E-mail tactics boost online advertising opportunities
by Dana Blankenhorn
November 1999

  Without a lot of fanfare, e-mail has come into its
  own as an advertising medium.

  By sponsoring newsletters or placing banners on
  e-mails that subscribers request, advertisers can
  get an environment for their messages that might
  be better than Web banners at a comparable cost.

  John Funk, founder and chairman of Infobeat,
  Denver, a major producer of sponsored e-mails,
  says click-through rates on his messages range
  from 0.5% to 1%, the same as with Web banners.

  But when users click on an e-mail ad, he says,
  they're more likely to follow up with a purchase
  than viewers of Web banners.

  "So our effective customer acquisition costs are
  low," he says, when compared with other online
  media.

  Subscriber lists increase

  The amount of e-mail ad inventory is also growing
  quickly. Infobeat has 3.5 million subscribers for its
  150 e-mail lists, Mr. Funk says. At the same time,
  Lycos' Wired Digital has about 1 million daily
  subscribers, says spokesman Andrew DeVries,
  and C Net has 4.7 million names on its lists,
  according to L-Soft, Bethesda, Md., which
  maintains the lists.

  For publishers, e-mail is very profitable. Barry
  Briggs, VP-advertising sales and marketing for
  ZDNet, San Francisco, estimates his company
  sends 50 million sponsored e-mails a month.

  His largest list, AnchorDesk, has 1.7 million
  names. ZDNet charges $15 per 1,000 names to
  sponsor the AnchorDesk list. But the costs of
  producing the daily letter are shared with the Web
  site, as are advertising costs, and the cost of
  delivery is minimal.

  Mr. Briggs says the success of AnchorDesk and
  other ZDNet letters is leading to line extensions,
  including a "Goody Drawer" mailing of special
  offers, and to ZD getting more demographic data
  from subscribers to build its community, and earn
  a higher CPM (cost per thousand readers) from
  advertisers.

  Buying ads on sponsored e-mails isn't easy,
  however.

  "There's a wide variety of pricing, anywhere from
  $15 to $45 per 1,000," says Jeff Clausen, a media
  buyer with the Multimedia Marketing Group, Bend,
  Ore.

  There is also no single agency where a media
  buyer can buy a wide variety of lists, Mr. Clausen
  says, adding, "a lot of the research we have to do
  ourselves."

  The format for ads is also changing rapidly. Text
  remains the most popular format at Wired Digital,
  says Mr. DeVries.

  Still, half of AnchorDesk readers take the HTML
  version, which supports graphic banners, Mr.
  Briggs says. 

  One key to moving subscribers to HTML is to keep
  the files short, he says. Instead of adding graphics,
  he suggests publishers use hyperlinks and a basic
  layout.

  But the overhead, for users, is still substantial. As
  an HTML file, for instance, AnchorDesk is 15
  kilobytes, says Mr. Briggs, but as text, it's 5
  kilobytes.

  Marc Johnson, a senior analyst for Jupiter
  Communications, New York, who will publish a
  report, "The Opportunity of E-mail," this month,
  warns that e-mail may not live up to its potential as
  a new medium because it's so easy to produce
  and send.

  "Everyone rushes in due to its low cost, and that
  can quickly become mailbox glut," Mr. Johnson
  says. "Communications become poorly thought
  out, they're not executed well, and you get
  burnout" from users.

  What's ahead

  In addition to maintaining quality, e-mail publishers
  such as Infobeat can also help ad buyers by
  providing demographic data that will allow them to
  target their ads, says Dave Hills, VP-director of
  Cox Interactive Sales, New York, Cox
  Broadcasting's Web rep firm.

  Many e-mail newsletters, because of their narrow
  focus, are already targeted. Ruth Townsend,
  president of Lifestyles Publishing, Cortland, N.Y.,
  which publishes a directory of e-mail newsletters,
  estimates 18,000 to 20,000 such publications take
  ads now on every subject under the sun.

  The problem is, says Mr. Clausen, many of these
  publishers are amateurs or hobbyists, unable to
  justify their rates or provide the services
  professional ad buyers need to buy with
  confidence.

  "Potentially e-mail is the killer app," says David
  Smith, who buys ads in e-mails as president of
  MediaSmith, San Francisco, but there needs to be
  better tracking of transactions generated by
  e-mails, as well as measurements that show if the
  e-mails are read, not just subscribed to.

  "That's the biggest problem, the clutter situation,"
  he says. "Even if you opt-in, do you read them?"

  Measuring readership, rather than subscriptions,
  and measuring what readers do with ads in e-mail,
  will determine the new medium's fate, he says.