Investment in the Email Ecosystem

Last week, my colleague George Bilbrey posted about how (turns out – shocking!) email still isn’t dead yet.

Not only is he right, but the whole premise of defending email from the attackers who call it “legacy” or “uninteresting” is backwards.  The inbox is getting more and more interesting these days, not less.  At Return Path, we’ve seen a tremendous amount of startup activitiy and investment (these two things can go together but don’t have to) in in front end of email in the past couple years.  I’d point to three sub-trends of this theme of “the inbox getting more interesting.”

First, major ISPs and mailbox operators are starting to experiment with more interesting applications inside their inboxes.  As the postmaster of one of the major ISPs said to me recently, “we’ve spent years stripping functionality out of email in the name of security – now that we have security more under control, we would like to start adding functionality back in.”  Google’s recent announcement about allowing third-party developers to access your email with your permission is one example, as is their well-documented experiment with NetFlix’s branded favicon showing up in the inbox starting a few months back.  And Hotmail’s most recent release, which has been well covered online (including this article which George wrote in Mediapost a couple months ago) also includes some trials of web-like functionality in the inbox, as well as other easy ways for users to view and experience their inboxes other than the age-old “last message in on top” method.  Yahoo has done a couple things along these lines as well of late, and one can assume they have other things in the works as well.

I wouldn’t be surprised if many ISPs roll out a variety of enhanced functionality over the next couple of years, although these systems can take a lot of time to change.  Although some of these changes present challenges for marketers and publishers, these are generally major plusses for end users as well as the companies who send them email – email is probably the only Internet application people spend tons of time in that’s missing most state of the art web functionality.

Second, although Google Wave got a lot of publicity about reinventing the inbox experience before Google shut it down a couple weeks ago, there are probably a dozen startups that are working on richer inboxes as well, either through plug-ins or what I’d call a “web email client overlay” – you can still use your Yahoo!, Hotmail, Gmail, or other address (your own domain, or a POP or IMAP account), but read the mail through one of these new clients.  Regardless of the technology, these companies are all trying, with different angles here or there, to make the inbox experience more interesting, relevant, productive, and in many cases, tied into your “social graph” and/or third-party web content.

The two big ones here in terms of active user base are Xobni, an Outlook plugin that matches social graph to inbox and produces a lot of interesting stats for its users; and Xoopit, which recently got acquired by Yahoo and wraps content indexing and discovery into its mail client.

Gist matches social graph data and third-party content like feeds and blogs into something that’s a hybrid of plugin and stand-alone web application.  That sounds a little like Threadsy, although that’s still in closed beta, so it’s hard to tell exactly what’s going to surface out of it.  There’s also Zenbe and Kwaga, and Xiant, which focus on creating a more productive inbox experience for power users.

Furthermore, services like OtherInbox and Boxbe aim to help users cut through the clutter of their inboxes and simultaneously create a more effective means for marketers to reach customers (say what you will about that concept, but at least it has a clear revenue model, which some of the other services listed above don’t have).

Finally, a number of services are popping up which give marketers and publishers easy-to-use advanced tools to improve their conversion or add other enhanced functionality to email.  For example, RPost, a company we announced a partnership with a couple months back, provides legal proof of delivery for email with some cool underlying technology.  LiveClicker (also a Return Path partner) provides hosted analytics-enabled email video in lightweight and easy-to-use ways that work in the majority of inboxes.

Sympact (another Return Path partner) dynamically renders content in an email based on factors like time of day and geolocation – so the same email, in the same inbox, will render, for example, Friday’s showtimes for New York when I open it in my office on Friday afternoon but Saturday’s showtimes for San Francisco after I fly out west for the weekend.  And a Belgian company called 8Seconds (you guessed it, another Return Path partner) does on-the-fly multivariate testing of email content in a way that blows away traditional A/B methods.  While these tools require some basic things to be in place to work optimally, like having images on by default or links working, they don’t by and large require special deals with ISPs to make the services function.

While these tools are aimed at marketers, they will also make end users’ email experiences much better by improving relevance or by adding value in other ways.

Some of this makes me wonder whether there’s a trend that will lead to disaggregation of the value chain in consumer email – splitting the front end (what consumers see) from the back end (who runs the mail server).  But that’s probably another topic for another day.  In the meantime, I’ll say three cheers for innovation in the email space.  It’s long overdue and will greatly enrich the environment in the coming years as these services gain adoption.

Buying Back Your Own Left Leg

There has been much written about the spectacular sale of Pixar to Disney for $7.4 billion this week.  The fact that Steve Jobs is now Disney’s largest individual shareholder is amazing news on many levels.  Fred has a great posting on this today from the investor perspective.

Another angle that I find interesting about this transaction is that it reminds me to some extent of Yahoo’s purchase of Overture a couple years back.  Yahoo OWNED the search business.  For years.  Invented it.  Synonymous with it.  Then they let others lap them they became more of a diversified online media company, and voila!  Others focused, innovated, and created a massive business in paid search.  Yahoo lost its own leg and had to pay $1 billion or so to buy it back.

The same could be said of Disney.  There was no other animated film company in America of note for DECADES.  Disney was it.  The mouse ruled the house.  Then others innovated, figured out how to sprinkle their own version of pixie dust on things, while Disney became a global multi-dimensional media and entertainment conglomerate, and poof!  $7.4 billion later, they had to buy their own franchise back to reclaim the animation throne.

Maybe I’m missing something here, but these stories tell me that diversification may be a wonderful thing, but businesses should never forget to innovate at their core and think like insurgents, not like unassailable market leaders.

Killer Email Industry Stats

In case you’ve missed any of these reported recently, all by the Direct Marketing Association’s outstanding research department (link so you can see the details of reports available to purchase):

• Email marketing in the US alone will account for approximately 71,000 jobs this year, growing at 8-10% annually historically and projected into the future as well
• The ROI for email marketing is $57.25 for every dollar spent. The ROI of all non-email online marketing is $22.52, less than half

As I mentioned here (where a client of ours said her email ROI was 40:1), the biggest problem with email isn’t how effective it is — it’s how much inventory you as a marketer have available in your housefile and super qualified and permissioned rental lists.

The Business of Being a Scumbag

I’ve written a couple of times about what Fred calls the Internet’s Axis of Evil.  But David Kirkpatrick from Fortune just blew me away yesterday with his lurid description of the Internet’s crime scene.  This is a must-read for anyone who works in the online medium.

What Kind of Entrepreneur Do You Want to Be?

I had a great time at Princeton reunions this weekend, as always.  As I was talking to random people, some of whom I knew but hadn’t seen in a long time, and others of whom I was just meeting for the first time, the topic of starting a business naturally came up.  Two of the people asked me if I thought they should start a business, and what kind of person made for a good entrepreneur.

As I was thinking about the question, it reminded me of something Fred once told me — that he thought there were two kinds of entrepreneurs:  people who start businesses and people who run business. 

People who start businesses are more commonly known as serial entrepreneurs.  These people come up with ideas and love incubating them but may or may not try to run them longer term.  They:

– generate an idea a minute
– have a major case of ADD
– are easily distracted by shiny objects
– would rather generate 1 good and idea and 19 bad ones than just 1 good one
– are always thinking about the next thing
– are only excited by the possibility of what could be, not what is
– are more philosophical and theoretical
– probably shouldn’t run the companies they start for more than a few months, as they will frustrate everyone around them and get bored themselves
– are really fun at cocktail parties
– say things like “I thought of auctions online way before eBay!”

The second type of entrepreneur is the type who runs businesses (and may or may not come up with the original idea).  These people:

– care about success, not just having the idea
– love to make things work
– would rather generate 1 idea and execute it well than 2 ideas
– are problem solvers
– are great with people
– are maybe less fun at cocktail parties, but
– you’d definitely want them on your team in a game of paintball or laser tag

Neither one is better than the other, and sometimes you get both in the same person, but not all that often.  But understanding what type of entrepreneur you are (or would likely be) is probably a good first step in understanding whether or not you want to take the plunge, and if so, what role you’d like to play in the business.

My 360 on Your 360

Last year, I wrote about the 360 review process we do at Return Path, which is a great annual check-in on staff development and leadership/management.  In Part I of What a View, I described the overall process.  In Part II, I talked specifically about how my review as CEO worked, which is a little different.

This year, we changed the format of our reviews in two ways. First, for senior staff, we continued to do the live, moderated discussions, but we dropped having people also fill out the online review form.  It was duplicative, and the process already consumes enough time that we decided to cut that part out, which I think worked well. 

Second, for my review, instead of having the Board review me separately from the senior staff, I combined efforts and had all of them participate in my live moderated discussion together.  I also think this worked well, although we did receive some feedback about how to modify the format slightly for next year.  It was great for the Board to get a window into how the team feels about me, and vice versa, and it produced a single, unified development plan for me, which is much more helpful than two sets of feedback about different questions and issues.

The one theme that came out of this year’s live reviews, which is definitely worth thinking about, is the impact of the Heisenberg Uncertainty Principle, that once something is observed, the act of observing it can actually change it.  Because the live discussions are face to face (anonymous to the person being reviewed, but not anonymous among the reviewers), some people mentioned that they were conscious of what they were saying in the presence of others in the company.  Others didn’t particularly care about that but did say things that could be construed as negative about some of their fellow reviewers.  Someone came up to me after one session and said "I wonder what the rest of the group thought of my comments — I need a 360 on your 360!"

The reality is that transparency is a good thing.  There shouldn’t be any state secrets about someone’s performance, especially when the person is in a senior management position.  All people always have things they can improve upon, and the open discussion around what they are and why they happen produce MUCH better results for the people being reviewed, uncomfortable as it may be at times.

The sessions are confidential, so participants should feel comfortable that their thoughts won’t be shared outside the room.  Plus, we provide a mechanism to give feedback that really is hard to provide in public for whatever reason via email or one-on-one conversations with the moderator.

I received in the mail yesterday (by overnight priority mail, no less), a 400+ page prospectus from Mittal, a Dutch company in which I apparently own a few shares of stock through a managed mutual fund I’m part of. This book was BIG – well over 2 inches thick and big enough to have a binding strip instead of staples. And it had enough legalese in it to put anyone to sleep.

What did I do with it? After ranting about how silly it was to ever print such a thing for mass push distribution to an audience that largely doesn’t care about it — straight into the trash. With a big thud, of course.

What a ridiculous waste. Why print it on paper at all? Make it available online via pdf. Email shareholders or send them a postcard or leave an automated voicemail and ask them if they want a hard copy. Figure out which shareholders are in a managed fund, and send a single copy to the fund manager, since the individuals don’t even know they’re shareholders or don’t make decisions about individual stocks in the fund. Do something that costs less and doesn’t destroy trees that 99% of people will never read.

Shame on Mittal and their bankers, proudly displayed on the cover of the book — Goldman Sachs, Citigroup Credit Suisse, HSBC and Societe General.

Gmail as Competition – Another View?

This week, while many from the industry have been in Brussels at the outstanding yet oddly-named MAAWG conference for ISPs and filtering companies, internet marketing pundit Ken Magill had a scary, scary headline related to Google’s insertion of ads in email — Is Gmail Feeding Your Customers to the Competition?

The assertion is that Gmail’s contextual ad program, combined with image blocking in commercial emails, could easily lead to a situation where one of your subscribers doesn’t see your own content but then sees an ad for a competitor in the sidebar.

Scary, I admit, but how much is that really happening?

We analyzed some data from our Postmaster Direct business that is quite revealing, but in a completely counter-intuitive way.

The overall response rate for our mailings sent out in May across all clients, all campaigns, and all ISPs/domains was just under 2%.  The response rate for our mailings in May to Gmail users, on the other hand, was about 3.5%, a whopping 75% BETTER.

Even more stunning is the comparison of response rates in the same time period for subscribers who have joined Postmaster Direct in the last 6 months.  That’s probably a more useful analysis, since the number of Gmail subscribers has grown steadily over time.  On that basis, our overall response rate for May mailings, again across all clients, campaigns, and ISPs/domains, is just over 2.8%.  Howerver, for mailings in May to Gmail users, average response rates were about 5.6%, or 100% BETTER.

I’m not sure what to make of this.  My theory about this at the moment is that Gmail users are generally more sophisticated and therefore are better about keeping their inbox clean and only full of solicited offers, so therefore the user base is more responsive.  But who knows?  What I do make of it is that the issue Ken raises probably isn’t having a big impact on advertisers — or if it is, then Gmail users must be EVEN MORE responsive relative to the rest of the world.

Thanks to Ed Taussig, our director of software development for our list and data group, for this analysis.  Ed is also co-author of our corporate blog’s posting about subject line character length optimization, also a must-read for online marketers if you haven’t seen it.

Less is More

The latest research shows that people spend 51 seconds reading any given commercial email newsletter, as opposed to 15 seconds on a promotional email.  I find this credible based on personal experience, at least the ratio of the two, although I might do a little less on both.

Return Path’s Stephanie Miller blogs about this and the implication for marketers on the Return Path Online Resource Center for Email Marketers.

Doing Well by Doing Good, Part II

At Return Path, we feel strongly that companies can and should make the world a better place in several different ways.  Certainly, many companies’ core businesses do that — just look at all the breakthroughs in medicine and social services over the years brought to market by private enterprises, including my friend Raj Vinnakota, who I wrote about in part I of this series last year.  But many companies, including Return Path, aren’t inherently “save the world” in nature (although some people in online marketing would have you believe that we are!), and those companies can still make a difference in the world in a few ways:

1. Organize projects in the local community for their employees to help out/work at

2. Allow employees to take a limited amount of paid time off for community service work

3. Provide matching gift programs so employees’ donations are enhanced by the company

4. Donate money or services to charitable organizations they believe in

As a relatively small company, we have to pick our battles here.  We currently have a policy for #2 above that allows employees 3 days per year of paid time off for community service work.  And today, we are announcing a comprehensive program for #4 above in association with the Accelerated Cure Project for Multiple Sclerosis.  This choice was inspired by our long-time employee and friend Sophie Miller, who was diagnosed almost two years ago now with MS (and is doing great)!

Read the details of what we’re doing with Accelerated Cure in the full press release here.

Good Help is Hard to Find

We’re having a bitch of a time lately hiring good sales people.  We’re growing like crazy this year and are trying to invest more in our salesforce, but it’s not easy.  And we’re a good catch.  Good brand, healthy company, good comp and benefits, charming CEO, the works.

I just traded emails with a friend who is CEO of another online marketing services firm who said the same thing, with the exact same explanation I have:

I have been so unimpressed with everyone from our space (weak links drop out, mediocrity churns from company to company, and true talent is retained).

Anyway, we have gotten very lucky with a few key hires the past few months — and we certainly work like mad to retain the talent we have (or at least we try hard!) — but the reality is that it’s a good year for Internet businesses, and it’s hard to get people to jump ship when they have an established book of business and good commission check flow. 

Most of the people I know who are doing well with sales recruiting in our space these days, including ourselves, are mostly pulling people out of adjacent industries or even out of clients.  I’d ask my general readership for advice, but I assume if you have the secret sauce here, you’ll hoard it for yourself!