Some More Spam, Please

By Lisa Takeuchi Cullen

When John Mozena opened his e-mail last week, he found a pleasant surprise. Brooks Brothers had sent him notice of a 25%-off sale that weekend at its store in Mozena's hometown near Detroit. "I went right in and got myself two of those no-iron Oxford shirts," says the public relations executive. Elsewhere in Mozena's e-mail In box were updates on the computer games he plays and news of autographed editions from Powell's Books in Portland, Ore. Mozena, 31, hates spam--those unwanted bulk ads for low-interest mortgages and cut-rate Viagra. In fact, he's a founder of an antispam advocacy group called the Coalition Against Unsolicited Commercial Email. But he loves getting messages from his favorite merchants. He even asks for more.

Think of it as spam cooked to order. This tastier brand of e-mail marketing--messages from respected merchants who have your permission to send notices of sales or new products, and who stop sending them on request--is on the rise and is helping to boost sales in a slumping economy. But as you've probably noticed from the bulge in your e-mail In box, the nasty brand of unwelcome spam is also booming. And it's getting harder to find the good stuff amid all the garbage. In a study released last month, Jupiter Research forecast that you will receive 2,257 pieces of "commercial e-mail" by the end of the year, 60% of them unwanted spam and the rest from merchants you've given permission to contact you. By 2006, both kinds will double.

Why? E-mail marketing is fast, effective and dirt cheap--a godsend for marketers in an economy that has crunched advertising budgets. Zipping an electronic ad to your mailbox costs a marketer about 5-c-, compared with 25-c- to $3 for the postal equivalent. And e-mail marketing works. The Direct Marketing Association, which represents nearly 5,000 companies that send both postal and electronic direct mail, announced at its conference last month that two-thirds of its member companies reported increased sales from e-mail, which generated an average of 15% of their online sales--up from 3% in 2000. Because it's so easy to click from an e-mail to a website's "purchase" button, an e-mail campaign can reap up to 12 times the response rates of ordinary junk mail.

Little wonder that old-line companies like Ford and Procter & Gamble are joining early users of targeted e-mail pitches like Amazon.com and J. Crew. Corporations will spend $1.8 billion on e-mail marketing this year and $6 billion by 2005, according to Forrester Research. It's a ticklish irony that the humble medium of e-mail is blossoming while flashier forms of Internet advertising are going the way of the Pets.com sock puppet. Response rates--called "click-throughs"--on banner ads have hit an all-time low of 0.3%, and the AOL online service (owned by TIME's parent company) has announced that it will squelch most of its annoying pop-up promotions.

The best e-mail marketers turn customers into virtual pen pals. Lands' End sends its shoppers electronic newsletters filled with folksy tales from around its headquarters in Dodgeville, Wis. One told of a neighbor who grew her own prairie, another of a local llama farm. On occasion the newsletters mention products, as in a story about a man who wore a Lands' End mesh polo shirt to a gorilla preserve in Africa. Sales for the shirt shot up 40% that week. Following a newsletter about women who love their moccasins, sales of the shoes doubled. E-mail is a big reason Lands' End sells more clothing online than anyone else--$327 million last year out of $1.6 billion in total sales. Already this year, online sales have surpassed the 2001 total by almost 50%. "What's more," says Bill Bass, head of e-commerce and international sales, "we can have the same sort of relationship with shoppers in Germany, Japan and the U.K."

This was a promise of the Internet--to give regional companies global reach. Peet's Coffee & Tea has only 65 retail stores based almost entirely on the West Coast. But via e-mail, it can alert java lovers around the world to a new shipment of special beans from Ethiopia or Sumatra. The postal equivalent wouldn't work. Says CEO Patrick O'Dea: "We'd never want to sell you coffee that wasn't hand-roasted a day or two before you get it."

The more you respond to commercial e-mail, the more marketers know about you--and whether that's for better or worse depends on the marketer. Many companies tailor e-pitches to where you live and what you've bought in the past. Consider a recent campaign by Hewlett-Packard, which began tracking customers who had bought, say, a printer. A month after the purchase, HP sends an e-mail telling how to deal with paper jams. A month later, when you might be low on toner, another note would explain how to shake it to extend its life. Then about the time the toner really runs out, HP sends an e-mail guiding you to its site for a replacement. HP and its e-mail marketer Digital Impact say the company saw a $300 million boost in sales over 12 months from the campaign.

A well-timed reminder to shake the toner can be helpful. But there's a fine line between helping and nagging, and we appear to be growing less tolerant of the onslaught. The effects of e-mail-marketing overload can be seen in declining response rates. About 7% of e-mail recipients today click through to a website in response to an offer; just a year ago, 10% might have done so. They also take longer to respond, from three days a few years ago to a week or so now. "It's not a novelty anymore," says Jupiter analyst Jared Blank.

Blame the skunky old brand of spam (which got its name from a Monty Python TV skit that pays obnoxiously repetitive tribute in song to Hormel's canned-meat product). Last year 45% of e-mail users said they deleted messages from unfamiliar sources immediately, according to Internet marketing agency Doubleclick. Today it's 60%. Corporate marketers, fearful that consumers will trash their ads along with the come-ons for porn sites and Nigerian get-rich-quick scams, are frantically trying to set themselves apart. "We're very, very concerned about the mass proliferation of spam," says Jim Conway, head of government relations for the Direct Marketing Association. "It hurts our industry."

Tom Cowles, however, objects to the notion that he is ruining the e-mail marketplace. Fingered on a perp list of top spammers worldwide by watchdog group Spamhaus.org Cowles, 35, runs Empire Towers Corp., based in Bowling Green, Ohio. The 5 billion e-mail ads his company spews each month include offers for nutritional supplements and window and siding installation. ("I don't do porn," he says.) He won't name his "several hundred" corporate clients, but says they include 10 publicly traded companies. It's a living, and then some. Cowles has 60 employees in Ohio, Nevada, Florida and Texas, and says his company made $12 million in sales last year.

The bottom line is this: as long as a sliver of e-mail users click through to investigate those work-at-home opportunities and other come-ons, the great majority of users will continue to be barraged by spam. "I do see the argument that if a consumer gets 100 e-mails a day, you get numb to it," admits Cowles, who claims he de-lists "chronic complainers." But spam "will only die out when it's no longer going to be profitable." Or when enough roadblocks pop up. Internet service providers routinely try to thwart spammers, some by taking them to court. Verizon last week won a settlement from prolific spammer Alan Ralsky, barring him from e-mailing Verizon's 1.6 million Internet users ever again.

In any case, tighter marketing budgets and the scramble to boost business will increasingly blur the line between e-mail marketing and spam. Companies are quietly stepping up efforts to sneak into your In box by acquiring lists of addresses from marketing partners or dangling sweepstakes to get you to register your address. "Some very respectable companies come to us with a list of postal addresses they currently send direct mail to, and ask us for the people's e-mails," says Michael Mayor, president of e-mail list managers NetCreations, who says he refuses to sell those e-mail addresses.

But others aren't so persnickety. When Internet-based retailer Toysmart went bankrupt in 2000, it tried to pay off some creditors by selling its customers' e-mail addresses and retreated only when the Federal Trade Commission filed suit. Earlier this year, popular Internet portal Yahoo changed the terms of its privacy agreements (as AOL and eBay had done earlier) to allow it to send e-mail offers to registered members unless they specified otherwise.

While 26 states have antispam laws, the direct-marketing industry has lobbied to keep tough federal legislation off the books. "Any legal limits on spammers might also limit other direct marketers," says David Sorkin, an associate professor at the John Marshall Law School in Chicago who runs watchdog group Spamlaws.com "They don't want to lose the right to prospect for new customers by e-mail."

For now, most consumers seem resigned to wielding the delete button to separate spam from other messages they want. But the war has moved to a new front: cell phones. Rodney Joffe, a founder of Web host Genuity, whose current ventures include an e-mail-marketing company, was enjoying a performance of Riverdance in a Phoenix, Ariz., theater early last year when he got spammed via a text message--a promotion from a mortgage company--on his phone. Cell-phone providers typically charge their customers to receive e-mail. "So not only was I getting spammed, I was paying for it," fumes Joffe, 47. He slammed the offending marketer with a lawsuit, which he won at the trial level. (The mortgage company is appealing.)

Several states have joined the fray. In September, California became the first state to ban spam to cell phones and pagers. "E-mail has been ruined by spam," says Joffe. "We've got to stop it before it ruins cell phones." With so many ways to serve it up, though, one thing is clear: spam--the good, the bad and the ugly--is on the menu to stay.