Will Email Go the Way of Banner Ads?

Unless you’re working with Cindy Crawford in a Diet Pepsi commercial, advertising is not glamorous. It’s even less so for those of us in online advertising, where not super models but terms such as “click-through,” “conversion rate,” “opt-in,” and “spam” make our pulses race.

I hope this column will provide email marketing solutions so you can tap into some of the excitement in our industry. I want to open a dialogue with you and encourage an exchange of ideas, not proffer one-sided lectures.

My promise to you is this: I won’t just think outside the box, I’ll take up residence there to provide you with usable solutions for your marketing endeavors. I’ll analyze situations and problems from a bottom-line perspective. Many ideas won’t be what you want to hear, but differing points of view will help you make educated decisions.

To that end, I want my first column to discuss the current state of email marketing: how it’s in danger of going the way of the banner ad if we don’t take fast and drastic measures to prevent that from happening.

Back in the ’90s, prices for banner ads began at $75 CPM and rose to a peak of about $130 CPM two years ago. At that time, they were generating an average click rate of 7 percent — demonstrating the pricing was completely arbitrary and had nothing to do with market dynamics and media value.

Novelty played a big role in high click rates. It wore off quickly. By the end of the decade, prices and click rates started slipping precipitously, picking up speed like a runaway train on a downhill track.

Excepting a few niches, banner prices and click rates have plummeted to somewhere between slim and none. Today, you can buy a run-of-network banner for $2 CPM or less and expect a 0.2 percent average click rate. Faced with those kinds of numbers, it’s easy to see why online advertisers stopped buying banners in droves and woke up to email marketing.

Why wouldn’t they?

Email carries no major out-of-pocket expenses, such as paper and postage or ad servers. It’s an opportunity to inexpensively blast ads and content to millions of potential customers. Marketers saw a gold mine in email, figuring they could push out as many emails as their servers could handle. They didn’t think about the ramifications. Brokers began selling lists for $300 per thousand and higher, based on the assumption that even at that price, it was still far cheaper than direct mail.

By all appearances, email’s working. The Direct Marketing Association’s (DMA’s) “State of the E-Commerce Industry Report” found 66 percent of 700 direct and interactive marketing companies surveyed saw increased sales last year as a result of email marketing.

Well, boys and girls, appearances can be deceiving. The reality is email marketing is heading down the same exact path as banners — at a much faster rate. Why? Because consumers are bombarded and saturated with email, particularly by every known flavor of spam. The sources range from legal but unethical to barely legal and blatantly outrageous. Open rates, once as high as 50 percent, now hover between just 3 and 8 percent.

The volume of email continues to rise. Forrester estimates this year alone, 250 billion emails will be sent to about 250 million recipients. That’s roughly three commercial emails per day per person clogging our inboxes, setting up the industry for a fall. The outcry against email will be far greater than the outcry against banners, which are merely annoying at worst.

What does all this mean and what can be done to preserve and protect this powerful medium? There’s no easy answer. The problem is being further compounded by industry gatekeepers who are reacting in knee-jerk ways, with negative repercussions on legitimate marketers. New email guidelines released by the DMA demand marketers respect consumer privacy. Sooner or later, the Federal Communications Commission may enact laws against spamming. Server costs could increase, ISPs could begin charging push fees, and legitimate marketers could begin paying fines for spamming.

The biggest culprit today is spam. Even for the most vigilant marketers, spam is impossible to eradicate. Here’s why:

• Consumers can register other people’s names without permission.
• A consumer opting in to an offer who later decides to opt out may receive the same offer, because her name is on another list.
• Confusing or hidden privacy policies result in consumers getting on lists involuntarily.
• Companies ignore standard practices and buy, sell, and swap lists, losing forever permission rights information.
• Spammers harvest names from newsgroups and other online sources, selling 1 million for only $99.95.

Many Web hosting companies don’t have the time to investigate spam complaints. They react by canceling serving contracts with valued marketers. If you’re facing an issue like this, seek out a more tolerant hosting company specializing in services to marketing firms. They do exist.

Anyone can send anything to a snail-mail box. Consumers trash it if they don’t want it. Online antispam zealots are out to make marketers’ lives miserable. Frankly, I don’t know what these people do all day, but we have to deal with them.

Marketers must take charge of the situation before it’s too late. The potential backlash is too great to leave to chance and overreaction.

Responsible email marketing is key: targeting properly, not burning out lists, practicing appropriate opt-in procedures, using proper unsubscribe practices, and, most of all, being careful about who mails to and manages your list are all part of the solution. It’s humdrum but necessary to the future of email marketing — before email goes the way of banner ads.

Everyone in your company should be provided with a best-practices document, so each person — including salespeople, biz dev managers, order takers, and tech people — knows the right thing to do.