By Gary H. Arlen, Senior Contributing Editor

The email marketing statistics and forecasts are overwhelming.

For example, commercial sources sent 1.4 trillion email messages last year, according to International Data Corp. Jupiter Media Metrix says the average online customer gets about 1,500 email ads per year now, and that figure will rise to nearly 4,000 per year by 2006. The Direct Marketing Association (DMA) adds that two-thirds of online marketers boosted their 2001 sales by using email, while Victoria James Executive Search Co. concludes that 80 percent of direct marketers plan to increase their use of email this year.

However, the studies also have inconsistent findings, albeit all their forecasts are headed in the same direction – upwards.

• Email ad revenues will hit $1.5 billion by 2005, according to GartnerG2, the research service of Gartner, Inc.

• Email marketing expenditures will grow at a 41 percent annual rate, reaching $3.5 billion by 2005, according to the Winterberry Group.

• Of course, both those predictions fall short of the inflated “$4.8 billion by 2004” email marketing onslaught that Forrester Research Inc. forecast in early 2000 before the Internet hype collapsed.

And there also is the dark side of email marketing. Unsolicited commercial email, or “spam,” represents at least 10 percent of all email, according to eMarketer.com. Yahoo!, Inc.’s newly revised privacy policy also includes the release of customers’ email and traditional mail information to selected partners.

Collectively, these developments and trends underscore the growing importance of email marketing even as the controversies swirl around it. Nonetheless, its effectiveness is rarely questioned. Last year’s eMarketer study still holds up, according to industry participants, such as Boston, Mass.-based e-Dialog, Inc. The click-through and conversion rates (i.e., live sales leads) is 3.2 percent for permission email vs. under 1.5 percent for conventional direct mail and nearly zero conversion rate for banner ads.

Effectiveness Confirmed

Even as the clamor against nuisance email escalates, more marketers are embracing the email process because it generates sales. The DMA survey, unveiled this month, found that 15 percent of total online sales were spurred by email promotions, and 63 percent of marketers in the DMA survey said that email marketing was their most effective customer retention tool.

Although DMA’s study treads a careful line – in respect to its core membership of snail-mail marketers – the association has been critical of the Gartner study, issued last month. Gartner suggested that the growth of email marketing – accompanied by the looming postal rate increases – will drive old-line direct marketing into retreat by 2002.

“Direct mail has reached its peak and will account for less than 50 percent of mail received by U.S. households in 2005, down from 65 percent in 2001,” according to GartnerG2. The researchers point out that “the entire cycle time of the email campaign from creation to delivery [takes] one-tenth the time of traditional direct mail” at about 1 percent of the cost of a mail campaign.

DMA vociferously disagrees with that viewpoint. An association spokesman says it is “premature to make the assumption that people can go from direct mail to email.”

Independent marketing experts insist that coordinated, integrated campaigns that include email are the most successful.

“Email marketing works best as a direct marketing vehicle when it is used in tandem with branding banners,” says Hank Dearden, director of 3D Technologies Ltd. of Washington. He cites empirical evidence for campaigns he has run, such as one for Red Herring magazine, and ads that an integrated campaign lifts response rates.

Shopping Malls and Beyond

Among the latest adherents to email campaigns are shopping malls, which are finding that such efforts bring customers into the shopping centers.

Taubman Centers, Inc., which has run an email campaign to current and prospective mall visitors for nearly two years, is expanding its email marketing. Its new campaign is aimed at teenage shoppers. Taubman uses email promotions at all 31 of its properties, sending its current e-bulletin alerts to about 350,000 opt-in customers. Its new teen-oriented version will include a wireless e-bulletin option because the company believes that teens are more open to wireless delivery and less likely to use the Web alone to find deals. A Taubman study found that 26 percent of its customers have wireless devices, but only about one-fifth of that universe is interested in receiving wireless e-alerts. The company identified that 73 percent of its prospective customers have access to the Web today, compared to about 45 percent three years ago.

Another mall operator, General Growth Properties, Inc. (GGP), said that redemption of its email coupons averages 9 percent, compared to 2 percent to 3 percent redemption rates for traditional direct mail coupons. Seventy of GGP’s malls participate in the email marketing campaign, which is intended to generate mall visits. The company expects all of its 135 malls nationwide to offer the service by the end of the year. The company has been adding opt-in email addresses at the rate of 3,000 per week through promotional incentives, such as gift certificates. The company also found that its email relationships allow it to conduct surveys more quickly and economically.

Other new adopters of email marketing range from the United Way to Web-only discount merchant SmartBargains.com. Early this month United Way of Metropolitan Tarrant County, near Ft. Worth, Texas, retained e2 Communications to develop and execute a series of email campaigns targeting existing and potential contributors and volunteers. The company has handled a similar campaign nearby for the past two years for the United Way of Metropolitan Dallas.

Meanwhile, a start-up online-only marketer, SmartBargains.com, has used email to boost its site traffic from 400,000 visitors last July to 4 million monthly by early this year. The company, a spin-off of Gordon Brothers LLC retail liquidator, sells brand-name merchandise at discounts prices.

Other recent email campaigns include one from Moen, Inc., the faucet-maker, which attracted a 15 percent click-through rate, and another from the National Geographic Society (NGS), one of the nation’s oldest and most conservative direct marketers. NGS, which claims to have one of the world’s largest consumer direct mail databases (40 million names) wants to use its email newsletters “to differentiate” and “meet the needs of our Web site visitors,” said Mitchell Praver, president of NationalGeographic.com. Mr. Praver told EMMS that one of his major tasks has been coordinating the activities of the organization’s various print and video divisions.

Spam Problem and Dismay Grow

As a growing number of legitimate marketers join the email parade, there is growing concern and frustration about the deluge of material – much of it for pornographic or “fast-buck” offers – that threaten to overwhelm the channel. Federal Trade Commission and congressional investigations have confirmed the problem, but few viable solutions have yet emerged.

ePrivacyGroup.com, a Philadelphia, Pa.-based firm, plans to begin a beta-test next month for a service that will create a “seal” – probably to be placed on the subject line of incoming mail – confirming that email marketing messages comes from legitimate merchants who abide by a set of guidelines. ePrivacyGroup’s “Trusted Sender” program operates in conjunction with TRUSTe (EMMS, Feb. 8, p. 1). The test is expected to include Microsoft Corp., Daimler-Chrysler, and other major firms, who will license the technology.

“The reason why email is broken and getting worse is because consumers cannot differentiate legitimate email from spam,” said Terry Pittman, senior vice president-strategy of ePrivacyGroup. Existing solutions, such as filtering “are either over- or under-inclusive. Even a savvy consumer cannot differentiate the good guys from the bad guys.”

That frustration threatens those huge forecasts of email growth – although the arrival of blue-chip email marketers suggests an increased effort to find viable processes to assure customers about the value of the process.

At the same time, controversial moves – such as the new Yahoo! policy of mandated opt-in procedures – emphasizes the ongoing hurdles in the business. Late last month, Yahoo! informed its registered users that it would send them information in 13 marketing categories unless customers changed their preferences within 60 days. Curiously, the Yahoo! policy came just after DoubleClick, Inc., settled three lawsuits involving similar privacy provisions.

Consumer concerns about such invasions – either of personal privacy or simply the spam attacks – were a centerpiece of last month’s Harris Interactive poll. More than 90 percent of U.S. consumers said they would do more business with a company that verifies its privacy policies through a trusted third party.

Implicit within such research is the suggestion that online users – even those who are just becoming comfortable with e-shopping – would be receptive to email campaigns if they come in acceptable formats. The growth of email marketing is generating loads of anecdotal findings (for example, Tuesday is the most popular day for sending email ads). Other research is homing in on how specific customers want to see email messages. Ipsos Research found that 79 percent of Internet users in Canada have opted-in to Web sites to receive email messages and ads.

All of this data is for naught, however, if the spam or privacy threats overwhelm the legitimate email opportunities. On the other hand, one way to look at the tribulations of email’s birth is that the process resembles the rambling arrival of videocassettes two decades ago: standards battles, the early dominance of unsavory content (porn), and lofty economic forecasts.

Eventually the uncertainties are sorted out, and a viable business with recognized providers emerges and is widely embraced. Sadly, the forecasts don’t pinpoint how long that process will take.