By sponsoring newsletters or placing banners on e-mails that subscribers request, advertisers can get an environment for their messages that might be better than Web banners at a comparable cost.
John Funk, founder and chairman of Infobeat, Denver, a major producer of sponsored e-mails, says click-through rates on his messages range from 0.5% to 1%, the same as with Web banners.
But when users click on an e-mail ad, he says, they're more likely to follow up with a purchase than viewers of Web banners.
"So our effective customer acquisition costs are low," he says, when compared with other online media.
Subscriber lists increase
The amount of e-mail ad inventory is also growing quickly. Infobeat has 3.5 million subscribers for its 150 e-mail lists, Mr. Funk says. At the same time, Lycos' Wired Digital has about 1 million daily subscribers, says spokesman Andrew DeVries, and C Net has 4.7 million names on its lists, according to L-Soft, Bethesda, Md., which maintains the lists.
For publishers, e-mail is very profitable. Barry Briggs, VP-advertising sales and marketing for ZDNet, San Francisco, estimates his company sends 50 million sponsored e-mails a month.
His largest list, AnchorDesk, has 1.7 million names. ZDNet charges $15 per 1,000 names to sponsor the AnchorDesk list. But the costs of producing the daily letter are shared with the Web site, as are advertising costs, and the cost of delivery is minimal.
Mr. Briggs says the success of AnchorDesk and other ZDNet letters is leading to line extensions, including a "Goody Drawer" mailing of special offers, and to ZD getting more demographic data from subscribers to build its community, and earn a higher CPM (cost per thousand readers) from advertisers.
Buying ads on sponsored e-mails isn't easy, however.
"There's a wide variety of pricing, anywhere from $15 to $45 per 1,000," says Jeff Clausen, a media buyer with the Multimedia Marketing Group, Bend, Ore.
There is also no single agency where a media buyer can buy a wide variety of lists, Mr. Clausen says, adding, "a lot of the research we have to do ourselves."
The format for ads is also changing rapidly. Text remains the most popular format at Wired Digital, says Mr. DeVries.
Still, half of AnchorDesk readers take the HTML version, which supports graphic banners, Mr. Briggs says.
One key to moving subscribers to HTML is to keep the files short, he says. Instead of adding graphics, he suggests publishers use hyperlinks and a basic layout.
But the overhead, for users, is still substantial. As an HTML file, for instance, AnchorDesk is 15 kilobytes, says Mr. Briggs, but as text, it's 5 kilobytes.
Marc Johnson, a senior analyst for Jupiter Communications, New York, who will publish a report, "The Opportunity of E-mail," this month, warns that e-mail may not live up to its potential as a new medium because it's so easy to produce and send.
"Everyone rushes in due to its low cost, and that can quickly become mailbox glut," Mr. Johnson says. "Communications become poorly thought out, they're not executed well, and you get burnout" from users.
In addition to maintaining quality, e-mail publishers such as Infobeat can also help ad buyers by providing demographic data that will allow them to target their ads, says Dave Hills, VP-director of Cox Interactive Sales, New York, Cox Broadcasting's Web rep firm.
Many e-mail newsletters, because of their narrow focus, are already targeted. Ruth Townsend, president of Lifestyles Publishing, Cortland, N.Y., which publishes a directory of e-mail newsletters, estimates 18,000 to 20,000 such publications take ads now on every subject under the sun.
The problem is, says Mr. Clausen, many of these publishers are amateurs or hobbyists, unable to justify their rates or provide the services professional ad buyers need to buy with confidence.
"Potentially e-mail is the killer app," says David Smith, who buys ads in e-mails as president of MediaSmith, San Francisco, but there needs to be better tracking of transactions generated by e-mails, as well as measurements that show if the e-mails are read, not just subscribed to.
"That's the biggest problem, the clutter situation," he says. "Even if you opt-in, do you read them?"
Measuring readership, rather than subscriptions, and measuring what readers do with ads in e-mail, will determine the new medium's fate, he says.