Highs and Lows

I was reminded recently of one of my favorite entrepreneur sayings.  What drives me nuts isn’t the inevitable presence of highs and lows of running a new company, it’s when they happen at the same time.

It’s one thing to get used to the roller coaster ride of running a startup.  That’s part of the fun and the challenge of it all.  There are great moments when everything’s working beautifully.  Your strategy is proving to be spot-on.  Your team is executing brilliantly.  Your biggest client renews and gives you a testimonial.  Then there are the dark moments of despair.  You’re running out of cash.  The new product release is behind schedule.  A competitor steals a top client.  No one lives for the lows, but you at least grow to anticipate them and realize that "this, too, shall pass."

But the thing I can never get used to is when those highs and lows occur simultaneously.  It just seems unfair.  Let me enjoy the good news — whatever it is — for at least a day or two before clocking me with something terrible!  But perhaps that’s just another, even more poignant part of the humbling process that comes with running a startup.

Sender Score:  Credit Scores for Emailers

Yesterday, I wrote about email authentication, and why, although it’s great, it won’t stop spam without the emergence and scaling of accreditation and reputation systems.

Today, Return Path has announced the beta launch of Sender Score, our new reputation management system.  Sender Score is a groundbreaking service that we’ve been working on for a long time here.  The best way to think about it (or the analog analog, as Brad might say) is as a FICO or credit score for email.

We’ve gone out and compiled TONS of data about emailers, much as the credit bureaus do when they gather financial profile and transaction data about individuals and businesses.  But our data, when aggregated and modeled, represents an emailer’s reputation — are they a “good risk” to let into your email network, or are they a “bad risk” to be treated separately?

What kind of data?  It’s the same data that ISPs and sys admins use to block and filter most emailers…variables such as complaint data, e-mail send volume, unknown user volume, security practices, identity stability, and unsubscribe functionality.  The system tracks 60 different data points and draws data from a diverse sample of more than 40 million email boxes.  The data comes from lots of different places, some from our own systems, and some from partner ISPs and other tech/filtering/data companies we’ve partnered with such as Cloudmark and Lashback.

This is powerful stuff.  The main thing we do with the data is provide it back to email marketers and publishers in a format that’s easy to understand and act on.  It’s like the free credit report many banks offer their customers so their customers can see themselves as potential creditors see them, then work to shore up the weak spots in their profile so they’re more likely to get the next loan/mortgage/approval.

Sender Score rounds out our Delivery Assurance offerings by adding reputation management to accreditation, monitoring, and professional services offerings.  With authentication gaining steam out there as a backdrop to all of this…we’re a lot closer to solving spam and false positives than we’ve ever been.

Why We Love Email Authentication, But Why It Won’t Stop Spam

Microsoft made a big announcement today that they’re taking email authentication, in the form of Sender ID, very seriously.  They’re using a stick, not a carrot.  Emailers who do not publish a proper Sender ID record are now going to (a) find themselves in the bulk mail folder at Hotmail and MSN, and (b) have a big fat disclaimer thrown on top of their emails from Microsoft warning users that the email’s source can’t be authenticated.

At Return Path, we’re big fans of authentication, and we’re sponsoring the upcoming Email Authentication Summit in a couple of weeks in New York as one way of supporting the effort — encouraging our clients to get on the ball with authentication is another one.  Here’s what we think it will (and won’t) do:

– It WILL make a big dent in spoofing, phishing, and fraud, right away.  Why?  Because those particular elements of the Internet Axis of Evil are identity-based…therefore, identity authentication will either stop those things, make it easier for consumers to steer clear of them, or make it easier for law enforcement to go after them.

– It WILL NOT make a big dent in spam right away.  Why?  Because spam is much more nuanced than fraud.  If I’m Microsoft, and I know that you are the particular sender of an email into my network, that’s all good and well, but I might not have any idea if I want to accept that mail or not.  Another way of saying this is that spammers can publish Sender ID records, too.

– It WILL lay the foundation for longer-term spam solutions.  Why?  Because it’s important to understand exactly who is sending mail into a network in order to answer that next question of “do I want to accept your mail or not?”  We think the answers to that question lie with accreditation and reputation services.

Obviously, I have my biases.  Return Path owns Bonded Sender, the leading accreditation service, which answers that question by saying “yes – you want to accept this mail, because Return Path and TRUSTe have examined me thoroughly and are vouching for my integrity, they’re measuring how many people are complaining about my mail, and if I get too many complaints, they fine me and kick me out of the program.”

Look for another announcement from us soon about what we’re up to in the reputation space, which is a more complex cousin to accreditation in answering that same question.

Counter Cliche:  Sleeves, or Shoes?

Fred’s VC Cliche of the Week this week is about "rolling up your sleeves."  It’s a good one about how investors need to really understand a business inside and out in order to be effective board members – that they have to believe that they work for the CEO as much as the other way around.

One of my very first posts on this blog over a year ago talked about the fact that as a CEO, you have to remember that you don’t just work for your board, but you also work for your customers and your employees.  It’s the same principle.

My counter cliche this week is that Sometimes You Have to Walk in the Other Person’s Shoes.  It’s the same principle but focused a little differently on employee relations instead of CEO-Board relations.  Everyone inside an organization has internal customers and hand-offs with peers in other departments, or within the same department. 

The healthiest thing people can do when they’re in that type of relationship is make sure they have a full understanding of what their colleagues do — the scope of their job, their external and internal hurdles, and their success metrics.  That understanding makes the relationship much stronger.  And one of the ways to achieve that understanding is to literally walk in the other person’s shoes from time to time. 

If your internal hand-off is to sales, get out there and talk to some customers with a sales rep.  If your internal hand-off is to operations, spend a day putting out fires.  If it’s to customer service, answer the 800 number for 15 minutes once in a while.  You’ll be amazed at how much even a few minutes of walking in the other person’s shoes can help you be more effective in working with that person.

The (Email) Elephant in the Room

Email marketing continues to be under attack by some members of the media who are looking to stir up melodrama and controversy and seem to be uninterested in or unwilling to look at real metrics from real companies who are enjoying unparalleled success with email.

I can’t say this any better than Bill McCloskey from Email Data Source, who writes in MediaPost:

The Elephant in the Room that no one is willing to talk about is that Spam is not the problem. The problem is the OVERREACTION to Spam. This overreaction is not something that is hurting e-mail marketing communications–it is hurting all communications.

Read the full column here.  It’s great.

UPDATE:  Apparently, the column is only available if you register for MediaPost (grrr…).  It’s good enough, and free, but don’t feel compelled.  Two other useful paragraphs to read are below:

And all this hysteria is wiped up without looking at the facts. Because if you look at the facts, you’d see a pattern emerge. For instance, according to the DMA, e-mail has the second-highest ROI of any direct marketing channel, even with reduced deliverability and open rates. The fact is that if you examine the clickstream data from companies such as Hitwise, you will see that the biggest traffic driver time and time again is e-mail. E-mail is not just an important interactive marketing channel, it is the most important marketing channel–but you’d never know it judging by today’s trade shows and industry publications.

In the name of keeping us free of viagra ads in our inbox, we have crippled the most efficient communications system ever developed. We have allowed the free flow of information to be hijacked by fanatics. And because no one speaks for the e-mail industry, this is going on under our noses with no cry of protest.

Fred’s VC Cliche of the Week this week is called "the pass," which is the euphemism that VCs have adopted when they decide not to invest in a particular company or entrepreneur.  Fred’s VC wisdom comes down to this:

1 – Say no quickly to the things you know you aren’t going to do

2 – Don’t take an opportunity into diligence unless you are willing to spend enough time to truly  undersand it, and if you don’t invest, make sure you are willing to spend time explaining why.

It won’t make it any easier on the entrepreneur who is trying to find someone to invest in his business that you are passing, but they might learn something from the discussion, and in the end you will gain their respect.

And in this age where VCs and their money are a dime a dozen and great entrepreneurs are rare, respect from entrepreneurs is critical to success in the VC business.

The counter cliche is that the same advice applies to entrepreneurs who "pass" on a particular VC.  There are many times where startups (especially good ones) have offers on the table or are pursuing them from multiple VCs.  That strategy is a must and one that I’ve blogged about before. 

VCs may be a dime a dozen, but great ones are hard to find.  If you find yourself in the position of having to "pass" on one of them — follow Fred’s advice and do it quickly, politely, and without wasting any more of their time.

Prepping RSS for Prime Time, Part II

David Daniels from Jupiter wrote a good article yesterday in ClickZ about RSS and email marketing.  It reads like a response to comments he received after publishing his main report on this topic earlier in the month.  He tackles three main points:  spam/clutter, personalization, and the (impending) flood of vendors.  It’s definitely worth a quick read if you care about the RSS/email debate and space.

I addressed this topic a little bit last June here, although somehow I forgot about the personalization challenge.  I think RSS is closer to prime time than it was then, but it’s still not quite ready to go toe to toe with email or other forms or more direct/addressable media yet.

Developer User Guide?

Tom Evslin wrote a two-part series this week called “Managing Programming for CEOs” (links here for Part I and Part II).  The first is pretty funny, and the second has some good thoughts in it, especially around milestone creation.

But if Tom’s had the experice he relays in Part I in real-life over and over, I have a suggestion for him:  get a great head of development he can trust, and work closely with him or her over the years to build a relationship of mutual trust so those issues are no different than they are with functional managers of other departments.  We are fortunate enough at Return Path to have two such individuals in Andy Sautins and Whitney McNamara (a fellow blogger).

Spam, Hot Spam, Now Only $0.10 Each!

By now, you may have seen news of the report from Ferris research citing the annual global economic impact of spam at $50 billion (apparently the U.S.’s share, $17 billion, is 0.17% of our gross national income).

I have no doubt that spam is an expensive problem.  IT managers and sysadmins spend lots of time dealing with it, and much hardware, software, and bandwidth are consumed.

But the one number that strikes me as odd in the report is that the economic impact of not having a spam filter (i.e., manually filtering spam, more commonly known as hitting the delete key) is $718 per user per year.  I guess it depends how you measure cost, but since the average user — not people who live on email like people who, oh, say, work at an email company or who blog compulsively — only get something like 20-30 emails per day, even if most of it were spam, that cost translates into something like $0.10 per spam.  That’s a lot of economic cost associated with a push of the delete key.

Interestingly, the antidote to the $718/year problem is a good desktop filter product like Cloudmark’s SafetyBar, which costs something like $30/year.

The Rumors of Email’s Demise Have Been Greatly Exaggerated, Part IV

This one could also be entitled “What Are The Bloggers Smoking?”

Reports from last week’s Blog Business Summit like this one are starting to filter in (pun slightly intended).  This one gets a big yawn from me, even more so than the other times I’ve posted on this subject, here, here, and here.  I’m as much of a blogger and a believer in blogs and RSS as the next guy — maybe even more so — but honestly, people, blogs are going to replace email?

I’d like to address a few critical points here head on, although a large part of me doesn’t even want to dignify yet another empty “email is dead” quote with a response.

Basic error #1. The article seems to confuse blogs with RSS feeds.  RSS feeds are data streams coming into an RSS reader application.  Blogs are web sites.  Hello?!?

Fallacy #1. Because blogs/RSS are interesting new media, email will go away.  To paraphrase my colleague Mike Mayor, why is it that whenever something new comes along, its proponents have to bash the current paradigm to make their thing seem more important?  Let’s go through this one — TV came along, and people said radio would go away.  Cable came along, and everyone said the networks were toast.  The fax machine came along, and FedEx was said to be relegated to legal documents that needed to be signed personally.  The Internet came along, and people said everything else was insignificant (newspapers, TV, radio, snail mail).  So yes, new media do arrive on the scene and perhaps make a dent in all prior media, but I’m having a hard time thinking of that one comes in and clocks another one mano a mano.

Fallacy #2. Spam has made email more difficult, therefore email will go away.  There’s a whole industry out there fighting spam.  I know, I know, just because we want the problem to go away doesn’t mean that we can will it away — but filters are working better by the day (did everyone catch this posting about Postini this week?), false positives can be managed down by vigilant clients working with vendors like Return Path, and whitelists, whenever they start really working and charging money to clients to guarantee delivery, will still leave email as the cheapest medium for targeted commercial messaging out there.

Naive belief #1. Spam has harmed email, but blogs/RSS are immune to the same problems.  I’m sorry, do you think the bad guys, or as Fred always calls it, the Internet Axis of Evil (spam, viruses, spyware, DNS hacking, phishing, and the like) are going to leave blogs and RSS feeds alone?  Not a chance.  The bad guys are already hard at work expanding their Axis of Evil.  There’s already comment spam for blogs (or blam, as some call it).  People have and can hijack RSS feeds (no cool name yet).  There’s Instant Messenger spam (spim).  Last week, I heard about a new one that blew me away, which is that someone figured out how to hijack a Voice Over IP phone call and insert an audio ad/porn into the call (spip).

Naive belief #2. Blogs are truly interactive.  Other than a couple of very popular blogs during the height of last fall’s election, I just don’t think this is true for the mainstream.  There are certainly some people who have a little too much time on their hands who spend hours every day blogging, but most people skim most blogs as one-way communication.   While there are mechanisms for commenting, there aren’t ready mechanisms for publishing comments back to the blog audience (thank goodness), so this medium hasn’t turned out nearly as interactive as people had hoped at the onset.  RSS feeds, in case the writer/speaker was confused in this argument, are completely non-interactive.

Naive belief #3. People will read blogs with an agenda of marketing specific products and services.  The beauty of the blog is that it’s not corporate, and it doesn’t have marketing spin on it.  Blogs are much more journals and publishing tools than marketing vehicles.  Who the heck is going to read a blog on Coke?  Or Nike?  Or Microsoft?  Sure, I might read Howard Shultz’s blog if he had one (his book was good enough), but that’s very different than reading the Starbucks official blog.  Why bother?  Where’s the value there?

Ok, I’m done with today’s rant.  As I said, I love blogging as much as the next guy, but puh-lease!  And for the record, I do believe that RSS feeds and maybe even IM from marketers/publishers will supplement email and in some cases maybe even replace it, but email just isn’t going away any time soon.

Everyone’s a Direct Marketer, Part II

(If you missed the first post in this series, it’s here.)

So, all companies are now direct marketers — their web sites and email lists make it so, they can’t effectively reach their fragmented audience without it, and consumer permission demands it.  Why is this new to some companies and not others, and what lessons can companies who are new at it learn from traditional direct marketers?

First, the quick answer — it’s new because it’s being driven by the new technologies the Internet has brought us in the past 10 years.  Those technologies have opened up the possibility for 1:1 communication between any company and its customers that was previously unaffordable to many industries with low price point products.  You never received a telemarketing call for a movie, because making the call costs $3, and all you’ll spend on the movie is $10.  P&G never sent you a glossy direct mail piece for toothpaste, because they’d spend $1 at a small chance you’ll buy their $2.25 product.  But the cost of a banner ad or a given keyword or an incremental email is so low (virtually zero in some cases), that everyone can afford a direct presence today.

What lessons can companies who are new at it learn from traditional direct marketers?  There are many, but four things stand out to me that good DMers do well that are different from the skills inherent in traditional marketing/advertising:

1. Take the creative process seriously.  Just because you can dash off an important email to your staff in 30 seconds doesn’t mean your marketing people should do the same to your customers.  Put your email campaigns or templates through a rigorous development and approval process, just as you would a newspaper ad or radio spot.  There’s just no excuse for typos, bad grammar, or sloppy graphics in email or on a web site.

2.  Use live testing and feedback loops.  It’s hard to test two versions of a TV commecial without incurrent significant extra cost.  It’s impossible to test 20.  But with today’s software, you can test 10 versions of your home page, or 100 versions of your email campaign, almost instantly, and refine your message on the fly to maximize response.

3. Make transparency part of your corporate culture.  Just as you can have a 1:1 relationship with your customers, your customers expect a 1:1 relationship back.  If they want to know what data you store on them, tell them.  If they want you to stop emailing/calling/mailing them, stop.  If they want to know more about your products or policies, let them in.  Think about marketing more as a dialog with your customers, and less as you messaging them.

4. Merge content with advertising.  Old-school advertisers didn’t have to worry about this one, because their ads were always surrounded by other people’s content (TV, newspaper, radio, magazines).  But in direct marketing, your message is sometimes the only message around.  Make it interesting.  Make it entertaining.  I always think the prototypical example of this as the old J. Peterman catalog, which was trying to sell clothing and accessories by creating stories and mystique around each product.  But there are tons of other examples as well, especially around email newsletters.

Next up in the series:  What does this mean for the way companies will be structured or operate in the future?