When Steve Pelletier decided to name his e-mail newsletter network last September, he looked to the world of derivatives trading for inspiration. The phrase "fat tail" is a statistical term used among derivative traders that means a particular outcome is highly uncertain.
Yet Pelletier, CEO and founder of Woodland Hills, Calif.-based FatTail Inc., wants to market his company to mean just the opposite.
"We want to chip off the tail and make [e-newsletters] more certain, to help advertisers better predict what the response will be to their advertisements," Pelletier said.
FatTail is a conduit between publishers and advertisers. The company, which is shooting for profitability before the end of the year, does not produce any editorial. Rather, it helps publishers leverage their assets by grouping together vertical titles with similar audiences into one newsletter, then selling groups of newsletters to advertisers targeting highly specific audiences. In addition, FatTail augments the sales forces of its publishing clients.
Len Daykin, senior VP of Melville, N.Y.-based Don Jagoda Associates, a full-service promotion company that recently entered into a relationship with FatTail, said the company is about to have a test run with FatTail’s services.
Indeed, e-mail newsletter networks could be to online publications what Direct TV is to couch potatoes. "They’re very segmented markets that allow you to precisely home in on the audience," Daykin said.
The newsletters are "like little rifle bullets," Daykin added. FatTail’s newsletters offer the company the opportunity to target core concentrations in key industries, such as food and packaged goods, health care and financial services.
Securing CPM rates
Richard Kern, co-founder of NewsFactor Network, a Los Angeles-based Internet news agency whose products include NewsFactor.com, eCommerceTimes.com, CRMDaily.com and TechNewsWorld.com, said FatTail is "able to get out there and secure very high CPM rates for the ad space we’re selling through our newsletters." Mostly, FatTail caters to small and midsize publishers like NewsFactor Network.
The FatTail network currently represents more than 200 newsletters of varying frequencies, representing more than 25 million monthly e-mails. The total audience for the network is around 6 million.
FatTail gets its revenue from taking a share of the advertisement sold to market the newsletters. Ad agencies and marketers need the middleman to aggregate the inventory so they can then make one major buy, according to Joanne Currie, president of FatTail. The company declines to specify what percentage cut it takes in these transactions. But sources said the revenue cut falls squarely in the middle range for the online advertising industry, which typically sees revenue split 30% for the publisher and 70% for the network, or vice versa.
Pelletier said the company selects industries first, then builds the e-mail network. An ad can run in as many newsletters as the advertiser wants. Once the e-mail newsletter is distributed, FatTail studies the click-through rates to monitor audiences’ reactions to the embedded advertisements.
FatTail’s prices are negotiable, depending on frequency, and its rates vary widely, but the company has sold many newsletters to advertisers for $100 per CPM or more.