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Marketers are turning to e-mail to get word out

November 27, 2000 

Debbie D'Antonia, a Social Security administrator who lives in Bellmawr, has a two-word reaction to the daily e-mail advertisements she receives on her home computer - and it's not printable in a family newspaper.

Suffice it to say that, as soon as she sees them, she hits the delete key.

"An everyday thing is Amazon," she said, mystified. "I've never bought a book online. I've never bought anything online. When I want a book, I'll go to a bookstore."

D'Antonia is at a loss to explain why Internet market-research companies predict that advertisers will spend $7.4 billion by 2005 to send their messages via e-mail, up from $164 million in 1999 and a projected $700 million this year.

"I say that all they do is annoy people," she said.

Maybe so.

After all, the evil twin of e-mail marketing is spamming, the practice of clogging the Internet with unwanted e-mail messages.

Marketers say the last thing they want is for someone like D'Antonia to get unsolicited messages. Their sales pitches are wasted on those who click "delete."

"There is a difference, and it boils down to one word: permission," said Ray Everett-Church, counsel for the Coalition Against Unsolicited Commercial E-Mail, an Internet organization that helped draft anti-spam legislation pending in the U.S. Senate.

"When the consumer has expressed any interest or given their permission to receive such solicitations, e-mail can be exceedingly successful. The response rates are off the charts," he said.

"E-mail is hot," San Francisco consultant Michael Tchong agreed. He writes a marketing newsletter called Iconocast. "All of the major advertising agencies have added e-mail to their tools."

The statistics are not news to people in the advertising business. Traditional ad agencies are hustling to add interactive divisions.

"E-mail is now just another bullet in the gun," Jon Roska, chief executive of Roska Direct, a marketing agency in Montgomeryville, said.

Suppose a client wanted to send a message to Webmasters from a list rented by CIO magazine, a publication for business information and technology executives, he said.

"Three years ago, I would have mailed those people," Roska said. "Now, I blast out an e-mail. Within 24 hours, I know whether it is working. Then I'd follow it with a direct-mail piece."

Locally, several companies are hoping to win with the trend.

Naviant Marketing Solutions Inc. is a Newtown Square company that maintains and sells mailing lists culled from a database of online households. In August, it signed a deal with NetCreations Inc., a New York e-mail marketing service, to incorporate some of its list services. L.L.C., a three-person start-up that sends e-mail messages for its clients, usually colleges or nonprofit organizations, moved from an attic in Wyncote to new quarters in a refurbished mill in Bristol two weeks ago. And one of two founding partners quit his day job to manage the company full time.

TMXinteractive, a West Conshohocken company that juices up e-mail messages with video-like glitz and then tracks results, recently received $15 million in venture capital. The 37-employee company plans to add another dozen staffers by the end of the year

I-Frontier, an interactive advertising agency, plans to expand onto another floor in its Northern Liberties headquarters. The agency has more than doubled its staff from about 40 to 85. Its e-mail business has increased by 500 percent in a year, according to its chief executive officer, Brad Aronson, author of a book on Internet advertising.

These companies are moving ahead despite the drubbing interactive advertising companies are taking on Wall Street.

The stock of U.S. Interactive Inc., a King of Prussia firm that includes marketing among its Web services, dropped from $76.50 at the start of the year to 59.4 cents Friday. On Nov. 8, U.S. Interactive announced it would lay off 202 people, or 28 percent of its workforce, and move its headquarters to California.

The stock of 24/7 Media Inc., an all-purpose interactive agency and e-mail list manager from Manhattan, tumbled from $64.65 a share in January to $1.69 Friday.

Naviant's partner, NetCreations, tumbled from a high of $61 a share in March to a low of a little more than $4 last month, a week after DoubleClick Inc., the largest Internet advertising agency, announced it would buy NetCreations and its valuable lists of e-mail addresses for $191 million in stock. NetCreations' shares bounced back to $6.13 Friday. DoubleClick's stock has dropped, closing at $14.13 Friday.

"The whole dot-com sector has fallen out of bed, and e-mail marketing has not escaped the wrath," said Robert J. Martin, an analyst with Friedman, Billings & Ramsey, a stock brokerage in Arlington, Va.

Short term, that has caused a dip in online advertising rates, including fees for e-mail.

The decrease in prices - about 25 percent in recent weeks - is a function of supply and demand, a Merrill Lynch & Co. Inc. analyst, Henry Blodget, said. Troubled dot-com businesses cannot afford advertising, leaving a glut of capacity.

If anything, that bodes well for i-Frontier and its mostly traditional off-line clients, such as Coppertone and Claritin, the allergy medicine. "We're able to buy space at a discounted price, providing an even greater return on investment for our clients," Aronson, the company's CEO, said.

TMXinteractive's chief executive officer, Blair Lyon, does not appear too alarmed, even as he presses forward with plans to hire more staffers and open more offices. In the last month, TMX has opened four offices, and plans to add three in 2001.

Lyon said he thought that, as companies look to more targeted e-mail messages, his company's tracking abilities would put it in good stead.

In the future, as advertising messages become even more annoying and, therefore, ineffective, "people are going to want to shift away from intrusive and obnoxious advertising," Lyon said. "Advertising dollars are shifting to more permission-based advertising."

Permission-based advertising means that the consumer, by entering a sweepstakes, by providing an e-mail address, by registering a new product, agrees to receive marketing messages.

The ultimate in permission marketing is the double opt-in that occurs when a consumer, perhaps inadvertently, signs on to receive marketing messages. The consumer quickly receives a follow-up e-mail asking if he or she is certain about receiving messages.

"Your better companies are doing that right now," Roska, the direct marketer, said. Some question whether the double opt-in causes the loss of potential customers, he said.

"We do want to lose those people, because the ones that are left are the vein in your gold mine," Roska said. "I'll take 10,000 names like that over 50,000 names who haven't said they're interested."

Typically, e-mail marketing takes two forms. It comes directly or as a "sponsored e-mail," an advertising message that is included in a Web newsletter subscribed to by the consumer.

Part of the reason that companies are so optimistic about e-mail marketing is its quick turnaround time and relatively low cost.

An April study by Jupiter Communications, a market-research company, says it costs $30 per thousand to deliver an e-mail to existing customers, and $500 per thousand for an offer that comes in the mail.

It takes three weeks and $1,000 to create an e-mail marketing message; three months and $20,000 to create a direct-mail piece with envelopes, letters and return cards.

However, when it comes to acquiring new customers, direct mail has some advantages. The study says it costs less to convert new customers and it's also cheaper to buy lists of prospects.

Everett-Church, of the Coalition Against Unsolicited Commercial E-Mail, said some database companies use a technology known as an "address harvester," which searches for e-mail addresses in Internet chat rooms or message boards, "harvesting them like they are wheat or olives from trees." He added: "They are taking these things without your ever specifically giving your address to these folks."

Naviant executives say they provide their clients with e-mail addresses culled from product registrations and their database of 30 million online households.

"The folks that get e-mail the best are the ones that do direct marketing the best," Carol Krol, managing editor of the Myers Report, a New York advertising newsletter, said. She pointed to online catalog companies such as Lands' End Inc., which can send specific targeted e-mails that say: "You liked the khaki pants, how about something in blue?"

How well e-mail marketers target will affect the future of the business, its practitioners say.

If consumers complain about unwanted e-mail, it could lead to growth-stifling regulations.

But what may be even a bigger threat to e-mail marketing's long-term growth could be simple consumer fatigue. By 2005, Jupiter predicts that consumers will receive more than 5,600 e-mails a year, including 1,600 marketing messages.

"Right now, there are so many new people who still read most of their e-mail," i-Frontier's Aronson said. "All these new people will eventually get Net savvy. They'll get so much e-mail that they'll only read messages relevant to them."

Jupiter's report predicts that the soaring response rates that are exciting marketers now will drop over time. A drop in effectiveness will mean that e-mail marketers won't be able to charge as much as they do now, eroding profits.

E-mail marketing "will continue to boom as long it continues to have good response. It works," Tchong, the San Francisco consultant, predicted. "But once [response rates] start to decline again, interest will wane."

Jane M. Von Bergen,

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