America Online Acquires Mailblocks

  |  August 4, 2004   |  Comments

UPDATED: Challenge/response technology gains more momentum, which may create headaches for marketers.

America Online has acquired anti-spam Web-based email company Mailblocks, in a deal that will bring challenge/response technology to the giant ISP. Financial terms of the acquisition weren't disclosed.

Mailblocks was founded by Silicon Valley entrepreneur Phil Goldman, who died suddenly on Christmas day of last year at the age of 39. Goldman had also founded WebTV, which was later sold to Microsoft. The company never found a permanent CEO after Goldman's death.

The email firm was best known for its user-friendly interface and its challenge/response technology. In challenge/response, an email from an unfamiliar entity is "challenged" -- an email is sent requiring the sender to respond and verify that a human, and not just a machine, sent the message. Once the sender responds, the email is allowed through. Users of Mailblocks' challenge/response technology could also manually add senders to their whitelists. The most prominent email provider to use challenge/response is ISP EarthLink.

Mailblocks also offers users disposable email addresses, known as "trackers." This technology allows people to generate new addresses that can easily be abandoned if they start getting spam. People nervous about giving their email addresses for newsletters, for example, could use a disposable address and be assured they could later cut it off should they begin receiving unwanted messages. Yahoo Mail offers this technology to its paying Plus customers.

AOL plans to integrate the Mailblocks technology and interface into its Web-based applications for AOL and Netscape mail. This will occur by the end of the year, AOL officials said. The next phase will be to integrate challenge/response into the AOL service software. It will, by default, be set to "off," but users can turn it on if they so desire. The company didn't say when that integration would occur.

Some industry experts question whether implementing challenge/response is a good move for AOL.

"Challenge response is not the most elegant spam solution for ISPs because it amplifies the mail volume," said David Daniels, an analyst at Jupiter Research. "It turns one message into three -- inbound, outbound challenge, inbound response -- which ultimately impacts Internet traffic and adds to infrastructure costs."

Daniels also points out that the more widespread use of challenge/response could raise costs for email marketers. "Not only will marketers need the resources to process these responses, but it will make the best practice of using a consistent 'from' address -- from mailing to mailing -- a required practice," he said. "Marketers that tend to use different from addresses to measure campaign results will have to use a consistent 'from' address or risk handling these challenges multiple times."

George Bilbrey, vice president and general manager of deliverability services at Return Path, says the acquisition highlights the importance of getting in AOL users' address book. Already, email from an address in the address book gets preferential treatment because images are automatically enabled in AOL 9.0.

"If Mailblocks is implemented at AOL in the same way it works as a standalone entity, you can avoid that whole challenge/response loop by being in the address book," said Bilbrey. "There are a lot of reasons to want to be in the address book. This is another reason to do that."

In addition to trying to get into users' address books, email service providers are dealing with existing challenge/response systems by using technology to gather challenges, then having staffers respond manually. "You have to address those -- even though it's only a small percentage of email -- to make sure that critical communications aren't being lost, because there are real implications," said Michael Della Penna, chief marketing officer for email service provider Bigfoot Interactive. Della Penna gives the hypothetical example of a financial services player whose billing statement isn't delivered via email, therefore robbing it of the ability to charge a late fee if the customer's payment is delayed.

AOL's acquisition is somewhat reminiscent of Yahoo's recent purchase of Web-based email service Oddpost. Both of the smaller companies purchased won accolades for the speed and user-friendliness of their interfaces.

Mailblocks' approximately 15 employees, located in Los Altos, Calif., will join AOL, according to the company. "They have a world class group of engineers and individuals who are extremely dedicated and dynamic," said Nicholas Graham, a spokesperson for AOL.

Current Mailblocks customers can continue to use their accounts, and it's still possible to sign up for the service via the company's site. Graham said AOL was working on a transition plan for Mailblocks customers.

The Mailblocks acquisition is America Online's latest move in its aggressive anti-spam efforts. Other technological undertakings include the testing of the SPF email authentication standard. It has also aggressively supported both federal and state anti-spam laws, and has filed a number of lawsuits against alleged spammers.

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Pamela Parker

Pamela Parker is a former managing editor of ClickZ News, Features, and Experts. She's been covering interactive advertising and marketing since the boom days of 1999, chronicling the dot-com crash and the subsequent rise of the medium. Before working at ClickZ, Parker was associate editor at @NY, a pioneering Web site and e-mail newsletter covering New York new media start-ups. Parker received a master's degree in journalism, with a concentration in new media, from Columbia University's Graduate School of Journalism.

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