Blue Mountain in talks to sell site

Summary:The free online greeting-card service may sell the site for about $1 billion. Potential buyers include eToys, CMGI and Excite@Home.

The company that owns one of the most highly trafficked sites on the Internet -- a free greeting-card service called Bluemountainarts.com -- is in talks with a number of companies to sell the Web site for about $1 billion.

According to people close to the situation, the leading candidate to acquire closely held Blue Mountain Arts Inc.'s Web site is likely to be eToys Inc. (Nasdaq:ETYS) Currently, eToys, Pasadena, Calif., has a market capitalization of about $8 billion. Others who have looked at the site, according to these people, include CMGI Inc. (Nasdaq:CMGI), Andover, Mass., and Excite@Home Corp. (Nasdaq:ATHM), Redwood City, Calif. The deal is likely to be an all-stock transaction. While the talks are advanced, there is no certainty that a deal will be reached, according to the people.

People familiar with eToys' thinking said the company is very interested in the potential of the Blue Mountain Arts site, which could expose its other products to a broader range of customers. eToys has mostly been focused on selling a range of gifts to families, and Blue Mountain Arts fits that demographic with a folksy image. But the people said eToys officials are worried about recently intensified competition in the greeting-card sector, which has hurt Blue Mountain's traffic, and could be an impediment to any deal.

Online cards a hit
Blue Mountain Arts, Boulder, Colo., conducted discussions earlier this year to sell the Web site to major Internet players such as America Online Inc. (NYSE:AOL), Yahoo! Inc. (Nasdaq:YHOO) and Amazon.com Inc. (Nasdaq:AMZN), the people said, but those talks had been unsuccessful. All three of those companies recently have added card offerings to their services, in direct competition with Bluemountainarts.com. The attraction for a larger Internet site to purchase Bluemountainarts.com -- despite the high price tag -- would be the ability to generate revenue through advertising and selling products.

Bluemountainarts.com has grown into one of the largest sites on the Internet with hardly any outside funding, advertising or major distribution deals. It started as a hobby and an adjunct to the physical greeting-card business started in 1971 by Susan Polis Schutz and Stephen Schutz.

Nonetheless, Bluemountainarts.com is the third-ranked e-commerce site, in terms of visitors, behind the shopping areas of America Online and Amazon.com, with 9.2 million monthly visitors, according to ranking service MediaMatrix Inc. In MediaMatrix's overall list of most-visited Web sites, Bluemountainarts.com recently placed 16th.

Such huge amounts of traffic had prompted speculation the site would go public. The Schutzes had begun to talk with investment bankers, so the decision to sell the site is a shift from plans for an initial public offering, people close to the situation said.

One plan to turn the free site into a revenue-generating company would involve a series of gift-related sites closely linked to the card service. After users send a free card, for example, they might be offered the opportunity to send flowers, candy or fruit. The Schutzes own an online flower service, and a candy and gift-certificate service will be introduced before the holidays. A fruit service is planned for next year. If Blue Mountain sells its online-card service, the online retail companies aren't likely to be sold, and would remain closely tied to the card site, people close to the situation said.

Topics: Amazon, E-Commerce, Start-Ups

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