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Growing Pains for E-Mail Marketers

March 1, 2002

Tod Loofbourrow is an e-mail marketer's dream and nightmare rolled into one. He's the CEO of Authoria, a rapidly growing 200-employee software producer that creates tools companies use to communicate with employees and customers securely over the Internet. Thus, Loofbourow can help make an Internet pitchman rich.

The downside? He has a one-strike-and-you're-out policy on the e-mail solicitations he receives -- and an increasingly itchy finger on the delete button. "I am ruthless," he says. "Most of the time [e-mail pitches] go straight to the junk-mail list. If you're going to pitch a CEO, you had better get it right the first time."

As a tough nut for a marketer to crack, Loofbourrow has lots of company. With superfluous messages stuffing in-boxes, e-mail marketers are struggling more than ever to cut through the noise. Some of their difficulty comes from soaring levels of obnoxious unsolicited mail -- known as spam -- that hawk everything from discount mortgages to sex. But whether the problem is junk or volume, the result is the same: More and more, people like Loofbourrow -- who gets more than 100 e-mail messages each day -- are tuning out even pitches they might want to see, from companies that asked permission to send them mail.

ROBUST GROWTH. "It's an issue we as an industry need to deal with," says Michael Mayor, president and COO of leading e-mail marketing-list provider NetCreations. "Making your message stand out among the hundreds of other messages that are out there will become more and more of a challenge."

That's not to say e-mail marketing is in danger of self-destruction. In fact, the sector is growing robustly -- at 100% to 150% per year, according to Mayor and others. Forrester Research estimates that companies spent $1.1 billion on e-mail marketing in 2001, up from $400 million the year before. The figure should climb to $1.8 billion by the end of 2002, it predicts. Compare that to the stagnation or decline in other advertising media, and e-mail marketing looks like a vein of gold. It's cheap, and it works well.

According to AMR Research, finely targeted e-mail marketing campaigns can garner 7 to 12 times the response rate of comparable snail-mail direct-marketing efforts. At times, the response rate can be sky-high.

SLAM-DUNK WINNER. Witness a marketing effort run by the National Basketball Assn. through its Web site, Site visitors could register to vote on players for the All-Star team online, and in return they would receive an e-mail the minute the lineup was announced. The campaign also included, in a second and third e-mail that customers had to ask to receive, a letter from NBA Commissioner David Stern and merchandise offers from the NBA store. According to NBA Senior Vice-President for Technology Steven Hellman, the response rate of people who read at least one of these e-mail pitches was 43%, vs. the usual sub-10% for less pointed promotions.

Or take the campaign Digital Impact put together for Hewlett-Packard (HP) that allowed purchasers of printers or other HP equipment to ask the company to send them software updates and other pertinent info, such as estimates of when their printer cartridge might run out. According to Digital Impact CEO William Parks, HP realized additional revenues of $150 million to $180 million thanks to the campaign.

For such success stories to become the norm, however, e-mail marketers need to stay on the good side of consumers -- which means both keeping their act clean and distancing themselves from the bad boys of spam. One issue: letting consumers remove their names from a marketing list. In a recent experiment, e-mail software and direct-marketing company EchoMail subscribed to e-mail newsletters from hundreds of the world's largest companies. EchoMail then unsubscribed from the newsletters. According to V.A. Shiva, the company's CEO and founder, less than 30% of the companies were able to remove EchoMail from their list quickly.

That's a pet peeve of e-mail account holders. "Marketing departments aren't talking to their own company's customer care departments," says Shiva.

RIGHT HAND, LEFT HAND. In part, it's a result of the huge logistical challenges of e-mail marketing campaigns. At bigger companies in particular, lists of customers and their contact information are often stored by individual units on disparate software systems. Getting the corporate left hand and right hand talking to each other can be all but impossible. So sometimes, companies pitch a customer who has told another unit to lay off. "If anyone asks you how to make something like this work, it's making sure you have the right data, data, and data," says's Hellman.

Crossed wires aside, companies face a tough choice between buying increasingly controversial lists and building an e-mail campaign themselves. Hellman and the NBA chose to go it alone. "List marketing has a slight return -- I don't appreciate getting unsolicited e-mail," he says. "We have enough mechanisms to touch our fans without getting involved with purchasing outside lists."

List compilers such as Net Creations (which has more than 50 million names) and DoubleClick are working furiously to prove Hellman wrong -- to ensure that the e-mail addresses they sell marketers will produce a good return. Mayor allows customers to run test campaigns on portions of his lists to verify company claims that the recipients are in fact interested in whatever is being sold. Moreover, NetCreations and DoubleClick both adhere to a policy of "double opt-in." Anyone on any list they compile must not only fill out a form on the Web acknowledging their interest but also reconfirm in answer to an e-mail they're sent.

BLACKLISTED. All of that sounds great, but "the unfortunate truth is many lists are of Internet users who likely have no recollection of how their name was added," says Scott Brew, president of direct e-mail marketing company Adtegrity. Worse still for e-mail marketers is when their company gets added to lists compiled by anti-spam organizations that track e-mail offenders. These lists are distributed to system administrators at companies or Internet service providers, which often use them as a guide to screening e-mail.

Disputes over this tactic have led to lawsuits by e-mail marketers that ended up on Web blacklists. In November, 2000, 24/7 Media persuaded a court to issue a restraining order against the anti-spam nonprofit MAPS, which maintains the widely used Realtime Blackhole List of spammers.

At the heart of such conflicts is an issue that's likely to be a source of constant friction. "What's spam to someone else might be perfectly O.K. to me," says Sarah Lefko, lead product manager for Microsoft's Hotmail unit. "Some people don't like J.Crew, but I do." While some Internet service providers and the TRUSTe organization -- an industry group aimed at shoring up customer confidence in online commerce -- have started programs to register legitimate e-mail marketers, such a slippery issue may have no solution.

That could mean e-marketers will have a harder time connecting in the near future, as they try to compete with spam, placate overburdened recipients, and battle ISPs and the anti-spam corps. The telltale sign will be whether response rates to e-mail marketing fall over time -- or whether this offshoot of direct mail develops real staying power.

By Alex Salkever, with reporting by John Cady and Susan Zegel in New York. Copyright © 2000-2001, by The McGraw-Hill Companies Inc.


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