ECOA Firms Benefit From Demise of Free E-Mail

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While the move by many companies to charge fees for e-mail services they once offered for free may not be good news for customers, firms that offer e-mail change-of-address services are seeing their businesses grow as a result.


The two leading purveyors of these change-of-address services -- ReturnPath Inc., New York, and Veripost, Superior, CO -- most recently have seen spikes in their customer base thanks to USA.net's announcement that this month it will begin charging for its e-mail service, which had been free.


Both companies facilitate permission-based notification of e-mail address changes between consumers and businesses. By registering with either service, marketers will be notified when participating customers' e-mail addresses change or are no longer valid. Consumers can specify which companies they want to be notified of their address change. Neither company would say how many subscribers it has.


USA.net, an e-mail messaging service provider that offers consumer e-mail and corporate messaging services, said in early July that it would begin charging people who signed up for the new service before July 31 $29.99 for a year of e-mail service. People who sign up starting Aug. 1 will have to pay $49.99 for a year.


While the company would not say how many people opted out of the pay service, USA.net spokeswoman Danette Lopez said the company was "very pleased with the subscription rate" of those signing up for the new pay services.


But according to Eric Kirby, CEO of Veripost, at least 50,000 customers of USA.net opted not to accept the company's offer to pay for e-mail service. That is how many new customers Kirby said Veripost picked up in July alone after USA.net announced its new pricing plan.


Noting that USA.net is one of the larger providers of e-mail services to both consumers and businesses, Kirby said its new pricing plan creates a problem for people who do not want to pay and have to change their e-mail addresses.


"About 2 percent of any marketer's file is made up of USA.net addresses," he noted. "So that means marketers will see 2 percent of their files go bad this month."


Kirby noted that on average, about 2.5 percent of a marketer's list goes bad in any given month. He said the USA.net problem was "probably the most pronounced example to date" of mass defection by customers.


"Entire towns don't get up and move all at once," he said. "E-mail is unique in this."


USA.net does not release subscription figures, and Lopez would not say how many subscribers the company had before it announced its new pricing policy.


Matt Blumberg, ReturnPath's chairman/CEO, said his company also has seen a spike in subscribers since USA.net made its announcement. He would not say exactly how many new subscribers the company gained. But he did note that they were evenly split between consumers and businesses.


ReturnPath has about 42 customers, among them Restoration Hardware and Moving.com, which pay anywhere from 10 cents to $1 for every e-mail address that is successfully updated. E-mail list outsourcers such as Topica, Responsys and Experian's Exactis division offer similar services.


Moving.com, a Web site that offers information and services related to moving, said it sends about 6,000 e-mails a day to customers. The company estimates that an average of 5 percent of those messages do not get delivered in a month.


While keeping their e-mail lists up-to-date is obviously important for marketers, change-of-address services so far are not, according to at least one industry expert.


"Unfortunately they are not currently viewed as critical components of e-marketing initiatives," said Jay Schwedelson, corporate vice president at Worldata/WebConnect.


A number of industry observers said they would not be surprised to see the industry consolidate further, particularly after ActiveNames Inc., a privately held company that also provided a change-of-address service for e-mail, went out of business in April.


ActiveNames used a permission-based service and featured an e-mail plug-in program that could be downloaded from its Web site. The company had an exclusive reseller agreement with FloNetwork, which is now part of DoubleClick Inc.


The remaining companies are in a stronger position than a year ago, but he said the shakeout may not be over, Schwedelson said.


"The two remaining firms, Veripost and ReturnPath, have secured very strong partners, and it will be interesting to see if they can withstand current market conditions," he said. "It would not surprise me to see these two firms consolidate at some point to create an even stronger overall service offering."


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