Fight Is On by Two Competing Online Stamp Firms.

It's the war of the stamps.

The only two companies allowed to sell postage over the Internet are engaged in a feverish struggle to become the leading brand name in a huge uncharted market.

Both Santa Monica-based Stamps.com and San Mateo-based E-Stamp Corp. have launched national marketing campaigns recently, and the two companies are busy building alliances in order to stake out their respective claims.

"This is a critical proving ground for both companies," said Geoff Beard, an analyst with Thomas Weisel Partners in San Francisco. "It is a land grab, and they have about a nine month window of opportunity before Pitney Bowes will start to catch up with them."

Pitney Bowes Inc. is the 600-pound gorilla of postal business services, and the $12 billion Stamford, Conn.-based company has belatedly started to develop and test its own online postage service, Click-Stamp Online, in response to the threat to its core business posed by the two Internet startups.

So it's no surprise that E-Stamp and Stamps.com are moving quickly on the marketing front.

"It's very important to establish a brand name, since what we're offering is essentially a commodity," said Ellen Pearlman, senior marketing director with E-Stamp. "Brand building is crucial to differentiate our product."

E-Stamp announced last week that it would devote 65 percent of its $126 million initial-public-offering earnings on marketing, brand building, and customer acquisition.

Meanwhile, Stamps.com isn't standing still, launching its own multimillion-dollar ad campaign. And just as its online postage services were made widely available to customers on the Internet last month, the company announced that it had entered a three-year, $56 million agreement with America Online Inc. that will give Stamps.com a presence on key AOL Web sites, as well as put its software on AOL, Netscape and CompuServe start-up CD-ROMs.

"Our software application will be bundled with 1 billion CD-ROMs over the next three years," said Stamps.com Chairman and Chief Executive John Payne. "AOL will represent 25 percent of the Internet in the coming years, and it is very important to us to have access to that customer base."

In addition, Stamps.com announced last week that it had acquired iShip.com, an Internet shipping and tracking services provider, for $300 million in stock.

"That was a brilliant move," said Stephen Lacey, managing editor with the IPO Reporter. "iShip would have gone public in the imminent future, and Stamps.com was able to acquire at what is seen as a very good price."

With the acquisition of iShip, Stamps.com will be able to provide one-stop mailing and shipping services to its target customers -- small businesses and home offices. Whereas Stamps.com allows customers to print postage on envelopes from the Web, iShip enables them to compare shipping rates and print shipping labels from their desktops.

The two companies' major points of difference have to do with technology, and each methodology has its champions.

E-Stamp requires users to buy a $49 external storage device, which downloads postage from the Web and can store a great deal of information at once, so consumers can keep using it for awhile without having to go back online. Stamps.com requires no such up-front investment, but each piece of postage must be individually downloaded when it is needed, which for people with slow modems can be a time-consuming affair.

Melissa Shore, an analyst with Jupiter Communications, sees a slight advantage for E-Stamp, because the company was the first to make its services widely available on the Web and because she thinks its technology might he more practical for small-business owners.

"Not all small businesses have high-speed Internet access and the 'always-on' environment, and for them E-Stamp's product may be more advantageous," said Shore. "That might change, though, when we move forward and go through the text renewal cycle, and high-speed access will become more widespread."

But Beard sees E-Stamp's $49 gadget as a distinct disadvantage. "Ease of trial is a crucial element in the success of a new medium," said Beard. "And it is much easier and risk-free to download free software from the Internet rather than having to buy a $49 piece of hardware."

Payne, meanwhile, is looking at the current rivalry with E-Stamp as only a warm-up in preparation for the real battle ahead to dominate the $30 billion shipping and mailing market. "This is just a speed bump on the road to the real competition with Pitney Bowes," Payne said.

And when that battle gets underway, the start-up companies are expected to give the traditional supplier of postal meters to the business community a run for its money.

"It is true that Pitney Bowes has a high brand awareness, but this might not be to their advantage," said Shore. "Many small-business owners have been frustrated that for many years they have had no alternative than Pitney Bowes, and they are excited to have other opportunities."

Wall Street seems enthusiastic about both startups, though it appears to favor Stamps.com. Its share price closed at $57 on Oct. 28, up 53.5 percent from a week earlier. E-Stamp was up 33.3 percent during that period, closing at $24 on Oct. 28.

Pitney Bowes' stock, on the other hand, has been declining. It closed at $43.50 on Oct. 28, down 11 percent from Oct. 21.