LOST IN THE CYBER-KUDZU
Alyx Sachs is raging about the clutter in her e-mailbox. “I hate spam!” she says of unwanted electronic solicitations, and with so much vehemence it seems as if she’s distancing herself from some odious accusation. She recalls recently logging into her Yahoo e-mail account and missing two important messages because Yahoo had filtered them into her bulk e-mail--that is, spam--folder. “My e-mail’s getting censored by ISPs,” she grumbles, referring to Internet service providers.
Other e-mail annoyances have become a daily headache for Sachs. There are the pop-up ads that she can’t get rid of, and, of course, all manner of offers from pornography profiteers that clog her in-box. “I spend half an hour a day deleting spam,” she says.
Sachs’ anti-spam sermon is not surprising. Millions of other Americans are complaining about the blight of spam, a cyber-kudzu that is suffocating in-boxes and now accounts for an estimated 60% of all e-mail. Of American consumers who were recently surveyed by the Harris Poll, 64% said they found spam “very annoying,” while 79% favored making spamming illegal--which is what Congress and various state legislatures, including California’s, have set out to do. In one of the first cases of “spam rage,” a Sunnyvale, Calif., computer programmer last month was charged with threatening to kill the president of a Canadian company that he blamed for sending him “junk” e-mail. The defendant, Charles Booher, a testicular cancer survivor, was particularly upset about receiving penis-enlargement ads.
What’s surprising is that Sachs also is in the business of sending bulk commercial e-mail messages to millions of people. Her 18-month-old Los Angeles company, Net Global Marketing, devises online marketing campaigns for consumer products, and its computer servers send out e-mails to Internet users at a rate of 6.49 messages per second. She and her tech-wizard partner, Albert Ahdoot, say they have the capacity to send about 500 million e-mails a day, although they normally send about 25 million.
Sachs points to a crucial difference between what she does and what spammers do. She only mails to those who have “opted in,” people who have purchased a product over the Internet and agreed to receive other offers for similar products. She has compiled a database of more than 2 million such people. “I’ve never once sent any spam,” she insists. “There’s no way in a million years anyone can say we did.”
But when you opt in, you give Sachs if not a license to spam, then certainly carte blanche to invade your in-box. One simple “yes” can trigger many offers. Like others in the “legitimate” online marketing industry, she is hoping consumers will distinguish between spam and opt-in or permission-based e-mail. But at a time when most are adopting the philosophy of Howard Beale in the film “Network"--"I’m mad as hell, and I’m not going to take it anymore!"--you have to wonder if Sachs can really cut through the kudzu, or if she is clinging to a cyber-delusion.
The birth of e-mail as an advertising medium is commonly attributed to--or blamed on, depending on your point of view--Gary Thuerk, a marketing manager for Digital Equipment Corp. In 1978, he sent out an ad publicizing real estate open houses over a network of government and university computers that was the forerunner of the Internet. Network administrators warned him not to do it again, and e-mail ads stayed on the shelf until the Internet took off as a tool of mass communication in the early 1990s.
In 1994, two California immigration lawyers cooked up spam as we know it by sending a promotional message about their services to 6,000 Internet bulletin boards. Laurence Canter and his wife, Martha Siegel, spammed millions in a matter of 90 minutes and claimed to have made $100,000 from the campaign. The spam template was in place. Consumers could be reached for a fraction of the cost of a postal junk mailing. You could make a campaign pay even if less than 1% of the e-mails you sent generated a purchase. And in regulation-free cyberspace, there wasn’t much anybody could do to stop you.
But if you wanted to build a legitimate online marketing industry, spam definitely was not the way to go. Big advertisers wouldn’t want to be associated with so primitive a vehicle. You could churn out mass e-mails for online pornography sites or penis-enlargement procedures, but you weren’t going to get prestigious, lucrative accounts. Those demanded thoughtful campaigns aimed at specific demographic groups that didn’t want their messages gobbled up by spam filters.
Enter Seth Godin, the founder of Internet marketer Yoyodyne. After selling the company to Yahoo, he published the book “Permission Marketing: Turning Strangers Into Friends and Friends Into Customers” in 1999. Jeanne Jennings, an online marketing consultant, credits the book with launching a new e-vogue. “A lot of people have co-opted terms like ‘permission-based,’ ” she notes.
It works like this: Consumers permit themselves to be e-mailed by making an online purchase and then checking the little box on the Internet ad inviting them to receive other offers. “They do something proactive to say, ‘Yes,’ ” says Jennings. Some marketers also provide “opt-out,” a box that allows the consumer to get their name off a mailing list.
Willing consumers obviously represent an opportunity for entrepreneurs such as Sachs. Industry analysts predict that the amount spent on e-mail marketing in the U.S. should increase from the current $2.7 billion to $10.8 billion in 2007. Corporate advertisers now are devoting more than 10% of their marketing budgets to e-mail, up from 2% to 4% a few years ago. “We’re seeing large companies come in to work with us,” says online marketer Kim MacPherson of Inbox Interactive in Bethesda, Md. “They’re seeing the value, that it’s so much less expensive than other mediums.”
Sachs remains convinced that online marketing is “the fastest way to break a brand, the fastest way to change an image.” But she also concedes that her industry’s potential is limited, at the moment, by an image problem of its own.
A native of Long Island, N.Y., Sachs studied finance at the University of Arizona before being bitten by the television bug. “I decided I wanted to be the next Barbara Walters,” she recalls. After obtaining a degree in broadcast journalism at Brooklyn College, she got a job as a producer for the tabloid show “Inside Edition,” where she specialized in investigations of consumer scams.
Sachs never became an on-air reporter, but she built a successful producing career that included five years with Geraldo Rivera on both his syndicated morning show and his CNBC evening news show. Her career then wasn’t exactly a model of mass-media subtlety. She booked such guests as John Wayne Bobbitt and Joey Buttafuoco, and supervised coverage of the O.J. Simpson murder trial. By 1998, however, she was “burned out” on TV and had launched 10K Intertainment, an Internet consulting firm.
10K Intertainment entered into partnerships with other Internet concerns, enabling Sachs to widen her range of contacts. After the company folded, she began developing ideas for TV shows and, just before the terror attacks of Sept. 11, 2001, she left New York for Los Angeles. A mutual acquaintance in the entertainment industry introduced her to Ahdoot, a UCLA graduate and medical student-turned-computer whiz who had just founded Net Global Marketing.
The two agreed to join forces and sink their savings into the company. Sachs, a petite, husky-voiced dynamo, could bring her creative know-how to e-mail marketing. Ahdoot brought his technical savvy. “This is something personal for me,” says the 26-year-old Ahdoot of his desire to build the “perfect” computer system.
The enterprise, which has a technical and marketing staff of 15 people, had a sales office in Hollywood until Sachs recently combined it with her data center in the windowless basement of a high-rise just west of downtown Los Angeles. In the trade this is called a “colocation,” or “colo,” of computer servers connected to the outside world by miles of fiber-optic cable. Some of these high-powered machines are host servers--Net Global Marketing hosts clients’ Web sites as part of its menu of services--while other servers each pump out e-mails at a rate of 390 a minute, 23,000 an hour, 561,000 a day. There is no downtime or shutdown here. The servers work 24/7, monitored constantly by technicians in a control room arrayed with desktop PCs, ready to tackle the slightest glitch. Firewalls and protective software are poised to defeat even the most sophisticated computer virus.
Most of the “colo” looks like a set from a science-fiction movie--row upon row of servers, LED displays flashing, stacked up in black cabinets. Ahdoot often stays all night, installing equipment, running test mailings and tinkering with the servers. Security is tight. You’re not supposed to go down to the “colo” unless someone who’s already there comes up to the building lobby to escort you.
The overall effect is sterile and somewhat unnerving. All of this investment in technology and entrepreneurial effort devoted to sending commercial messages to Internet in-boxes, fanning the flames, you would think, of consumer discontent. TV viewers, of course, get bombarded with advertising, too. But without those ads, there wouldn’t be programming, and, with remote control, it doesn’t take much to change a channel if an ad annoys you. E-mail marketing--legitimate or otherwise--is more intrusive, so much so that it can overwhelm the medium itself and make some, like Charles Booher, want to go after the messenger.
Sachs believes she has the solution to consumer angst. Her opt-in, she says, is optimal. The consumers in her database filled in surveys at the time they opted in. That provides her with detailed information so that she can target campaigns effectively. In some cases, she sends e-mails to people on the client’s own database. “Why would I want to send an 18-year-old a product for osteoporosis?” she asks. “Why would I want to send out tons of e-mail to people I don’t know anything about?”
This, for Sachs, is the essence of “smart marketing.” “We spend all our time trying to figure out who our audience is,” Sachs says. With opt-in e-mail marketing, “you’re going to have more information about your customer than any medium out there.”
We’d like to tell you what messages you may have gotten from Sachs and what, with the Christmas season upon us, you may look forward to getting. But while she is personable and garrulous, Sachs is so guarded about the details of her business that she could be auditioning for a job as a White House spokeswoman. Asked what products she has promoted, Sachs, citing non-disclosure agreements, responds, “Let me be strategic about this,” and, after a pause, lists generic products and services such as health insurance, credit repair, music CDs, computers, software, clothing and travel.
She displays the same reticence when it comes to how many clients she has and how much they pay her. The industry standard, she says, is to charge from $2,000 to $5,000 per million e-mails. In some cases, her company also takes a cut of the sales generated by an offer. Another opt-in marketer, Scott Richter of OptInRealBig.com, recently told Newsweek magazine that he clears $2 million in sales a month, sending out 80 million messages a day. If Sachs gets to half a billion messages a day, by that arithmetic she would be clearing more than $10 million a month. But she also could be testing the patience of those on her database. “You don’t want to bombard people with all these offers,” she says.
Sachs talks volubly about landing one of the Democratic presidential candidates as an e-mail advertising client. Although candidate Howard Dean has gotten a head start in using the Internet as a campaigning tool, Sachs says she will blow Dean’s operation “out of the water.” But she implores The Times not to identify the candidate she will be selling and then hedges about whether or not the candidate has actually signed her.
One client she does identify is Yukio Endo, a New Hampshire entrepreneur who is selling high-dose pharmaceutical-grade fish oil. Like other dietary supplements, his OmegaRx product is not FDA approved. Endo’s Web site claims the essential fatty acids contained in fish oil can help treat everything from heart disease to Alzheimer’s. He and his partner hired Sachs after concluding that an e-mail campaign was the only promotional option they could afford. “We were looking for somebody who knew about opt-ins,” he says.
Net Global Marketing so far has made some changes to Endo’s Web site and conducted limited test-mailings. As with her other projects, Sachs won’t reveal the content of the fish-oil campaign. The key to content, she says, is “having a creative subject line.” It’s what acts as a “TV promo.” But, alas, she won’t give any examples of her creativity.
How do we know that any of this actually works, that Sachs’ opt-in e-mails aren’t just getting lost in the clutter? Here Sachs and Ahdoot are a bit more forthcoming. They have “very sophisticated” software, they say, that can tell them how many of their messages are opened (the “open” rate) and how many of them lead to consumers actually clicking on the offer (the “click-through” rate). According to industry research, only 2% of e-mail users actually respond to spam; the rest just hit the delete button. But Sachs and her partner say they get “open” rates ranging from 25% to 60% of an e-mail campaign; “click-through” rates range from 10% to 30%.
One industry expert says those numbers seem a little high. According to industry research, online marketing “open” rates average 37% and “click-through” rates average 9%.
Net Global Marketing also describes its customers in a way that makes them sound like virtual shopaholics. “These people have chosen to receive [commercial e-mail],” says Bill Tholke, the company’s board chairman and a Silicon Valley consultant. “They enjoy getting things. They are people who are extremely sophisticated computer users or are just intellectually curious.”
But can the “legitimate” e-mail marketing business really escape the specter of spam? The next few years may well answer that question and decide whether companies such as Net Global Marketing will overcome consumers’ powerful urge to delete, or simply become another business casualty of the Internet Age.
Even among some of the industry’s boosters, the prognosis is grim. In a recent online column, Jeanne Jennings expressed her fear that “e-mail is headed down the same path telemarketing is on, at a greatly accelerated pace.” Consumers now can “opt out” of being telemarketed by putting their phone numbers on registries operated by the federal government and the state of California. “Every time there’s a new marketing technology, the marketers get going and it’s intrusive,” Jennings says. “There’s a consumer backlash, the government steps in. That’s where we are with e-mail now.”
Nowhere is safe. “AOL stops 2 billion [pieces of spam] a day, but the amount getting through is increasing every day,” says Jared Blank, a senior analyst at Jupiter Research. At AOL, the world’s largest Internet provider, spam accounts for more than 80% of e-mail traffic. Another major provider, EarthLink Inc., filed a lawsuit in August against 100 people, mostly in Alabama and Canada, whom it blamed for sending 250 million pieces of spam.
Spam is intruding into Web logs (or “blogs”), cell phones with text messages, online chat rooms and instant messaging. There’s even “spoof” spam to worry about. Web retailer Amazon.com has started legal action against 11 Internet marketers for sending e-mail forgeries under Amazon’s name. The marketers were promoting, among other things, home appliances and penis enlargement.
Anti-spam filters, unfortunately, are like the proverbial finger in the bursting dike. “Every improvement in anti-spam technology is matched with an improvement in spamming technology,” says Scott Hazen Mueller, the operator of a spam-fighting Web site, www.spam.abuse.net. In an apparent escalation of the spam wars, three Web sites that provide lists of known spam sources recently shut down as a result of server-clogging attacks believed to be the nefarious work of spammers.
On the legislative front, efforts to control unwanted commercial e-mail so far have had little effect. Experts have labeled the new federal Can Spam Act meaningless, its sanction of a $250 fine per e-mail evaded easily by spammers, many of whom use offshore servers to avoid prosecution. Even though California’s new anti-spam law is tougher than the congressional measure, it also is being criticized. “There’s no understanding [among legislators] of how much of a problem spam is,” says MacPherson of Inbox Interactive, whose clients include the New England Journal of Medicine and AOL.
The main fear that Jennings and others have is that spam-besieged consumers are becoming so undiscriminating that “good” e-mail is being deleted with the “bad.” “As the volume of out-and-out spam goes up, the willingness to tolerate errors you make in deleting e-mail also goes up,” says Hazen Mueller. And just because you opted in to some e-mail lists won’t make any difference.
With opt-in, “you’re still putting [the marketer] in charge of what they are going to offer you, and they may not be right,” Jennings says. “Technically, you do have an opt-in. But it is so broad that people are going to mistake it for spam. At that point, people don’t care.” Even online shopping enthusiasts, experts say, suffer from “Web amnesia"--that is, they lose track of what they have opted in for and delete messages they might otherwise have opened.
Alyx Sachs demonstrates a “personalized” e-mail she has been testing with a software firm. It’s her latest effort to hack through the digital kudzu that’s flourishing on the information superhighway. The message features the synthesized voice of actor Eddie Murphy greeting the Internet user by name and inviting him or her to see “I Spy,” a 2002 movie in which he starred. It’s a nifty gimmick and obviously more inventive than the average commercial e-mail. But to whom would such an ad be sent? Tholke’s “intellectually curious” Eddie Murphy fans? And if so, how does she find out who those fans are?
For Sachs and other online marketers, it may all come down to the accuracy of consumer data. Marketers of any stripe make mistakes, of course, and so has Sachs. “Our whole business is based on bad experiences,” she says, while declining to specify any. But it looks like spam is making the margin of error razor thin. Says Sachs: “Getting people to open an e-mail is very challenging. It’s a hard business. It’s a scary business.”