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Paid ecards are less than one percent of the greeting card market, but the lucrative female-skewed audience is driving solid growth.

Online greeting cards from such sites as Hallmark.com, American Greetings.com and BlueMountain.com perpetuate a tradition that dates back well over 500 years -- to about the time of the invention of the printing press.

The 1400s are more associated with explorations of the sea than explorations of the heart. Still, that century marked the first appearance of printed Valentine's Day cards. Hand-made, paper valentines were popular, as were New Year's Day cards. Surprisingly, printed Christmas greetings did not come into vogue until 1843, when British artist John Calcott Horsley painted a card that showed a happy family hugging each other, and enjoying Christmas cheer. It contained the message: "A Merry Christmas and a Happy New Year to You."

In 2003, consumers purchased approximately 7 billion greeting cards, generating more than $7.5 billion in retail sales, according to the Greeting Card Association (GCA), the trade group for the industry,

While the GCA only tracks greeting cards sold at retail stores, Jupiter Research compiles sales figures for the online greeting card industry. From a paid content standpoint, Jupiter ecommerce analyst Patti Freeman-Evans estimates that $52 million in ecards were bought and sold in 2003. She projects that number will increase to $79 million in 2007.

Holding Jupiter's numbers up to the GCA figures; it is plain to see that paid ecards are only about 0.7 percent of the overall greeting card market. However, this arguably paltry percentage is not seen as a failure of online greeting cards to catch on.

The two key reasons for this low percentage are the fact that one of the leading ecard sites, Hallmark.com, does not charge for cards sent over the Internet, and that some cards, by virtue of the type of occasion they note, are not suitable for online delivery. Sympathy cards would be a key example.

Because American Greetings and its subsidiary Blue Mountain.com base most of their sales on an annual, "all you can send" subscription model rather than a per-card charge, sales of individual units are difficult to track. According to numbers from Web traffic measurement and analysis firm Hitwise, the combined Valentine's Day season site visit count for American Greetings and Blue Mountain was almost exactly two-thirds of Hallmark.com's total.

Hallmark.com offers free ecards as incentive to visit their main site, where they offer paper cards and miscellaneous gift items.

Other ecard sites depend on various advertising models. For example, 123Greetings.com generates pop-up advertising for third-party gift certificate aggregator TheUseful.com when site visitors view a card before they send it.

Since Hallmark.com and many of the smaller ecard sites are free, it would be a classic apples-and-oranges fallacy to project an increase in online greeting card sales if Hallmark.com and others charged for online-delivered content (as opposed to paper cards ordered from its site).

Demographics will Drive Growth

Still, the 20 percent annual growth in ecards estimated by Jupiter is worthy of note. The demographics of the ecard audience are also favorable.

According to statistics provided by Web site management firms, as well as some of the companies themselves, ecard sites tend to skew heavily female, and toward relatively high income and education levels that reflect high-speed Internet access and a degree of comfort with sending and receiving online cards. 123Greetings.com says that 60 percent of their users are college graduates.

The more than 10 percent of ecard visitors who are over 65 may seem surprising, but it makes sense when you think about how this group is more likely to be geographically separated from children and others to whom they would have snail-mailed cards in the past.

By income, Nielsen//Net Ratings found the following percentage breakdown for January, 2004:

The growth spurt will be driven by six factors:

• The broadening of Internet demographics. Freeman-Evans says that the growth in the ecard market will be helped by "the demographics of online becoming more like the offline world."
• The increasing penetration of broadband access that can support attractive, animated cards. "Interactive greetings are becoming more popular because of (the growth in) high bandwidth connections," says Vicki Kinzy, director of content management for AmericanGreetings.com.
• The spread of affiliate agreements between online greeting card sites and high traffic portals. "Part of American Greetings' distribution model is distributing through Yahoo! and MSN," says Bill Tancer, vice-president of research for Hitwise.
• Increasingly synergistic marketing campaigns between online greeting card sites and offline retailers. Inarguably, the standard for this strategy has been set by Hallmark.com, the online subsidiary of the 4,300-store retail giant. "Hallmark has a huge, incremental following offline," says Freeman-Evans.
• The rise of search engine keyword placement as a marketing tool. In one recent Google search for the term "greeting card," three, comparatively small online greeting card companies came up as Sponsored Links. Sometimes, well-established sites get traffic just by the virtue of their listing; Hitwise's Tancer says that for the recent Valentine's Day season, about 5 percent of traffic to AmericanGreetings.com came from Google, and 3.6 from Yahoo!
• The rise of niche egreeting card companies. A search of Yahoo!'s "Virtual Cards" category yields 220 brand listings, many reflecting ecological, lifestyle, or ethnic themes. Although some of these sites depend on pop-up ads for a significant portion of their revenue, that revenue stream may not be here forever. The increasing popularity of pop-up blockers, as well as the pop-stop features that will be integrated in the next edition of Internet Explorer due by the end of this year, may spoil the party. That's one reason why Jupiter's Freeman-Evans predicts some niche companies will drive sales by virtue of subscription or per-card models. Such enterprises have been attracted to the field by the lower barrier-to-entry of increasingly sophisticated but somewhat inexpensive, desktop publishing tools -- as well as the marketing opportunities created by the purchase of links and increasingly sophisticated search engine optimization.

Broadband Helps Growth, Too

A recently published study, cited by the Greeting Card Association, of a Toronto suburb with an unspecified, but high percentage of high-speed Internet access penetration adds another force at play here. In essence, the study claims that broadband use overlaps with increased willingness to socialize online, and that ecard sending is a natural outgrowth of this phenomenon. 

The study was released in December, 2003. Authors Dr. Barry Wellman, professor of Sociology at the University of Toronto, and Dr. Keith Hampton, professor of Urban Studies and Planning at Massachusetts Institute of Technology, said that wired residents were "more active in the community, had more neighborhood social ties and communicated with those ties more frequently" than non-wired citizens.

Given the small, but intensely competitive world of online ecards, one might expect a significant emphasis on research-driven, personalization. AmericanGreetings.com's Kinzy says that research is continuous, and is usually timed to conclude six months before the actual holiday.

"We have a very huge research division that studies what is popular as far as how art looks, and what are the most popular colors," Kinzy says. "We also do focus groups that study consumer trends," and e-mail links where consumers can" (request a card).

After a specific holiday is over, AmericanGreetings.com analyzes the top sends, and whether these numbers reflect specific trends. "We also look at customer comments (after the fact)," and sometimes ask ourselves, 'did we miss something?" Kinzy adds.

Electronic greeting cards also have a built-in time-to-market advantage over their dead-tree counterparts. Kinzy says that if it is urgent, a card can go from the drawing board to AmericanGreetings.com or BlueMountain.com in a 24-hour cycle.

While quick cycles such as these are far more exception than the rule, they can be driven by external events that evoke the kinds of emotion that greeting cards can best express.

The hostilities in Iraq and Afghanistan are the most obvious example of an ideal ecard climate. With more than 100,000 soldiers deployed to these regions, emotions among loved ones run high. At the same time, the growing number of Armed Services members with Internet access can receive a card more or less instantly -- rather than wait a week or two to pick up their card at mail call.

Hallmark.com has established a separate "Support Our Troops" category. Currently, 34 ecards are posted there. Many are Flash-animated, reflecting such timely themes as "Sending You An Angel," "Close In Thought and Prayer," and "A Shoulder to Lean On."

"Ecards bring together Hallmark's creativity with innovative technology, and allow us to respond in a timely way to current events -- more so than we can in paper cards --to give people ways to connect with each other online," says Hallmark spokesperson Kristi Ernsting.

In just one example, AmericanGreetings.com has a free animated "Preserving Freedom for All" card. Clicking the link for the card spawns a musical rendition of the patriotic song, "America," and prompts the sender to enter a personal message.

What's in the Immediate Future?

So what does the immediate future entail for the ecards segment? In addition to the constant supply of birthdays, Easter, the Jewish holiday of Passover, and Mother's Day will all arrive within three months.

Without a doubt, most card buyers will still trek their way to card shops and the greeting card sections of drug stores and supermarkets. Yet Jupiter's Freeman-Evans sees some evidence of "channel shift" between offline and online greeting card buyers and senders.

"There are newly emerging areas of incremental growth," Freeman-Evans says. "Plus, the bigger players have strong name recognition and nice marketing budgets."