More critics from within the industry itself are worrying louder and harder about whether anyone will be paying attention to any email message in the near future. The question is now widespread: Will a once-promising marketing vehicle become new media’s first "suicide app," a platform that got so thoroughly abused so quickly, even by its legitimate practitioners, that it lost all of its effectiveness? "I feel like the industry is starting to kill itself," says Lynn Wunderman, president and CEO of the direct marketing firm i-Behavior. David Smith, chief strategist, TargitInteractive, says that the proliferation of spam and even the sheer volume of legitimate offers are posing a major and costly challenge to the top-tier marketers. "Our perspective is, how do we get above and beyond the evils of this industry, and is there a way to preserve this industry so that spammers don’t kill it?"
Although most marketers resist such doomsday scenarios and murderous metaphors, many agree that there is a great deal at stake even in the perception that email readers quickly are becoming email deleters. A growing number of marketers (61%, according to DoubleClick) plan to increase their budgets for email promotion over the next year, in large part because this platform is considered effective and efficient. But a recent Wall Street Journal story sent shivers through the industry when it reported that opt-in email response rates had plummeted from 5.6% in 1999 to 1.8% in 2002, and that email was fast becoming the new banner ad — a moot promotional vehicle. Marketers were quick to rebut both the author’s metric and interpretation, but the larger fear was one of perception. "That is very reminiscent of what began as whispers hinting at falling CTR rates back in 1997-98 for banner advertising and quickly grew over the next two years into a widespread belief that online advertising doesn’t work," wrote Thomas O’Neil of Dynamic Logic, an ad effectiveness research firm, on the MediaPost.com message boards. Email bloat presents a two-pronged challenge to marketers: that spam is in fact diluting the medium’s effectiveness and that overstating the first reality leads to a worse second reality, a collapse of client confidence in the medium.
Metrics for Everybody Like all Web metrics, there are more than enough statistics to go around and support multiple positions.
Traditional "spam," the often surreptitious and wholly indiscriminate mass mailing of email boxes without even a whit of permission, has increased phenomenally just this year. Filtering service to the ISP superstars (Earthlink, MSN, AT&T) Brightmail recorded only 1.7 million spam attacks in October 2001, but by May 2002, that number had multiplied to about 4.7 million and constituted 12% to 15% of all email traffic. Even apart from spam, the effects of general inbox volume on all email messages has been tangible, says Smith, who has seen CTRs on rented lists decline from 7% to 15% a few years ago to between 2% and 5% today.
Nevertheless, there is ample evidence to support some marketers’ confidence that they can break through this clutter with good targeting and genuine permission from consumers. "There is no question that CTRs are going down, says David Hallerman, senior analyst at eMarketer, which in fact reported the 1.8% CTR figure used in the WSJ article. "But CTRs are an outdated metric," he contends. "Recall and recognition [metrics] show that online advertising works very well in that setting. The difference between responding to a known source and an unknown source is huge." For instance, a recent DoubleClick report showed that CTRs on emails from U.S. marketers fell from 9.73% in Q1 2002 to 8.03% in the same period 2002, hardly the free fall in response rates some perceive. "Users do have a very positive attitude toward the companies they say they want to hear from," says Hallerman.
Spitting in the Soup But for how long will consumers really want to hear from companies that call on them every day? According to many of the industry’s own practitioners, the real threat to email marketing’s reputation and effectiveness is that legitimate email offers are looking and behaving more like spam itself. The FTC recently found that 63% of "remove me" links were ineffective or broken. "It’s being killed partially by bad guys but partially by our own kind," says i-Behavior’s Wunderman.
A slippery term at best, "permission-based marketing" has become especially slick online. Many publishers engorge their email lists by requiring that users opt out, while others trade, sell, and aggregate these lists with little regard for the integrity of the database itself. And because privacy policies at many websites are either obtuse about sharing personal information (or simply ignored by visitors), a single "permission" in one spot online can breed quickly into a torrent of email offers, all of which can claim technically to be "opt-in." "This is a real tightrope that companies are walking," warns Hallerman. "It is spit in the soup — soup that all email marketers are sharing." Unfortunately, spitting is cheap, and the depressed economics of online media, especially cost-per-click pricing, is driving what Jim Campbell, VP marketing at TargitInteractive, calls "an inundation of volume from people who supposedly are trying to do it the right way." Upstanding companies demand that agencies buy to a specific efficiency rating. "From an efficiency standpoint, it makes more sense to pay for a certain amount of inventory. They will over-send to make sure they make the CTR," says Campbell. Meanwhile, the sites themselves are desperate to monetize their audiences, and so they get permissions any way they can, then rent the lists promiscuously. "It is a lot of factors in the same place at the same time," says Wunderman. "The real crime is the way they are abusing the asset."
The High Cost of Low-Cost Email Regardless of whether email effectiveness already is being hurt by the inbox tidal wave, the cost of spam and near-spam is already evident to many marketers. "It’s a very sophisticated business where amateurs can play," says Smith. "There are very sophisticated vendors like us and at the same time you are competing with a guy in Florida with three PCs, a phone line, and a list." Spammers who charge a penny per email put a lot of negative pressure on pricing. Worse, many advertising clients remain wary of the entire industry. "Some are spreading [their media buys] across 10 vendors because they don’t trust anyone," says Smith. His TargitInteractive spent considerable time and effort getting its list and marketing policies "certified" by ABCi in order to distinguish itself from second-tier marketers.
There are also the operating costs involved in rising above the email dross. Matthew Moog, president and CEO of CoolSavings, sends 80 to 120 million emails a month to those who explicitly subscribe to his service, but he has to focus a lot of resources on branding in order to maintain CoolSavings’ consumer recognition as a trusted source whose email they will open. CoolSavings tests messages and mailing times exhaustively to program against the junk email flow.
If It Ain’t Broke… If there really is a looming crisis in the email marketing industry, however, it is hard to tell from the attitudes among many marketers and even their associations. "I feel that spam’s very existence is simply an indication that email marketing may be one of the most powerful tools available to marketers today," says Paul Entin, founder, EPR Marketing. "Spam is not killing email marketing any more than junk snail mail has killed the cataloguers. They are doing quite well, in fact, because they focus their mailings on their target audience."
The answer to spam is not limiting the messages, let alone vilifying the messenger, but doing what marketers have always done — penetrate the clutter, says Adam Deringer, director, WebFingerprint, the online marketing division of The Brownstein Group. "The number of emails people receive will only continue to increase. Our job is to break through, and that starts by targeting your email and only sending information to those you know have asked for it." In fact, many of the same marketers who bemoan the excesses within the industry are also quick to say that their own response rates are acceptable. Michael Brauser, Naviant’s President and CEO says he still gets 1% to 5% CTRs.
The power of email marketing is just too great to go away regardless of the degree of clutter, says David Kinard, president and CEO of Access Marketing and a marketing instructor. Studies show that the overwhelming majority of users check their email first thing in the morning and a great many check it last thing at night, he says. Moreover, most of us prefer being contacted by companies via email rather than by phone.
With email marketing succeeding for now despite the growing clutter, there seems to be little sincere movement toward industry self-regulation. Smith says that his attempts to form a coalition of top-tier companies in order to set stricter address-gathering guidelines and best practices have been rebuffed because few companies want to submit to standards. The largest business organization, The Direct Marketers Association, did issue some industry guidelines earlier this year to ensure that marketers have customer consent before sending emails and give recipients ample opportunity to opt out and limit their names’ being handed to third parties. "We want the consumers’ trust in this medium," says DMA’s VP of government relations, Jim Conway. The group also runs an email preferences service that lets consumers opt out of receiving any offers from its 5,000 members. And while this mechanism exists about half a dozen clicks down at a special site (www.dmaconsumers.org) that rarely gets promoted to consumers, the DMA reports that 1.3 million email addresses were registered for opt-out in 2001 alone.
Much of the DMA’s energies are focused more at limiting what it considers overzealous anti-spam legislative proposals now winding their way through Congress. With some politicians proposing to levy fines on just about anyone sending unwanted email, the organization has drawn a line in the sand against most legal solutions to all but the most egregious examples of fraudulent mailings from obvious spammers. The Problem With Solutions With the prospect of restrictive legislation looming, the direct marketing world is starting to explode with its own dizzying assortment of solutions, but no clear course appears to be emerging. The executive director of nonprofit privacy group TRUSTe, Fran Maier, warned in a recent CNet column that "the privilege to market to people via email, even for legitimate commercial email, will be severely restricted if the industry doesn’t act quickly and decisively." Earlier this year, TRUSTe issued a new Trusted Sender program for email marketers, a seal of approval for companies that adhere to stricter guidelines: permission-based mails only, easy opt-out options, accurate subject headings, etc.
ISPs continue to filter for spam, but just about every marketer complains that this approach leads to too many "false positives" — legitimate, permissioned email getting blocked. Although his customers have explicitly subscribed to the CoolSavings service, Moog complains that ISPs regularly block mailings because the technology assumes any high-volume email is a spam attack.
California-based IronPort has a Bonded Sender program in which marketers use the company’s email gateway and post a bond with a third party that is paid out to consumers who receive unsolicited messages. And email software provider VerticalResponse offers applications that don’t allow companies to use harvested or bloated databases. But with so little apparent incentive for self-regulation — and with so many marketers showing so little self-restraint and consumers clamoring for action — some executives even within this ordinarily entrepreneurial and independent world of direct marketing wonder if legal controls and fines will be inevitable.
Shape Up or Shake Out Not surprisingly, most marketers think that the real solution to the industry’s excesses is, well, better marketing. All of the usual mantras apply: Don’t cheapen the brand with email overkill or deceptive headers. Establish a genuine relationship with consumers so they don’t consider the promotion an intrusion. Limit frequency and give ample opportunity to opt out. But most of all, stop using the technology’s ability to broadcast and start using its ability to target accurately and inform.
If email marketing can survive its own excesses, it could emerge as one of the most powerful selling and branding tools of the next decade, industry pundits insist. Within the next few years, the email medium itself will enjoy upgrades that should help marketers increase their effectiveness and creativity while also separating themselves from spam, says Kinard. Subject lines will become more visual and interactive, much more like banner ads, he expects. And the messages themselves will become smarter, checking recipients’ bandwidth to deliver richer, more entertaining media to those who want it. "These types of customization to the target audience are going to save email marketing from itself," says Kinard.
In the short term, however, the email marketing industry might want to take some time off from pumping its databases in order to review some recent media history, namely the rapid deterioration of the Web ad market. Here, too, pundits and apologists screamed about the medium’s demonstrable effectiveness and accountability and its unprecedented capacity to target consumers, and even held that a healthy industry "shakeout" would leave the good marketing practices standing. Ignore all that bad press and daily research about the medium not working, they brayed — and all the while their clients started losing faith and pocketing their wallets. How will the email marketing industry itself appear as a character in these public tales — defensive or proactive, smugly complacent or responsive? More than consumers and legislators, it’s the clients who will be watching and deciding whether the platform is reliable and respectable enough to keep moving forward. When Smith tried to drum up interest in an industry coalition dedicated to shoring up the medium’s reputation among advertisers, he found what we found: a lot of companies confident that their own marketing strategies would rise above the dross, that market forces ultimately would weed out the bad guys. "They think it will shake itself out," says Smith. "The most negative shakeout is people abandoning [email] as a channel that they use."