AOL's New Email Marketing Tax

If you want to follow this conversation, start here, here, here and here.

If you want to follow where Jason Calacanis starts to speak BIGCO talk, read here.

Here's my response that I posted as a comment at Jason's last post.
(For some reason, I didn't get the email verification message to confirm my comment. I don't have to pay to have that delivered, do I Jason?)

Obviously, Fred, Brad and Matt have pissed off people inside AOL with their posts. I applaud them for taking this to the court of public opinion. It certainly has more potential to screw up their sales process than help it.

But, I don't think they are being dishonest. Maybe sensationalist. But, certainly not dishonest.

Goodmail's and AOL's lack of a public response shows to me that they are the ones with something to hide.

And if you really want fair and objective, you should try a little on yourself.  Investigate this from the perspective of the consumer. Investigate this from the perspective of email marketing ASPs. Or from the perspective of the email marketer. You're supposed to be the journalist. But, really you are just towing the company line.

Return Path's services are priced so that small email marketing firms can afford the service. And as they grow, their costs don't increase in proportion to their growth (unless they don't practice generally accepted practices for email marketing). With Goodmail, the costs of email marketing increase with email marketing firm's growth. Why should my company's growth benefit AOL?

At the best case scenario, Goodmail's approach creates a two tiered caste system for email marketing. There'll be the companies that can afford to get certified with Goodmail and pay the goodmail/aol tax. And there are the companies that won't be able to afford it. Both of these companies may be "good" email marketers. But, that isn't even relevant to the conversation.

Why? because "good" email marketers are shades of grey and because there is no consistent definition or way of measuring what is and isn't spam. Of course, we can tell that "vi8gra" ads are spam. But, there are many cases where consumers do not correctly report spam. And there are many cases where email marketers get away with sending spam.

Now, whether AOL has endorsed paid spam is another debate entirely. The definition of spam is in the eye of the beholder. Even legitimate email marketers (especially small businesses) add people to their mailing list without explicit permission. They might get someone's business card at an event, or exchange some emails with them or submit a form on their website. And many of those recipients enjoy receiving those messages. To the receiver it isn't spam.

At the other end of the spectrum, there are people that sign up for something, it isn't what they expect, they click the unsubscribe or the "this is spam" button.

With BSP and Return Path's delivery assurance programs, an email marketer's score is determine by how often these actions occurr (unsubscribe, flagged, etc). If it is a high occurrence, most likely this email marketer is not practicing generally acceptable permission practices. Therefore, they get penalized. If they have too many strikes against them, they are no longer bonded.

There is, of course, the Government's definition of what is and isn't ok. They define practices that must be adhered to like adding physical mailing addreses to the bottom of the email and having a working opt out method in the email. They also say what isn't acceptable, like harvesting email addresses. But, noone can tell who is and isn't opted in to a specific marketer's list. There is no central oversight for that and there won't ever be.

Therefore, there are gray areas of what is and isn't acceptable. And there are practices that are done by good email marketers that aren't so good.

The best way to catch them at their tricks is to monitor opt outs and flags, like BSP does.

With Goodmail's system, these companies could simply pay a fraction of a penny to let their messages through. For lead buyers that get mortgage leads (but don't have permission from consumers to email them), a fraction of a penny is worth the cost if they can close a few thousand dollar transaction. But, if the certification was through BSP, would it be worth the risk to that email marketer to risk losing their bond and then being unable to market through email - to the people that truly opted in.

Long story short: Permission is difficult to determine. But, currently, it can not be bought. With goodmail's system, it can. And transitively, if AOL moves forward with only this certification program and not others like BSP, they are letting "Good" and "not-so-bad" marketers buy their way into consumer's inbox.

There's really no way around skirting this issue or framing it another way.

Of course, AOL can make whatever behind-closed-door deal it wants, but there's no way of glossing this over in the blogosphere.

Further, I hope that email marketers take the time to understand this issue and make this more of an issue. And I hope consumers recognize it too.

Most likely, they won't though. It is a little bit too over the head of the average email marketer and consumer.

If anything, the email marketing ISPs will get hit the hardest on this one. In a competitive market, unable to raise their prices for fear of losing customers to competition, they will probably eat the cost.

On the other hand, maybe this could gain a lot more attention in the press.

The only recourse I see at this point to eliminate this potential flare up, is to adopt BSP and drop GoodMail. Or atleast implement both systems and let the market and some scientific data determine which certification program works best to prevent spam. With this move, it'll put the health of the email marketing industry and the sanctity of AOL inboxes before AOL's bottomline. And that might be a defensible position for you to blog about. 

I think this debate is equivalent to the debate about carriers asking internet companies to pay for premium bandwidth. It is BIGCO being jealous of thriving industry and wanting to tax it on the backend, even though BIGCO has a nice piece of revenue on the front side. It is greedy. It is equivalent to the monopilistic cable systems and paying the carriers to broadcast. This is a sad day for innovation on the internet that internet entrepreneurs will have to pay to reach AOL inboxes.

Further, it is very open to abuse and does not solve the problem it is being purported to solve: SPAM.

Comments

[Eric Sagalyn]

Here's the thing: Jason is a jackass. Once he get his fat head in the fray, I'm cheering for the other guy. The fact that he seems to be blindly backing his new benefactor, and then hiding behind AOL's shadow recently makes it even worse. People should just stop listening to him.

I hope the best for returnpath.

[Peter Caputa]

Wow. Way to really base your opinions on fact, Eric. :)

Jason certainly behaves like a Jackass at times, as do I. But, I don't think he IS a jackass. He's done a few things right a long the way.

[Dossy Shiobara]

"Why should my company's growth benefit AOL?"

Why should AOL help your company grow?

Go send commercial email to non-AOLers. Oh, wait, who are the kind of people to opt-in again? Oh, yeah, AOL members!

That's why companies who make money sending email should pay proportionally to how many emails they send into the AOL network. It's only fair.

[Peter Caputa]

Wow. Do all people from AOL smoke some kind of retard ganja?

That's the most backward thinking I've ever seen. Since cars burn gas, should gas companies pay car manufacturers? Since printers use ink, should ink makers pay printers?

Your argument amounts to: "We will because we can."

[Peter Caputa]

Should companie pay phone companies to call me?

Should google pay the browser maker to allow ads to come through?

Come on. I make software for email marketing. I sell my services to my clients. I service them. All AOL is doing is receiving the information for the client and they want as much as I am making from it? If they don't want to receive commercial messages, as they've agreed to do with their customers, they should tell them to go away.

But, to tax it (without the consumer being aware of what they are doing), is greedy and sneaky.

[Peter Caputa]

And the whole press release (eg regurgitated ClickZ article) talks about preventing spam.

And all you can say, is that "it is fair".

Come on.

I haven't seen anyone from AOL intelligently respond to the minuses of this arrangement.

Respond to the fact that this won't prevent spam.

Respond to the fact that AOL is accepting cash to ensure delivery.

Respond to the fact that they are stealing margin from email marketing companies and email marketing service providers.

Respond to the fact that it'll be more expensive for a startup to pay to launch a service that utilizes email.

I can't believe that there isn't anyone at AOL that doesn't have their head up their ass. And can't respond to this in a non-defensive, balanced way.

[Dossy Shiobara]

Cars and gas, printers and ink, browers and Google ads ... no. But, yes, telemarketers do pay the phone company for phone service which they use to call you. Why shouldn't email marketers pay AOL to send emails to their customers?

Phone companies charge both the telemarketers and the consumers. With 20M+ potential recipients, AOL could be considered a carrier for email services, and it's widely accepted practice to charge both ends of the transaction.

You know, many mobile carriers charge both the sender AND the receiver of SMS messages.

Increasing the cost of *sending* email *will* reduce spam. The only reason spam is successful is the cost to send it is many orders of magnitude lower than the revenue generated. ROI is still insanely high with spam. If AOL can make it more costly to send spam, that might actually have a measurable impact on it.

[Peter Caputa]

Increasing the cost of email will not reduce spam. That IS flawed thinking and rationalization.

It is a hypothesis. But, it is certainly not grounded in any research that proves it. Of course, blind spammers that send low value, low conversion spam may be eliminated. But,spam filters already eliminate that crap.

There are many examples where marketers will spend 50,100 or a thousand dollars for one conversion to a sale; to acquire one customer. As long as there are high margin sales to be made, there will be middle of the road email marketers that will not be deterred by a penny tax or even a dollar tax.

But, the efforts of sterling email marketers who cannott afford a fractional penny tax, will be sacrificed.

This will do nothing to prevent spam.

You're still not addressing the issues and all of the concerns of all of the constituents. A good business person/business understands how a change affects all of the constituents in the industry.

You guys can't even rationalize how it is good for consumers, let alone the rest of the players in the industry.

I know that many carriers charge senders and receivers of SMS messages. (Besides ATM networks.) And that is ridiculous. It may be the only system analagous to what AOL is implementing with Goodmail.

Telemarketing is certainly not analagous. Telemarketers (as do the rest of us) get charged to make calls by THEIR phone companies as email marketers generally pay an ASP for software and bandwidth to send their messages. But, telemarketers they don't get charged to call consumers by the receiver's/consumer's phone company. And consumer's don't pay when they receive telemarketer calls. Telemarketing is actually perfectly analagous to the way email marketing works without Goodmail in the picture.

You're reaching. Not even in the right spots.

This is a greedy move by AOL, who is doing it because they can. There are much better solutions to the issue of spam than this. This will have detrimental effects on the consumer and marketers and the thriving email marketing ASP market.

Why not implement BSP and Habeous certification and let the email marketing companies and consumers decide which program(s) to use?

WOuldn't that be a better, more equitable solution that is more likely to prevent spam?

[Dossy Shiobara]

"You guys can't even rationalize how it is good for consumers, let alone the rest of the players in the industry."

With certified spam senders, if an AOL member wants to opt-out, they can do so by clicking the "report spam" button and then AOL can block email from that sender -- because the sender's been authenticated. This *will* reduce spam from a certain class of senders. It absolutely will.

"I know that many carriers charge senders and receivers of SMS messages. (Besides ATM networks.) And that is ridiculous. It may be the only system analagous to what AOL is implementing with Goodmail."

Right. And, how much SMS spam do you get? Hardly any, I'd bet. Because the cost to send SMS doesn't make it an attractive medium.

"And consumer's don't pay when they receive telemarketer calls."

They absolutely do. Everyone pays a monthly service fee. Just because it's a flat rate "unlimited received calls" monthly fee doesn't mean you aren't paying per call. Just look at it as "the more calls you receive, the cheaper each of them get" if you divide your monthly fee by the number of calls you receive.

"This is a greedy move by AOL, who is doing it because they can."

I'd agree that it's greedy, but not all greed is bad. I don't have any inside knowledge about the AOL/Goodmail deal, but I'm speculating that the cost for AOL to continuously modify the mail filters and whitelist is non-zero, and "outsourcing" that cost to Goodmail is a cost reducing (and thus, net profit increasing) move.

According to Goodmail's site, Yahoo! Mail uses them, too. Why is AOL so "evil" now for choosing them? I don't recall seeing such a stink about it when Yahoo! started using their service.

"Why not implement BSP and Habeous certification and let the email marketing companies and consumers decide which program(s) to use?"

AOL members pay their monthly subscription because they want their online experience to "just work" -- they don't care about these things, they just want to see less spam in their inbox. You may not like this, but millions of people do. Enough to pay $23.95 a month for it.

[Peter Caputa]

Dossy.

This could go on forever.

I am glad that you concede that this is a greedy move by AOL.

Arguing about this by making analogies is really counterproductive and not relevant. Email is a different medium than SMS and telemarketing. Because consumers pay to receive SMS messages does not keep unsolicited messages out of my inbox. And a flat rate to have a telephone line to receive calls is a whole lot different than paying per mesage. If you are advocating a flat fee for permission email marketers, than BSP is much more akin to that (actually it is cheaper if you are a good email marketer), than Goodmail.

The conversation should be centered around what are the better ways to prevent spam. Not analogies to justify your stance.

AOL, Yahoo, MSN hotmail, etc are doing very little to embrace a common standard for email deliverability. I was unaware that Yahoo had adopted goodmail. Nor have I personally looked into goodmail other than reading their site.

I have looked into Habeous and Return Path's delivery monitoring services and Return Path's Bonded Sender Program. And I think they are both solid solutions to the issue of spam, that balance the needs of email marketers and ISPs alike.

I am an advocate of having all of the certification programs adopted by all of the ISPs. Goodmail seems to be the least competitive for the email marketing industry and it is open to abuse by email marketers with bigger pockets.

I am aware of the "this is spam" button, but it really has nothing to do with Goodmail.

I am still waiting for a concise explanation on how goodmail will solve the spam problem. Or even help it.

More importantly, I'd still like someone who is in AOL to answer this question:

"Why not implement BSP and Habeous certification and let the email marketing companies and consumers decide which program(s) to use?"

Or correlate "this is spam" complaints to the effectiveness of each program?

It seems that AOL is letting the number crunchers make this decision without weighing the customer relations and email marketers concerns. Nor are they looking at it scientifically.

[Dossy Shiobara]

"I am glad that you concede that this is a greedy move by AOL."

It's just as greedy as a email marketer sending out commercial email (solicited or non-) trying to make a buck off someone else.

"This could go on forever."

Could, and will, are two wholly different things. :-)

"Email is a different medium than SMS and telemarketing."

Oh, stop that. "Murder and manslaughter are different!" Sure, but they both have the same result: a dead body. Are they really that different? Only to the lawyers. The victim still has to deal with the end result.

"And a flat rate to have a telephone line to receive calls is a whole lot different than paying per mesage. If you are advocating a flat fee for permission email marketers, than BSP is much more akin to that (actually it is cheaper if you are a good email marketer), than Goodmail."

No, I'm NOT advocating a flat fee for permission email marketers. I wish that telemarketers had to pay a premium (say, $1000/mo) for the *privilege* of making commercially soliciting telephone calls, in ADDITION to a per-call cost. I'd like the same for emails, too -- but, even MORE expensive, since emails are so much easier to send.

"I am aware of the "this is spam" button, but it really has nothing to do with Goodmail."

I suspect you're completely wrong, here. If there's a certification stamp in the mail headers authenticating a sender via Goodmail, then AOL can filter on that. It's a huge benefit to AOL email recipients.

"Goodmail seems to be the least competitive for the email marketing industry and it is open to abuse by email marketers with bigger pockets."

How so? If enough people mark a particular Deep-Pocket-Spammer as spam, AOL can prevent that sender from sending to all of AOL members -- effectively, locking them out. Doesn't matter how much they're willing to pay per message if their messages are being refused en masse, and since Goodmail certifies or authenticates the sender, it's trivially easy to ban individual senders.

With regard to customer relations -- AOL customers will get better email service with less spam: they win. Email marketers will have less competition for eyeballs in customer inboxes: they win.

Yes, there's an increased cost to the email marketers: so what? No consumer is going to care about that if it means less junk spam. And, the email marketers will just roll that cost into their overall cost for doing business: charge it back to the companies who you're sending mail for.

Or, just stop sending so MUCH spam. Invest in better targeting. If there's a per-email cost, then instead of sending 40 million emails out the way they do today, improve systems to only send 100K but make sure they're well-targeted so you get the same response rate as before. Everyone wins in that situation.

[Peter Caputa]

Yeah. I am done. My points have been made. You are using analogies, ancillary factors and rationaliztions in an attempt at winning a debate. Instead of hearing the problems and addressing them.

I'll cede the debate if you'd like. Not really interested in beating you in a debate.

If you want to address concerns or answer my questions in a balanced way, I'd be glad to resume.

[Dossy Shiobara]

I don't see how BSP offers an more benefit over existing SPF, other than the fact that implementing SPF is completely free (as in beer).

Reducing or eliminating spam *requires* that there be a per-message cost to the sender. BSP and SPF aren't sufficient solutions because they don't have this property.

This is the best answer to your question that I have at the moment. Thanks for listening.

[Peter Caputa]

Thanks for pointing out SPF, Dossy. I was unaware of it.

It is very different than BSP, though. Bonded Sender Program, run by Retun Path is a certification body. They first check out to make sure the email marketer is legit and following all of the rules and accepted practices of permission based email marketing. The marketer then puts up a "bond" that says I will not violate these rules. BSP puts this cash in an escrow account. BSP then certifies that email from email marketer's IP address is ok to send mail from. If the email marketer is caught violating the rules (too many complaints or unsubscribe volume), the program takes cash out of the bond. If the email marketer has too many violations, they lose their bond and they lose certification. It is a x strikes and your out policy.

With this explanation, is it clear how this is better for legit email marketers? Do you also see how it is better at preventing spam from reaching the consumer?

Losing whitelist status is a worse penalty than tax. Tax merely makes it more expensive. Fines for bad behaviour (or loss of the bond) and the threat of not being able to do email marketing deters bad behaviour.

Do you still think that it is necessary to have a per-message cost to prevent spam? If so, please explain why.

Thanks for being constructive, Dossy. I appreciate your comments, as always.

[Dossy Shiobara]

No, I don't see how BSP is better. Let me try to explain:

I am only assuming, but I'd hope that Goodmail will also reject/refuse to certify senders who violate their TOS, just as BSP does. I'd really like to see some information from Goodmail that says that they will continue to certify parties regardless of complaints/TOS violations, as long as they continue to pay the per-message fee. I really hope this isn't the case.

How does Return Path fund BSP operations? At least Goodmail's business model is clear: they will stay in business because they have an incremental revenue stream. From your limited explanation and my limited understanding, Return Path only generates revenue when they can dip into the escrowed funds? In which case, it's actually in their best interest to find marketers who put up a bond and then violate the TOS so they can generate revenue? See why I'm confused?

From a business perspective, I would have a very hard time partnering with Return Path if I couldn't see how they fund their operations. I'd hate to make enhancements to my mail infrastructure for some 60+M mail accounts (AOL member mail, AIM free webmail, etc.) if the partner might evaporate in a year or three due to lack of sufficient operating funds.

[Peter Caputa]

I would like to hear from Goodmail how they penalize offenders as well. From goodmail's site (I have never talked to anyone there), it seems that they also monitor violations. I am not aware of how they penalize or "kick-out" violators, though. It does seem as if they do. Their website says they monitor unsubs and complaints.

I think there is an inherent conflict, though. One that is much larger than the potential conflict with BSP. In the case of Goodmail, the people that are paying for certification are their customers. What would make Goodmail enforce high standards if enforcing those standards reduces their revenue? I am sure they will adhere to high standards, but they also have some incentive to look the other way.

Regarding Return Path's business model, the majority of their revenue is from services that they provide to email marketers to measure and report deliverability. It is a service that they provide and they layer consulting services on top of that to work on behalf of email marketing companies when disputes occurr. They are also releasing a cool new open way to score senders across a variety of metrics which measure the marketer's practices.

I believe their business is very healthy. Of course, Matt, Fred and Brad could speak to that better. But, I believe it is a non-issue.

All that said, I have no idea how BSP contributes to the bottomline, if it does at all.

The BSP bond is very small and I believe it simply covers the cost of investigating the email marketer to make sure they are certifiable. There is not a lot of incentive, therefore, for them to solicit bad email marketers.

I think that both of these systems have merit. Although, I'd put my bets on BSP solving more of the problems, I think it would be a wise move for all the large ISPs to implement more than one certification system, and then let the market decide.

That'll be healthier for the email marketing industry and better for consumers in the long run.

[Dossy Shiobara]

"[...] I think it would be a wise move for all the large ISPs to implement more than one certification system, and then let the market decide."

I didn't see AOL making a statement anywhere that "AOL will only use Goodmail's service" -- it's entirely possible that Goodmail is only the first sender-certification partner that AOL has engaged, not the only one to engage, ever.

Lets give it some time and see. At least we should be positive that AOL is actively looking at ways to add value to their email service for both their paying AOL membership and their free AIM mail audience.

[Peter Caputa]

I find it hard to believe that the people in charge of this decision at AOL are not keenly aware of all of the options.

I'd like to hear from someone in the decision seat at AOL that they are weighing the implementation of other certification programs.

Now that people are paying attention to this issue, I think it is the best time to address it.

I also don't agree that this program adds value to end users. I'd like to learn more about how Goodmail certifies email marketers and ensures that they comply.

[Dossy Shiobara]

"I find it hard to believe that the people in charge of this decision at AOL are not keenly aware of all of the options."

Suppose for a moment that they are aware of all the options. Should they have to implement all of them simultaneously, or can they do them serially, one after the other, evaluating along the way whether they should continue implementing more or stop at a reasonable point?

"I'd like to hear from someone in the decision seat at AOL that they are weighing the implementation of other certification programs."

I make no promises, but I will try to find a contact involved in the decision making process and ask them. If I get a response that I'm allowed to post publically, I'll update the comments here.

"I'd like to learn more about how Goodmail certifies email marketers and ensures that they comply."

Me too. Do you want to email them, or should I?

[Peter Caputa]

You the man, Dossy.

You might have better luck getting them to explain it. But, I will inquire as well.

Maybe a podcast is in order? Better yet: an online seminar?

[Miles Clark]

Yahoo's Goodmail implementation is supposed to only be for transactional email, and they have not announced anything like an end to a whitelist. Either could be the reason there hasn't been a stink about their adoption.

[Dossy Shiobara]

Okay, I emailed Goodmail PR contact and got no response so far. I'll give them a few more days, but I'm not expecting a response.

I asked around internally at AOL about things and I really shouldn't say anything other than "it's being worked on."

About as official as it comes is Jason Calacanis's most recent blog entry on the matter. Give it a read, and let me know what you think.

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