Sometimes, It's Best To Wait

If you think it's too late to make hay on the Web, consider Capital One Financial Corp. For two years, the giant credit-card issuer stalled its online efforts while it studied the Net. Marketing cards via Internet banner ads cost twice as much as direct mail, and Web applicants were 10 times as likely to commit card fraud. So instead of rushing an all-out Web effort, Capital One slowly started conducting thousands of tests to figure out how best to use its direct marketing techniques online.

Capital One is making up for lost time--fast. The company spent last year dribbling out Web offerings, but didn't hit the gas until this year. Now, CEO Richard D. Fairbank and President Nigel W. Morris say Capital One is on track to issue 1 million credit cards online by yearend, enough to make it a leader in the field. That's up from a paltry 115,000 Web-originated accounts at the end of the second quarter. So far, it has signed up 1 million customers from its huge base of 27 million cardholders to use the Web for customer service. Those folks have made the third most popular financial Web site, according to Nielsen/NetRatings.

Spending two years in tests helped prevent some costly missteps. Rivals raced to sign ad deals with portals, paying top dollar at the height of the Net boom. After the bust in the banner-ad business, rates are lower and it's costing Capital One no more to originate an account online than it does to woo customers through direct mail. In June, one billion people saw its Web ads, making the company the biggest advertiser on the Web, according to Media Metrix Inc. The payoff, execs claim, will soon be enough to erase any fears that Capital One waited too long before jumping on the Web.