Online programs

It seems only yesterday that many of us in the mileage-earning community were gung-ho on online rewards programs. The Internet was booming, both in terms of user growth and growth in the market value of online enterprises. Traditional programs were migrating as much functionality as possible onto the Internet. And there was a host of programs born in the Digital Age that had no offline presence whatsoever.

These cyber-programs promised miles and points for every conceivable online activity?shopping, site surfing, reading e-mails, etc. And wildly generous bonus-mile offers and million-mile sweepstakes were the rule rather than the exception. Where online rewards programs were concerned, it seemed, the trees would grow to the sky.

A lot has happened since then. And the prevailing sentiment?mine included?has turned from “Go, go” to “Go slow.”

Cybermiles’ troubled past

As you might expect, the history of online rewards programs mirrors that of the Internet economy itself. When the ‘Net was booming, new and established retailers put up online storefronts by the thousands. And to give themselves an advantage on the famously level playing field of cyberspace, many purveyors looked to the airlines’ solution to the loyalty problem: bundle products and services with miles, redeemable for free travel, to gain and retain the patronage of discerning but fickle customers.

Enter a slew of e-programs. Among them:

AirMilesMart, AllAdvantage, AltaVista Rewards, AOL AAdvantage Rewards, Beenz, Blink, ClickRewards, Cybergold, e-Rewards, Flooz, Flyfree.org, FreeAirMiles, GoldPoints, Greenpoints, MilesBar, Milesource, MileSpree, MyPoints, PointsUniverse, PrimaRewards, SilverClicks, SmartMile, and Webmiles

It was a mixed bag. Some programs were company-specific, rewarding consumers for patronizing a specific business. Others were mall-like, awarding miles or points for purchases at a multitude of retailers included in the program’s partner network. Some programs offered airline miles or hotel points. And others awarded other proprietary reward currencies, such as beenz, Flooz, ClickMiles, or WebMiles.

For a time, consumers enjoyed an embarrassment of riches. It was, in hindsight, a mileage bubble. When reality dawned, it was clear that both the retailers and the online rewards programs, which had been founded to support them, had dipped too deeply into the venture capital wells; overspent on infrastructure development, salaries, and overhead; and indulged in wildly unrealistic revenue projections.

Naturally, a shakeout ensued. Retailers reexamined the costs and benefits of awarding airline miles and concluded, in many cases, that their marketing resources could be deployed more efficiently. They pulled the plug on their own programs and pulled out of third-party programs. The very idea of online rewards was on the ropes. And if a knockout blow was needed, September 11 delivered it.

Members of online programs began receiving termination announcements (via e-mail, naturally). Here are some from the archives:

“Flyfree.org is ending its Rewards Program. We wish to thank all of our members for their participation in Flyfree.org. We believe Flyfree.org provides an excellent resource for frequent travelers on the Internet, so we hope we will be able to offer a rewards program again some time soon. Thank you for your interest in Flyfree.org.” (May 2001)

“We are writing to inform you that the AOL AAdvantage Rewards Program is ending on March 31, 2002.” (March 2002)

“The events of September 11, 2001, have negatively impacted the economy and in particular, the travel industry. Consumers are traveling less and there is likewise a depressed demand for programs that offer travel rewards. For WebMiles, Inc. this has meant lost partnerships and lost revenue for the company. WebMiles has come to a point where it can no longer continue to offer its travel rewards program to consumers. On April 15, WebMiles members will no longer earn miles in the WebMiles program.” (April 2002)

“We regret to inform you that the MilesBar program and its web site will be closing. Unfortunately, due to the slowdown in the online advertising market in general and the travel industry in particular, we will no longer be able to continue the rewards program.” (June 2002)

Even worse than receiving termination notices, in some cases, program members were given no notification whatsoever. They found the program’s website suddenly, inexplicably unavailable, and later discovered that their earned miles were lost forever.

The Cybermile survivors

It’s a safe bet that the last of the shakeout tremors are still ahead of us. Unfortunately, we can’t say with any such certainty which programs will continue rewarding their members with miles and points for many years to come, and which are destined to end their days as road kill alongside the Information Hiway. With that said, the following is a sampling of the more popular programs.

AirMilesMart

• Earning: Earn one point, sometimes more, for every dollar in purchases at more than 100 online merchants.
• Redeeming: Points can be exchanged 1:1 for American AAdvantage miles or for gift certificates.
• Summary: This is a no-frills miles-for-merchandise mall.

ClickRewards

• Earning: Earn ClickMiles for purchases at almost 100 online merchants.
• Redeeming: ClickMiles can be exchanged for American or US Airways miles, merchandise, and gift certificates.
• Summary: The original ClickRewards was for a time considered “Best in Class” among online programs. It boasted a huge merchant network, generous earnings, and a wide choice of airline miles as awards. That company went bankrupt. The “new” ClickRewards is a successor to the old program in name only. Ownership and management have changed, and there are fewer miles offered by fewer merchants. And the choice of airline miles has been cut to two. Time will tell whether, in this case, less is more.

E-Poll

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• Earning: Take short surveys to earn 100 points. Also, earn 500 points for enrollment and 100 points for referrals.
• Redeeming: Points are convertible to United miles (2500 points = 100 miles) or gift certificates.
• Summary: A departure from the usual miles-for-merchandise mall, E-Poll is an online research company which rewards survey participants with miles in exchange for their time.

GoldPoints.com

• Earning: Points awarded for shopping at many participating online retailers, plus several offline companies.
• Redeeming: Airline miles (Delta, Northwest, US Airways), merchandise, etc.
• Summary: GoldPoints is a kind of first cousin to Radisson Hotels’ Gold Rewards program. It’s a loyalty program for a number of companies owned by Carlson Companies, Inc., including Radisson Hotels, T.G.I. Fridays, TripForce, and others. But with its extensive roster of online retailers, it has more in common with a ClickRewards-type program than with a traditional hotel program. And as a member of the long-established Carlson family of companies, GoldPoints looks to have the corporate and financial support to be a long-term survivor.

Milesource

• Earning: Earn AwardMiles for online shopping, website visits, reading e-mail, survey participation, etc.
• Redeeming: AwardMiles are redeemable for discounted and free tickets, gift certificates, merchandise, etc. Airline miles are not offered.
• Summary: If your goal is to earn miles which can be added to your airline-program account, this program isn’t for you. For those wanting a freestanding program, however, Milesource offers an extensive list of earning and awards partners.

MyPoints

• Earning: Earn points for online shopping, website visits, reading e-mail, survey participation, etc.
• Redeeming: Points can be exchanged for Alaska Airlines Mileage Plan miles (1,000 for 2,250 points), Hilton HHonors points, Marriott Rewards points, and gift certificates.
• Summary: MyPoints suffered through its share of management shakeups and stock devaluations to emerge, chastened and slimmed-down, as a contender with legs. Now a wholly-owned subsidiary of United Loyalty Services, MyPoints is part of the UAL Corporation family of companies. Which begs the question: Why can’t points be exchanged for Mileage Plus miles? Notwithstanding limited airline-mile redemption options (Alaska only), the program’s many other earning and burning offerings have won an enthusiastic following.

For further information on cybermiles programs generally, see The Personal Travel Experience of Gary Steiger, a homey how-to website published by a self-described mileage junkie. And to keep current with special offers, tune in to the Mileage Workshop.

Caveat e-Emptor

Given the shaky history of online programs, and their uncertain future, risk management is a must.

Just say no

The surest way of avoiding the potential risks associated with online rewards programs is simple: just avoid them. Wherever possible, earn all miles directly through your primary airline or hotel programs. To keep their members from straying to independent programs, the trend among the larger airlines is to add miles-for-merchandise malls to their existing programs.

Currently, both Northwest and US Airways have fully developed online malls. At the Dividend Miles Shopping Mall, consumers can earn miles at more than 70 participating e-retailers. And Northwest’s WorldPerks Mall features more than 50 merchants. In both cases, the typical earning rate ranges from one to four miles for every dollar in purchases.

Continental’s ShopOnePass is a more modest offering, with a relatively small network of merchants.

Until recently, Delta and United frequent flyers could earn miles at SkyMiles Shopping and Mileage Plus Shopping, respectively. Both airlines’ malls were operated by the same company, Momentum Mileage Programs, which was purchased by Netcentives (parent company of ClickRewards). As a result of Netcentives’ bankruptcy, neither currently has a mileage mall. But I predict that both will, again, in the coming months.

American: Once the self-proclaimed king of the digital hill by virtue of its tie-up with AOL, American is also currently without a mileage mall.

Choose with care

It’s easier to counsel “caveat emptor” than it is to put that caution into practice. Many of the currently operating programs are small privately-held companies, so there are no publicly accessible financial statements to provide clues to impending bankruptcies. How, then, can you exercise caution?

First, look for programs that are owned and operated by solidly established parent companies. MyPoints, as mentioned earlier, is owned by United Airlines. And GoldPoints is a member of the Carlson Companies family.

Another positive is longevity. A program that has survived for several years?suggesting it has a viable business model?is likely to be a better candidate for long-term survival than an unproven upstart.

And be sensitive to signs of impending trouble. Gary Steiger, who spends an hour a day tracking mileage programs, suggests that special attention be paid to a falloff in service. “Be cautious of any company that does not provide customer service, an indication that they are in financial trouble.” Another red flag: recurring delays in delivering rewards.

Minimize exposure

Lastly, unless you have absolute confidence in the long-term future of a particular program, the best single way of managing risk is by minimizing your exposure. That means, simply, cashing out your earnings regularly and often.

ClickRewards, for example, allows members to redeem as few as 500 ClickMiles for a similar number of miles in the American AAdvantage or US Airways Dividend Miles programs. By redeeming every time that minimum is reached, a member will never be out more than 500 miles if ClickRewards fails.

A corollary to the “redeem often” rule is to favor programs that have low redemption minimums.