Poor performance, back-door deals pushing list prices lower

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While e-mail marketing as a discipline remains strong—an Alterian survey conducted at the DMA annual conference last October revealed 81% of the 540 marketers surveyed plan to increase spending on e-mail as a marketing channel—the e-mail list business does not have much to brag about right now.

E-mail list pricing for both b-to-b and consumer lists continues to decrease, according to list manager Worldata in its quarterly "List Price Index" (see chart, at right).

B-to-b permission-based e-mail lists commanded an average price of $273/M last month, a 1.4% decrease compared with January 2006. Worldata said the decreased pricing in the b-to-b e-mail category reflects growth in the number of lists available and poor performance.

B-to-b e-mail lists were still the highest-priced category among all lists, including business catalogs, business magazines, databases and attendee/membership lists, with newsletter lists a distant second. Newsletter lists commanded an average $172/M, a decrease of 3.4% from last year.

Prices sliding off rate card

Jay Schwedelson, corporate VP at Worldata said the index doesn't tell the full story.

"The prices are sliding much more than what our index is showing," Schwedelson said. He said that's because lots of wheeling and dealing is occurring. "We analyze the rate card pricing, but what is going on behind the scenes is much more dramatic. There are a lot of deals, a lot of off-rate-card pricing going on in the b-to-b space, specifically because of poor e-mail performance."

He said performance is getting worse, not better.

Schwedelson said the pricing drops can also be attributed to availability. "There are a lot more files on the market," he said, particularly small-business lists.

"It's still a very lucrative channel, but a lot of deals are being cut," Schwedelson said.

One consultant agreed. "I do think that a lot of marketers are cutting deals for lower CPMs," said Reggie Brady of Reggie Brady Marketing Solutions, a marketing consultancy.

She said list owners won't usually discount for a test mailing, but once a marketer has test results, "it's much easier to negotiate for a lower CPM."

Stefan Pollard, director of consulting services, EmailLabs, an e-mail service provider, said the pricing problem is more fundamental. "The reason prices continue to fall is that fewer and fewer companies continue to engage in the practice," of renting third-party e-mail lists, he said. "It's one of the biggest `do-not-dos' in e-mail marketing."

Pollard said acquiring customers through e-mail is a nonstarter, so he expects that the e-mail list rental business would suffer. EmailLabs goes so far as to forbid e-mail acquisition campaigns on its platform because of privacy concerns. "E-mail acquisition is not allowed on my platform," he said. "Our usage policy states you cannot use third-party lists. That's pretty common with e-mail service providers."

Another list manager had a different view of the pricing landscape. Rob Sanchez, president, List Management and Interactive Services at MeritDirect, said e-mail list rental is strong. "We experienced very positive trends in e-mail in 2006 and expect that trend to continue," Sanchez said.

An agency executive agreed. While she sees e-mail CPMs decreasing on the consumer side, "B-to-b lists are still holding strong," said Jeanniey Mullen, senior partner, senior director of e-mail marketing 2.0 at OgilvyOne Worldwide, New York.

Some say targeting particular segments, such as technology professionals, for example, can be difficult because technology pros tend to be adept at filtering unwanted messages out. "Targeting the technology professional has been critically damaged by filters and spam," Schwedelson said. "They're in the know, they know how to filter. Getting into the in-box of the technology pro is harder than ever."

Leaving CPM model behind

But marketers continue to try, and some are leaving the CPM model behind. Brady, for example, said she is currently working on two programs for marketers that are based on cost-per-action rather than CPM.

"There are more programs available on a CPA basis," she said. "I had always tended to shy away from any of these programs because I thought they were more likely to be spamlike, that the program owner would just blast their entire list with no targeting because that was the easy thing to do. I'm in the midst of managing two different e-mail prospecting campaigns right now—one for a product and another for a consumer magazine—and have found several programs that are credible and worthy of consideration. As one example, the program owner doesn't charge at all for sending the e-mail but we will pay a fixed fee for every order or every subscription we get."

Mullen said her clients are looking for more strategic e-mail lists and are willing to pay more for them. "Lists where we can confirm they `look like' high-value customers—through data matching or e-mail lists that we can send multiple messages to—are valuable. For example, six months' worth of list rental instead of one-time sends." Mullen said e-mail list rental for one-time use is not the best way to grow a list. "It is an acceptable branding tool, but with the onset of search, it is increasingly difficult for e-mail's ROI to pay out on a pure acquisition front. Cross-sell, upsell and retention e-mails are different.

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