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E-Mail: Evaluating Dedicated vs. Shared IP Addresses

  |  July 27, 2009   |  Comments

Sharing an IP address with other businesses can reduce e-mail delivery costs, but there are other factors to consider.

Is your e-mail being sent from an IP address (define) that's dedicated? Or are you sharing an IP address with other senders? The decision has ramifications, whether you're using an e-mail service provider (ESP) or sending from your own in-house system.

Conventional wisdom in the e-mail world is that a dedicated IP address is better, but some companies can benefit from sharing an IP address, according to one ESP I recently spoke with. I'll lay out the pros and cons of each -- giving you the information you need to make the right decision for your organization.

Why Is the IP Address you Send From Important?

One aspect of deliverability is reputation. Organizations that create blacklists look at the reputation of the domain in your sender address as well as the reputation of the IP address used for the send.

The definition of a dedicated IP address is that only e-mail from your organization is sent from it. This provides your organization sole control over what is sent and what reputation that IP address earns. As long as you're a "white hat" sender that follows opt-in and other e-mail standards and best practices, you should avoid a negative reputation that could jeopardize your deliverability. That's a positive.

The downside to having a dedicated IP address is the cost. Most ESPs charge an initial set-up fee of $500 to $1,000 for a dedicated IP address; there's also often a $250 monthly fee for maintaining it. This directly impacts your e-mail ROI (define). For large quantity senders the additional cost is minimal, but for those sending small volumes of e-mail it can make a dent in your profit margin.

A shared IP address is just what it sounds like -- you're sharing the IP address with other organizations. Every company sending from the IP address has the potential to impact, positively or negatively, its reputation. If your IP address neighbors are good guys, the reputation shouldn't be damaged. But if one of them (or if you) does something that raises a red flag, the IP address' reputation will be tarnished and all e-mail sent from it could be blacklisted.

Many lower cost ESPs have customers sharing IP addresses by default; some don't ever offer dedicated IP addresses. It's a simple cost issue -- having multiple companies using the same IP address makes it less expensive to provide the service. They pass those savings onto customers. That's good.

It's a cost-effective arrangement, until a sender does something that gets the IP address blacklisted. Then you have a problem. Most ESPs deal with this by maintaining multiple IP addresses and shifting customers to those with neutral or good reputations when one IP address gets tarnished with a negative reputation.

This is a valid response, but it's one commonly used by spammers, who change their IP addresses on a regular basis to get around blacklists. So even this tactic risks jeopardizing the reputation of the domain in your sender address, even if you've done nothing wrong.

Why Might You Want to Share an IP Address?

The ESP I spoke with recently raised another valid positive about shared IP addresses, at least for low-volume senders.

When we talk reputation, we talk about positive, neutral, and negative. To get on the reputation radar, the IP address needs to be sending a certain amount of e-mail each month. If your sends are small, your dedicated IP address may be below the radar and never "qualify" for a positive or a negative reputation -- you'll be stuck with a "neutral" reputation or no reputation at all. This isn't all bad, but it's also not all good.

By having companies share IP addresses, this ESP contends it is able to get enough volume to earn positive IP address reputations, which helps its customers' e-mail get to the inbox. This is a valid point, as long as everyone using the IP address behaves and avoids red flags. It's a calculated strategy, one which requires the ESP to provide education about e-mail best practices and closely monitor every IP address to ensure customers are in compliance.

If you're sending from your own in-house system, these same pros and cons apply, but in a slightly different way. Let's say that your e-mail marketing and individual e-mail from your employees are sent from the same IP address.

If the IP address has a positive reputation, you're good and everything should get delivered. But if your e-mail marketing efforts are red flagged by a blacklist, all your e-mail will be blocked. That could keep messages from your individual employees from reaching business contacts.

By the same token, if one of your employees takes some rogue action, all your e-mail marketing could be blocked. This isn't an outrageous scenario. I've worked with clients where a well-meaning sales person loads an e-mail list of unknown or sketchy origin into their Outlook address book and sends to it. If there are spam complaints as a result, it will tarnish the reputation of the IP address and jeopardize delivery of your e-mail marketing efforts.

In the end, deciding whether to go with a dedicated or shared IP address involves risk and financial analysis. Each has pros and cons. If your budget allows for a dedicated IP address for your e-mail marketing efforts, I highly recommend it, even for low-volume senders. If not, just be sure that you monitor your deliverability on a regular basis so you aren't blacklisted due to one of your IP address neighbors' bad practices.

Here are three sites you can use to monitor your deliverability:

And whether you've got a dedicated IP address or are sharing one, always adhere to opt-in and other e-mail standards and best practices. That's the best way to protect against deliverability issues.

Until next time,

Jeanne

Today's column originally ran on February 23, 2009.

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ABOUT THE AUTHOR

Jeanne Jennings

Jeanne Jennings is a 20 year veteran of the online/email marketing industry, having started her career with CompuServe in the late 1980s. As Vice President of Global Strategic Services for Alchemy Worx, Jennings helps organizations become more effective and more profitable online. Previously Jennings ran her own email marketing consultancy with a focus on strategy; clients included AARP, Hasbro, Scholastic, Verizon and Weight Watchers International. Want to learn more? Check out her blog.

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