NextCard Inc., considered one of the rising stars in credit cards since it appeared on the scene in 1997, proved last week that it can continue to dazzle: Its financial results and projections sent its stock soaring, and the company introduced more products that seem to outshine the competition.

NextCard, which offers a general-purpose Visa credit card tailored for use on the Internet, has often been named in the same breath as some of the larger and more established card companies because of the innovations it has brought to the industry. The card company claims to be the first to offer instant account approvals online, and to let people put pictures of themselves — or their dogs, or just about anything else — on their cards. It also created a “concierge” service that automatically fills in online shopping forms, as well as a selection of rewards programs and online bill payment options.

Last Thursday, on its first “investor day” since going public in May 1999, NextCard executives presented numbers that indicated the company is entering the big leagues of the credit card world, where portfolios worth tens of billions of dollars have become the norm and the largest issuer, Citigroup Inc., is approaching the $100 billion mark in receivables.

NextCard’s third-quarter managed loans were $1.093 billion, and cardholder accounts increased 331% from the same quarter last year, to 577,000.

Executives also said they project revenues of $1 billion in 2003, implying a three-year annual revenue growth rate of 75%.

The company has consistently linked its success to its niche strategy and its exclusive focus on the Internet, which it purports to understand more than other card companies.

For example, NextCard has bucked the notion that banner ads for credit cards do not work. The company is one of the biggest advertisers on the Internet— it places about three billion banner ads, button ads, and e-mails a month — and does not do much with direct mail.

“The way to slow down growth would be simply to put fewer banners on the Web,” said Jeremy Lent, NextCard’s founder and chairman. The company’s approach to banner ads is “a lot more sophisticated” than looking merely at the response rate, he said.

Last week NextCard executives explained the Internet Database Marketing system behind their banner-ad strategy. This year the company has tested 200,000 such ads on more than 500 Web sites. The ads lead the Web surfer to a variety of landing or splash pages, which detail the company’s offers.

NextCard mixes and matches its connections between banner ads and splash pages, and a continuous “feedback loop” allows the company to quickly adjust an ad campaign that is not working.

John Hashman, president and chief executive officer, said NextCard is “in an investment cycle now” and is taking “the long-term view — we could slow down growth and could become profitable sooner, but we feel now is the time to invest.”

Its stock has taken some roller-coaster rides this year — it closed at a high of $36.875 on Jan. 7, then sank to $5.25 on Aug. 21 after a bearish report detailed the company’s perceived shortcomings. On Thursday the stock rose 45% to $11.75, and on Friday it fell 14.4% to $10.0625.

Tom Carter, an analyst at U.S. Bancorp Piper Jaffray in San Francisco, said, “We would like to think we’ve just entered a transition phase for NextCard where investors realize that it is not a victim of the dot-com crash, but has been a beneficiary of the dot-com crash.”

Last week’s flurry of announcements included the news that NextCard has set up a Instant Finance Network that will offer consumers instant credit for purchases of between $500 and $10,000 in five product categories: computers, electronics, luxury items and jewelry, home and office furnishings, and luxury vacations.

NextCard also has introduced the “next generation” of its online concierge service in partnership with the Internet search company Obongo. The new service searches more than 2,600 Web sites to find the lowest price for an item a customer is seeking. If the person decides to buy the item, the service fills in any online forms with a single click.


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