How did I come up with this number, you might ask? From aggregating a number of sources from various experts. In particular, I want to thank all the folks on the Inbox Insiders list who provided much of the insight this number is based on. But you can decide for yourself if my numbers hold water or not. Here is my reasoning:

First, we have a couple of trade sources to go by. The Interactive Advertising Bureau reports that the email marketing industry was $250 million for 2005 and $338 million for 2006, or 2% of the overall online advertising spend. So let's put it at $456 million for 2007, based on the assumption that interactive marketing grew at the same pace from 2006 to 2007. The IAB, since it's a publishing-centric trade organization, only includes banner ads, text links, sponsorships, and the like in its number. In other words: these numbers quantify how much publishers made from email marketing.

But there are a whole lot of other people in the equation: services and tools are not included, as well as the money pumped out by lead-generation emails. Forrester Research puts the email marketing industry at 1.6 billion for 2007 (and this is a number first mentioned in 2005). This number includes things like service providers and agencies but does not include lead-gen revenue. According to my inside sources, the Forrester folks also think this figure is low, and will increase it in some upcoming numbers they are running now.

So that would put the advertising revenue at $456 million, and technology and services at $1.15 billion. That would seem to make sense, based on Ed (formally of Yesmail and now at Responsys) Henrich's estimate that the top seven enterprise-focused ESPs had a combined revenue of around $480 million.

But as Des Cahill, CEO of Habeas, points out: "Also add to this, from the IAB '06 data, a portion of the 8% of $16.9 billion lead generation slice of online ad revenue (or $1.35 billion) which is powered by email. Now we're starting to get some big numbers that more accurately represent email's value to online marketing."

So we have: $456 million for email-generated advertising revenue, $1.15 billion for all the technology, agency, consultant, service providers out there, and $1.35 billion for the lead-gen portion.

Add it together, and you have $2.9 billion--which we already know is probably low because of the Forrester numbers being low, so let's round it up to $3 billion.

Hey, it sounds like a good industry to invest in!

But what is missing: The value of email. None of these numbers include the revenue generated to companies as a result of more traffic being driven to the Web site. How much bottom line profits are being added to companies each year as a direct result of their paying that $3 billion bill for all the sponsorships, distribution, analysts and lead gen they bought. As Des says: "What percent of the $170 billion in U.S. '06 online commerce [source: comScore 10/06] was driven through email (how much Web site traffic driven by email)?"

Sounds like a job for the EEC!

This commentary is insightful. I recommend it to others.