Web-Centric Model Threatened by E-Mail Newsletters

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Something profound is happening in the Internet publishing space. While Web sites from drkoop.com to TheStreet.com have raised hundreds of millions of dollars to make content available for their visitors, an entirely different form of Internet publishing is threatening to revolutionize the way content is distributed and read. This medium is the e-mail newsletter.


E-mail newsletters are publications sent to a subscriber base via e-mail and are most often sent in plain text. The newsletters are free and subsidized by short text advertisements within the body of the content. What most e-mail newsletters do is replicate a portion of the best content in a newspaper or magazine.


There are an estimated 500,000 newsletters on the Internet, ranging from daily jokes, recipes and horoscopes to more substantial commentaries by syndicated columnists. Some of the more popular e-mail newsletters have subscriber bases that top 250,000, surpassing the reach of many consumer magazines.


The number of newsletters is expected to grow dramatically. With e-mail technology being one of the most significant innovations in the dissemination of information since the Gutenberg printing press, even the lowest capitalized publishers can provide original content to their subscriber base.


Adding fuel to this e-mail newsletter revolution is the popularity of the e-mail application among Internet users. With more than 96 percent of the online audience using e-mail, it is, without a doubt, the killer application of the Internet.


This move to deliver content to a subscriber's e-mail inbox is threatening to disrupt the Web-centric model that is pervasive in the Internet industry. Being Web-centric means that companies require people to visit their Web sites. The entire industry has been built on the notion of people surfing. E-commerce and advertising through banners or pop-up interstitials all require visitation. In other words, almost all Internet models are Web-centric. And infrastructure companies make their living selling the "picks and shovels" for this model.


Delivering content to an online audience turns the Web-centric model on its head. If people can find their horoscopes, weather reports, jokes and recipes in their inboxes every morning, they no longer need to surf for that information. As e-mail newsletters continue to proliferate -- in terms of both number of publications and number of subscribers -- they will adversely affect Web-centric advertising revenues, which require visiting Web sites. This sets Web-centric advertising models on a continuing downward spiral.


Having content "pushed" to the subscriber is not a new concept. PointCast was doing this in 1996, but its technological approach to delivering content made it a cumbersome process. Now, e-mail newsletters are "pushed" to subscribers without any need for consumer technology other than the recipient's browser and an e-mail inbox.


As an advertising medium, text ads inside e-mail newsletters represent a significant advance over the traditional banner model. The e-mail content gets read because the recipient has opted in or subscribed to receive the content. An added benefit to e-mail newsletters is that there is a very active viral component because of the ease in forwarding e-mail. When a newsletter is forwarded to a friend, the ad goes as well, along with the implied endorsement of the forwarder.


As a result, click-through rates are much higher than banners and the quality of the click through, as measured by conversion rates, is significantly better. Targeting is by interests inferred by the nature of the content of the e-mail publication.


And finally, with e-mail newsletters, content can be subsidized by advertising because cost structures are low for content providers (it is much less expensive to deliver e-mail than to provide the same information on a Web site) and advertising rates are commensurately lower. The Internet has finally found a viable business model where both marketers and content providers can make money.


But as significant as this is as a business model, it is even more profound from a sociological point of view. The ability to disseminate information in an uncontrolled, decentralized manner is bringing about the true democratization of information.


The low cost of publishing e-mail newsletters will continue this trend. In addition, because the barriers to enter are so low, consolidation in this segment of the publishing industry is unlikely. This decentralization is endemic to the e-mail-centric model and not likely to be corralled.


To date, companies with Web-centric focuses have had little interest in e-mail newsletters. Why? They have built infrastructures dependent upon their view of reality. Until the full force of necessity rears its head, most Web-centric models will continue to ignore delivering quality content via e-mail. We can almost hear the footsteps of necessity coming within earshot.


• Jaffer Ali is president/CEO of PennMedia, Mokena, IL. Reach him at jali@pennmedia.com.
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