Digital Impact: Spam Still Hurting E-Mail Business

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Despite glimmers of hope in stemming the flow of spam, Digital Impact said its business continues to suffer from the flood of unsolicited commercial e-mail clogging inboxes.

The San Mateo, CA, e-mail service provider reported its fiscal first-quarter sales fell 5 percent from a year earlier, to $10.4 million. It lost $884,000 in the quarter compared with $293,000 a year earlier.

The company reported a decline in its acquisition services business, with e-mail renewal rates in the quarter falling to 70 percent from 80 percent.

"We believe we will more than make up for those losses in revenue [from e-mail] with the search engine marketing business of Marketleap," Digital Impact CEO William Park said yesterday during a conference call.

Yet for the rest of the year, Digital Impact expects the search business to have only a marginal effect on its financial results, adding $1.5 million in sales. It expects revenue will decline slightly next quarter before picking up for "modest" full-year sales growth.

Digital Impact said it expects prices for e-mail management will continue to decline, though not as quickly.

Park said marketers increasingly would look to Digital Impact for a range of services around acquiring and keeping customers, including search, Web site services and e-mail campaigns.

"We are optimistic because we are laying the foundation for growth," he said.

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