com’s PhotoStamps program, Palo Alto-based Envelope Management Software, which offers stamps through Endicia.com and calls it PictureIt Postage; and Palo Alto-based Zazzle Inc., which customizes apparel, greeting cards and posters. Its ZazzleStamps program is offered through a partnership with office-postage giant Pitney Bowes Inc.

Stamps.com is the only public company of the three, and pioneered the personalized stamp program. Since PhotoStamps’ one-year trial period started in May, company revenues have increased exponentially each quarter. For the quarter ended Dec. 31, PhotoStamps brought in $6 million, a triple-digit increase from the prior quarter, and made up 30 percent of the company’s $20.6 million in total revenues.

“When you’re starting from almost zero use, it could be a big incremental amount of business for the custom stamp providers,” said Justin Cable, analyst with B. Riley & Co. “We still have to see approval from the U.S. Postal Service to go ahead with the business logos, but it would be a positive for them.”

The personalized stamps sell for a hefty premium to regular postage. At Stamps.com, a 20-stamp sheet of 39-cent stamps sells for $17.99, more than double the $7.80 face value. Large orders (100 to 500 sheets) sell for $12.99 per sheet, a 67 percent premium. For bulk orders, the companies say they will make discounted deals.

Postal milepost


The rule change didn’t cause too much of a stir after all, it was buried deep in a Department of Justice authorization bill. But in the postal world, it’s the biggest thing since self-sticking stamps.

“It was the most significant barrier to us being able to have advertisements and business content on stamps,” said Seth Weisberg, vice president and general counsel for Stamps.com.

Until recently, stamps were limited to the designs offered by the Postal Service rippling American Flags, commemoratives of dead scientists and civil rights leaders, holiday images and an endless parade of birds.

Stamps.com introduced PhotoStamps for an 8-week pilot program in 2004. About 30 percent of the orders were from businesses hoping to use their logos and brands, according to the company. The program stalled when consumers started ordering stamps with images of Adolf Hitler and Unabomber Ted Kaczynski. But the company regrouped, refined the screening process and began the year-long trial program with the Postal Service last May.

As with all government-regulated programs, there are rules for the personalized stamps: No nudity, for starters.

“We want to maintain the type of family image,” said Weisberg.

Also banned are dictators and celebrities. “We’ve had celebrities come to the site and make stamps,” said Katie Burke Mitic, vice president of marketing for Zazzle. “But our team knows that when we come across that, we need to make sure that person owns the rights to reproduce that image.”

Copyright infringements and corporate logos are also not allowed.

Rejecting orders


The law dates back to a Civil War-era statute outlawing notices and ads on postage stamps, according to the Postal Service’s Barranca. At the time, stamps were considered legal tender, and the government was trying to combat counterfeiting.

“We’ve been rejecting orders for stamps that have business ads on them ever since we started the program,” said Zazzle’s Mitic. Her company has been collecting customer information and saving stamp designs from companies, telling them they’ll send a notification as soon as the Postal Service gives the go ahead.

Because of the rules and restrictions, personalized stamps for now are mainly a consumer product “puppies and babies,” as the saying goes. The one-year test period is scheduled to end in May. The Postal Service could wait until then to renew the program and make a ruling on company logos, but it doesn’t have to.

“I’d like to see the commercial application in place prior to the May expiration,” Barranca said. In other words, the details and guidelines for company stamps need to be worked out quickly. “I have a lot of work to do in the next month or so,” he said.

It’s been ages since anybody licked a postage stamp, so perhaps it was time for another innovation.

“The camel’s nose got into the tent with personal postage, and the rest of the camel is following,” said Charles Snee, senior editor of Linn’s Stamp Weekly, the bible of stamp collectors. “The Postal Service is waking up to the marketability of this kind of postage.”

Stamps.com executives are being coy about revenue projections for the PhotoStamps program for the coming year. “The postal service prefers to regulate us, and they have the right to make their own decision. It would be premature to speculate,” Weisberg said.

In a recent earnings announcement, however, the company projected 2006 revenues between $75 million and $90 million, a nice increase from the nearly $62 million reported last year.

Law licked


Changing hundred-year-old laws is no easy task. “You’re looking at a year that was full of a lot of very big pieces of legislation from the budget to the war,” said Joanne Veto, spokeswoman for the Postal Service. “To have this go through in one congressional calendar year is pretty unusual.”

All three California-based personal postage providers were active in contacting congressmen. Stamps.com led the effort, with Weisberg drafting a proposed amendment to the law and meeting with representatives. Rep. Darrell Issa (R-Calif.) sponsored the amendment, though his district is San Diego. But, as Weisberg pointed out, he sits on the House Judiciary Committee. Company executives met with other California congressmen and senators several times. Weisberg said the company did not contribute directly to state senators or congressmen, but Stamps.com established its own Political Action Committee last year, raising $18,000 for lobbying efforts.

“The congressman tries to be supportive of California companies,” said Frederick Hill, Issa’s spokesman. He said that Issa felt that a ban on corporate logos was not what Congress intended when it passed the law, “so he worked to change it.”

The Postal Service stayed on the sidelines. “We took a hands-off approach to this,” Barranca said. “For all visible purposes, Stamps.com initiated this by themselves.” The Postal Service is not allowed to lobby Congress, he explained, “So we gave no direct support. But we thought it was a good move.”

“Snail mail” has been struggling in its battle with electronic mail and the Postal Service is hoping these programs will revive first-class postage use.

Barranca said the Post Office has seen some incremental revenue from the PhotoStamps program. “Things that used to be e-mailed are being migrated to custom postage,” he said. And even better, it’s grabbing the attention of new customers, at least in tests.

“We’ve gotten positive response from the Gen-X and Gen-Y generations, which are so digitally-minded,” he said. “They see the value of this type of communication. It’s very visual.”

While the Postal Service would welcome a boost to its business, the details of how the commercial program would work are still a little sticky.

Among the issues the companies and the Postal Service need to resolve is the fee structure. Currently the post office only charges face value for the stamps, and any premium is revenue to companies like Stamps.com, Zazzle or Endicia. And limitations on logos and products still need to be addressed, like whether tobacco and alcohol will be permitted. Should companies be permitted to create stamps think Barbie stamps and then resell them to the public?

Some marketing experts are unconvinced that the stamps will be a huge hit.

“I don’t think it’s a silver bullet,” said Robert Hollander, branding expert and president of BrandSense Partners. “It’s probably up there with vanity plates. It’s a nice thing to do, but I don’t see it as a huge marketing bonanza.”

Part of the issue is the decline of mail generally, but there’s also the question of how much impact adding a logo to a stamp will have.

Mark Delman, vice president of PictureIt Postage from Endicia, has research that indicates otherwise.

“Anybody who would like to increase the open rates on envelopes would want to do this,” he said. Delman says studies show that people who receive mail with personalized postage spend more time looking at the envelope and have a higher rate of opening them. “For certain companies, it will absolutely be worth it if they have high-value customers,” he said, citing jewelry, cosmetics and cars. “Anything that helps to get them to open the mail,” might be worth the premium, he said.

At the end of the day, however, getting people to open the mail depends in large part on what’s inside the envelope. Between bills, annual reports and account statements, not all letters are created equal.

“It’s nothing more than a novelty,” said Rob Frankel, L.A.-based marketing expert with RobFrankel.com. “Within a year, everybody will be doing it and it won’t be a big deal.”

In a way, that’s what Stamps.com is hoping.