Prospectus Summary
This summary may not contain all of the information that is important to you. You should read the entire prospectus, including the financial statements and related notes, before making an investment decision. As used in this prospectus, the terms "we," "us," "our" and similar terms refer to Be Free, Inc. and not to its management or stockholders. Unless otherwise indicated, all information in this prospectus:
. reflects a for reverse stock split effected on , 1999;
. assumes that the underwriters will not exercise their over-allotment option;
. gives effect to the conversion of all outstanding shares of preferred stock into shares of common stock upon completion of this offering; and . assumes the effectiveness of our amended and restated certificate of incorporation.
Be Free
Our Business
We are a leading provider of services that enable electronic commerce merchants and Internet portals to market their products and services in tens of thousands of locations on the Internet and to pay for these promotions based on performance. Our e-merchant and portal customers use our services to establish and manage performance marketing relationships directly with these third party locations. We enable the third party marketing partners to integrate our customers' promotions into their Web sites and e-mail messages that contain content that is relevant to the products or services being promoted. Our customers pay their marketing partners only for those promotions that generate sales or traffic. In this way, our customers create their own performance marketing sales channels. We provide a cost-effective solution for establishing, managing and rewarding these channels. We enable our customers to increase their sales and traffic and decrease their cost of customer acquisition.
Our services are critical to online performance marketing because they:
. provide the data interchange that integrates our customers' catalog, transactional and fulfillment systems with tens of thousands of Web sites and e-mail messages created by their marketing partners;
. enable our customers to generate and manage a variety of promotional links for each of their products or services;
. enable each of our customer's marketing partners to select those promotional links that are relevant to the content on its Web site or within its e-mail messages and integrate those links within that content;
. track the effectiveness of each individual promotion by recording each time a user views it on a marketing partner's site, clicks on it and is directed to our customer's site, and makes a purchase on that customer's site; and . collect, store and analyze viewing, click-through and sales data to improve the effectiveness of online marketing and to reduce the cost of customer acquisition.
Using our services, our customers pay only for those individual promotions that succeed. Our e-merchant customers typically pay their marketing partners only for the sales they generate. Our portal customers typically pay their marketing partners only for the traffic they send to the portal. Our fees are also typically based on the level of sales or traffic generated for our customers through their performance marketing channels. As a result, our economic interests are closely aligned with the economic interests of our customers and their marketing partners.
Our performance marketing services to date have focused on enabling our customers to establish and manage affiliate sales channels. These channels comprise third-party Web site publishers that include on their sites promotional links to their affiliated e-merchants and portals. We also provide performance marketing services which enhance more traditional online marketing, such as the serving of ad banners, by tracking their effectiveness through to a sale. Recently, we expanded our performance marketing services to enable the inclusion of promotions in e-mail messages sent by businesses and individuals.
The promotions we tracked for our customers were shown more than 300 million times in June 1999 through the more than one million performance marketing relationships our customers have established. Jupiter Communications, an Internet research firm, estimates that e-merchants with an affiliate sales channel generate on average 17% of their online sales from that channel. We believe that affiliate sales channels and other online performance marketing channels will constitute an increasingly significant revenue source for our customers.
Our Market Opportunity The Internet has experienced rapid growth both in terms of the number of users online and in the amount and dispersion of content available to them online. The Internet has also emerged as a significant sales channel for goods and services to consumers, with total U.S. online consumer spending projected to increase from $7.8 billion in 1998 to $108.0 billion in 2003.
E-merchants and portals use online promotions to reach a global audience for their products and services, drive traffic to their Web sites, attract customers and facilitate transactions. Initially, these online promotions took the form of banner advertisements. Under this model an advertiser pays fees based on the number of times its ad is displayed and typically evaluates the performance of that ad based on the rate at which viewers click on it and are directed to the advertiser's Web site.
As a result of decreases in these click-through rates and a need to reach a broader audience viewing more widely dispersed content, e-merchants and portals sought to pay for their marketing programs based on the sales or traffic they generated. These affiliate sales channels have emerged as the first widely introduced type of these performance marketing programs.
E-merchants and portals face several challenges in establishing and managing performance marketing programs. These challenges include developing technologies to exchange data with thousands of marketing partners that operate disparate systems, generating and placing promotions and managing relationships with large numbers of marketing partners. In addition, marketing partners want to minimize the time and expense associated with enrolling in a performance marketing program and creating and changing promotions for a particular e- merchant or portal. We believe these challenges provide a significant opportunity for our comprehensive solutions that are designed to help e- merchants and portals establish and manage performance marketing channels and to help marketing partners enhance their revenue.
Our Strategy
Our objective is to be the leading provider of online performance marketing solutions. We are focusing on the following strategic initiatives to achieve this objective:
. continue our technology leadership and expertise to enhance and extend our comprehensive solutions for performance marketing programs;
. rapidly expand our targeted customer base, both in the U.S. and selected markets abroad;
. continue to provide customer branded and controlled solutions;
. increase the size and effectiveness of our customers' sales channels; and . expand our services to existing customers.
Our History
We were incorporated in 1996 in Delaware under the name Freedom of Information, Inc. and changed our name to Be Free, Inc. in March 1999. In August 1998 we combined with two affiliated companies under common control and management. One affiliated company was incorporated in 1985 in Pennsylvania and the other was incorporated in 1996 in Delaware. All of our financial statements and data in this prospectus are presented on a consolidated basis for all three entities.
Our principal executive office is located at 154 Crane Meadow Road, Marlborough, Massachusetts 01752, and our telephone number is (508) 357-8888. Our corporate Web sites are located at www.befree.com and www.affiliaterecruiters.com. The information contained on our Web sites is not a part of this prospectus.
Be Free, BFAST, BFIT, B-INTOUCH and e-nabled are our servicemarks. This prospectus also contains other trademarks, servicemarks and tradenames that are the property of their respective owners.
The Offering
Common stock offered by Be Free.... shares Common stock to be outstanding after this offering............... shares Use of proceeds.................... Working capital and other general corporate purposes Proposed Nasdaq National Market symbol............................ BFRE The common stock outstanding after the offering is based on the number of shares outstanding as of , 1999, and excludes:
. shares issuable upon the exercise of outstanding options with a
weighted average exercise price of $ per share;
. shares available for issuance and grant under our 1998 Stock Incentive Plan, net of outstanding options; and
. shares issuable upon the exercise of outstanding warrants at a
weighted average exercise price of $ per share.
Summary Consolidated Financial Information (In thousands, except per share data) The financial data set forth below should be read with "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes, all included elsewhere in this prospectus.
Unaudited pro forma basic and diluted net loss per share have been calculated assuming the conversion of all outstanding shares of preferred stock into shares of common stock, as if the shares had converted immediately upon issuance. Accordingly, accretion of preferred stock to redemption value has not been included in the calculation of unaudited pro forma basic and diluted net loss per share.
Six Months
Ended June
Year Ended December 31, 30,
1996 1997 1998 1998 1999
Statement of Operations Data: Revenue: Performance marketing services..... $ -- $ 216 $ 1,319 $ 617 $ 1,396 Other.............................. 196 60 8 3 -- Total revenue..................... 196 276 1,327 620 1,396 Total operating expenses............ 1,461 1,211 4,794 825 7,603 Operating loss...................... (1,265) (935) (3,467) (205) (6,207) Interest expense, net............... (26) (99) (224) (61) (168) Net loss............................ (1,291) (1,034) (3,691) (266) (6,375) Accretion of preferred stock to redemption value................... -- -- (56) -- (590) Net loss attributable to common stockholders....................... $(1,291) $(1,034) $(3,747) $(266) $(6,965)
Basic and diluted net loss per share.............................. $ $ $ $ $ Shares used in computing basic and diluted net loss per share......... Unaudited pro forma basic and diluted net loss per share......... $ $ Shares used in computing unaudited pro forma basic and diluted net loss per share.....................
The pro forma as adjusted balance sheet data as of June 30, 1999 give effect to the conversion of all outstanding shares of preferred stock into shares of common stock and have been adjusted to give effect to the sale of shares of common stock offered hereby at the assumed initial public offering price of $ per share, after deducting underwriting discounts and commissions and estimated offering expenses.
As of June 30, 1999 Pro Forma Actual As Adjusted
Balance Sheet Data: Cash, cash equivalents and marketable securities......... $ 24,325 $ Working capital.......................................... 21,032 Total assets............................................. 30,183 Long-term debt, net of current portion................... 6,018 6,018 Convertible preferred.................................... 35,350 -- Total stockholders' equity (deficit)..................... (16,494)