List Firms Debate E-Mail Pricing Approaches
The current standard is to pay on a cost-per-thousand basis for the e-mails that are delivered. Though cost-per-acquisition deals exist on a smaller scale, they are much less common than they were a few years ago.
"A couple of years ago there were a lot of mailers aggressively pursuing CPA deals, and that made for a lot more e-mail going out," said Eric Zilling, chief marketing officer at direct marketing agency Communifax, Cranberry Township, PA. "It's really tough to find decent CPA lists out there now."
CPA deals took their toll by deluging consumers with e-mail, even though much of it was from legitimate marketers, he said. New filtering systems were put in place by Internet service providers to block commercial e-mail or send it to a bulk-mail folder.
The problem is tougher for consumer offers than business-to-business offers, which often are subject to less filtering, he said.
According to Zilling, it is almost impossible for mailers to know how many e-mails really were delivered because most ISPs do not send bounce messages when mail is blocked or sent to bulk folders. That is why he has proposed that mailers would be better off paying on the number of e-mails opened by recipients.
Though he concedes that open rates are trackable only on HTML messages, Zilling said he thinks list owners and mailers could agree on estimates for plain text messages.
He cited this example: "If a mailer pays just $100 per thousand names and orders 100,000 names, they pay $10,000. If the list only generates a 2 percent open rate, you get 2,000 opens. The math is pretty simple: That is $5 per open, or $5,000 per thousand. Can you imagine a list that is worth that kind of money?"
Still, he does not expect to pay just $100/M for opens.
"If the list owner were to charge even $500/M on opens, the list owner is guaranteed a return that is much better than a CPA, the mailer is vested in the mailing, and the list owners with better lists and e-mail practices are rewarded for the value they provide," Zilling said.
Another list professional is less sure that CPMs on opened e-mails would fly with list owners.
"It's hard to judge opens because you can only track opens on HTML e-mails and not text versions, so the overall open rate would have to be assumed," said Jane Kaiser, president of Eclipse Direct Marketing, New York.
Eclipse is a list brokerage firm for both e-mail and postal with clients such as Office Depot, Weight Watchers, American Power Conversion, Entertainment Book and America Online.
Kaiser specialized in e-mail list brokerage at Impower, DoubleClick and Walter Karl Interactive. CEO David Waldman was at Impower and most recently L.I.S.T. Inc. Kaiser and Waldman began Eclipse last July. John Hammersley joined as Eclipse's chief operating officer April 1. Direct Media Inc. provides back-office support.
However, Kaiser agreed that deliverability is a big issue in e-mail marketing.
"In the postal business, when you get a piece of mail you are at least holding it before you throw it in the garbage, whereas with an e-mail you might not even get that opportunity if it gets filtered before it reaches you," she said.
For that reason, Eclipse devised what it calls a risk-tolerance score for e-mail lists. Using a third-party system, Eclipse aims to track deliverability of specific lists.
"We are working with Pivotal Veracity on a risk-assessment tool to provide a risk-tolerance score based on the deliverability and viability of different e-mail lists," Kaiser said. "An audit e-mail is sent to 220 seeds that include 95 percent of all the domains out there like AOL, MSN, etc., and it will tell you what percentage gets delivered."
The audit can be used for pricing negotiations with a list owner based on deliverability figures, she said.
Meanwhile, at least one e-mail list professional said that prices already reflect the quality of the lists.
"It comes down to the source of the data and the content of the marketing message," said Rob FitzGerald, vice president, business development at Walter Karl Interactive, a division of Walter Karl, Pearl River, NY. "I don't necessarily have an overall problem with the way the pricing is structured. I think that it is fair that the advertiser pays for what is delivered, and pricing negotiations should be based on results."
He cited the varying price ranges of e-mail files.
"If you are ordering a business-to-business publishing file, for instance, you will probably be paying $300/M or more," he said. "If you are ordering a consumer list you are probably paying more like $70-$80/M."
Most BTB mailers don't take issue with the high prices because the files work so well, he said.