Friday, April 22, 2011

Email - not dead yet

I've been pretty heavily involved in email industry since 2003, as CEO of Habeas from 2003 to 2008 and the last few years as an advisor, consultant and entrepreneur in messaging related companies. Email has always sort of felt like the Rodney Dangerfield of the tech world - "Hey, I don't get no respect." It's not because email isn't important - we all know how much we rely on it. It's just that it's had its problems with spam and phishing and inbox overload, etc. But email is not dead yet.

In fact email has been pronounced dead on several occastions. IM killed email. No, wait....SMS will take email down. No, Facebook messaging will definitely do it. In the parlor, with Col. Mustard. Predictions and declarations of email's death are manifold.

Did he kill email?

But wait, email is hot. In technology and investment circles (aka "the valley"), email businesses are exciting again. This wasn't the case until the last few years when some innovative business models were applied to SMTP and revitalized email. Email was like the girl next door, reliable friend, always there....but not really who you want to take to the prom. That would be anything mobile or social. So what's making the girl next door look pretty good today?

  1. Maturation and consolidation of email service provider market - A lot of Web 1.0 investment dollars went into creating email service providers - the companies that send the majority of  business to consumer email. But there weren't returns on those investment until recently. Constant Contact, used by over 400,000 (!) small businesses went public in 2007 and has a $900M market cap. iContact, also serving small businesses,  raised $40M last year. Responsys (MKTG) , who focuses on mid to larger size companies, went public yesterday (congrats Dan, Anand, Raghu and team!) with great first day market response (sys).  ExactTarget has filed to go public and has been raising (and spending) boatloads of private money. Silverpop and competitors are also growing rapidy and reaching critical mass level required for a public offering. Things are looking good for the leading email service providers.
  2. Innovation in consumer email space.  Great examples of innovative email or email powered models abound. Groupon would be the top example. Sure it's an innovative local commerce model, but it runs on email. Consumers still like to get relevant content in their inbox, especially when it's 50% off a foot massage. Another example is Daily Candy, a daily newsletter and website for women's fashion, or ThrillList, an urban men's daily deals newletter. Vertical content oriented websites with newsletters as a key component for monetization (deals, ads) and for driving traffic back to the site. Old model, but niche focused and nicely executed. On the email infrastructure side, sending the emails themselves has never been easier or more cost-effective - SendGrid and Amazon's Simple Email Service (SES) are both cloud based systems that outsource all the back-end services necessary for an app developer or business to send their own email. Even email service providers are taking a look at these as options to buying their own servers and renting co-lo facilities. (note: Amazon's AWS debacle of yesterday may take a little bit of the shine off of Amazon SES). There's lots of cool innovative stuff happening in email.
  3. Mobile and social.  Yup, the hot new areas of interactive marketing are strengthening email IMHO. A lot of people focus on facebook or mobile apps taking up more of a consumer's online activity at the expense of old school activities like email, search or browsing, and therefore see these new areas as threats to email. I see it differently. Mobile and social are just new mechanisms (mediums?) for brands to interact with consumers. Ultimately the online marketer's goal, whether  using mobile or social or search or SEO channels to reach consumers, is to get the consumer to a landing page on the website,  to collect consumer information (i.e., email address) and to add that consumer to their CRM database as a prospect or customer. And the CRM database will be used for emailing that customer on an ongoing basis to keep the customer engaged through their lifecycle. Email is still super cost-effective and utilized on an ongoing basis thoughout the customer lifecycle. So social peeps - keep working on that sticky ROI equation, meanwhile your email peers will be keeping the customer coming back to the website and buying...again and again.
So what's not to love about consumer email? Well there are some new dark clouds around the consumer email industry. There have been a number of hacker break-ins at consumer email services companies like Return Path, AWeber, Silverpop and most notably and recently, Epsilon. Over 100 Epsilon customers, major national brands like Sears, 1-800 Flowers, Citibank, US Bank and Pottery Barn have had their customer email address lists taken by the hackers. (Here's a great article on the email security breach episodes from pcworld and here's one from cnn).  Consumer email addresses have been stolen by the hackers presumably be used in future phishing attacks where the spammer will send you a fake email that pretends to be your bank or your favorite on-line store. They hope they can get you to give them more information about youself (your bank PIN?) or maybe use the phishing email send a virus to infect and monitor your PC. Creepy stuff. Some email security gurus are advising consumers to stop trusting their emails from businesses and to be careful about opening emails or signing up for new email subscriptions. Not good for consumer email if consumers don't open emails or sign up for new ones.

So what are we (the email industry) going to do about this? Can we come together and fix this mess before it undercuts all the progress we've made with email trust, safety and utility?

The email industry came together in the mid-2000's to debate, define and implement authentication standards. We pulled that off and fixed a major security flaw in SMTP. During that same timeframe, online marketers were evangelized and educated on the need for using best practices in email: opt-in subscriptions; relevant content; easy opt-out, etc. And those behaviors were reinforced with consequent good or bad inbox delivery rates as ESP and 3rd party reputation systems were deployed.
Meng and Craig came together

So we can come together as an industry - even cats and dogs can be friends when it's in their common interest: history proves it.  So to my industry colleagues, it's imperative we come together and define the minimum acceptable security standards for our industry - before we lose the trust of consumers. Or before the government decides they have to do it for us. So if you are a consumer email services firm

1. Review your security practices now. The Online Trust Alliance Security by Design guidelines are a great way to start.
2. This is a "CXO" level issue for your firm. It's not an IT issue for the dude in the black T-shirt in the server room to fix alone. Put executive attention on addressing your security shortcomings across the organization and support cross-industry security standards as well as governmental and public relations initiatives.
3. Have ongoing participation and involvement in the associations supporting email industry trust and security: OTA, MAAWG, EEC, ESPC are a few of the more notable organizations.

Email is great. We make a living at it. We (and our friends and families and customers) rely on email. Let's not let the bad guys screw it up - we fought them off once before. We can do it again.


  1. Excellent summary of the email industry today, including some of the fantastic email-powered business models along with ridiculously scary challenges. Thanks Des!

  2. Awesome article Des. I'm also excited to see what comes of the various projects at gmail, yahoo, and hotmail to create a more engaging type of email with true two-way interactivity. We'll see if those projects every get traction but regardless email definitely has a bright future!