Believe it or not, we are witnessing the beginning of the largest redistribution of marketing dollars the world may ever see. According to a Deutsche Bank/ Media Post study, online ad spending is set to increase as much as 30% this year. A new five-year forecast from Forrester Research indicates online advertising will account for 8% of total ad spending in 2010, with over half of the surveyed marketers planning to divert funds from traditional advertising channels like magazines, direct mail, and newspapers to online opportunities. And this year alone, the estimated internet penetration in the United States is at 67.8%, representing over 200 million users (Nielsen/ Net Ratings).
Amidst all this growth, email still stands as one of the most effective forms of advertising overall. According to a Pew Internet & American Life Project survey, email is the number one activity on the internet, with 91% of internet users between the ages of 18 and 64 sending or reading email. Due to its high penetration and extremely low cost, email has become the most effective marketing medium to emerge since the introduction of television, and the most effective marketing tool of all time.
The opportunities for growth with email marketing are endless; the business model is incredible. But the fundamental problem squeezing this segment of our industry is delivery itself. A justifiable plan to stop illegal spammers has now grown completely out of control.
Under the guise of “blocking spam”, ISP’s and organizations alike are dramatically affecting legitimate and important business from being conducted in an industry that is exploding. Jupiter estimates that blocked email cost U.S. businesses $230 million in 2003 and expects that number to rise to $419 million in 2008. Meanwhile, Return Path estimates that nearly 20% of all requested commercial email is blocked by ISP’s in some fashion (DM News).
The real problem here lies with a variety of services that companies are putting in place to “protect” themselves without understanding the methodology being used to gauge unwanted email. In addition, too many vigilante blacklisters who have no basis for their actions, along with large corporations trying to improve their corporate image and increase sales, are attempting to enroll public opinion in a fight against spam while they are actually operating under a different agenda—a profit agenda.
But who really pays in the end? We all do…and it is a chain reaction. As individuals, organizations, and corporations use the delivery/spam issue in their favor, a domino effect is occurring and it is affecting all of us.
How so? Think of it this way: As the ISP’s block emails and delivery decreases, delivery companies are forced to utilize more resources and charge higher delivery rates. This equates to higher prices for delivery, a cost that is passed on to the legitimate email publisher as well. This, in turn, causes publishers to charge a higher CPM or CPA rate to account for the cost increase. Due to the increased cost of mailing, agencies, brokers, and networks then have to take a smaller margin and increase costs to the advertisers. Understanding that ad dollars are going to be spent no matter what (as such spends equate to bottom line profitability) advertisers raise prices to the consumer—namely you and me.
And please do not forget the endless number of small and medium sized companies that are quickly being put out of business due to increase issues with delivery, rising costs, and the new aggressive push advertisers are making to reach opt-in list owners directly, again, in order to cut costs.
The challenge is that there is so much rampant activity against email as an online advertising medium and so little activity towards educating both the government and public about the reality of the situation. The true irony is that a group of organizations and individuals are swaying public perception by manipulating growing concerns regarding “spam”. This in turn has triggered activities that affect all of us negatively and could stifle the largest sector of the fastest growing industry in America. At the end of the day, it is the general public and our overall economy that loses in this game. If we do not come together as an industry and work with the government to stop this spiral affect, we will all pay dearly one way or another.