It’s Gonna Cost Ya

Posted on by Chief Marketer Staff

What does a list cost? In the e-mail arena, way too much, list marketers and mailers are grousing.

And it’s not because the base list price has changed all that much recently. It’s because of transmission fees and add-ons that can jack up the total price of an e-mail file to twice that minimum. For a business-to-business list, which generally starts at around $300 base, all those add-ons can tally up to a grand total of $500 or more to send out 1,000 e-mail addresses.

And that is sticking it to the customer, say list brokers, mailers, and even some e-mail list managers.

They complain that the base list price and selections are just the starting point of a flood of expenses, starting with a transmission charge, an HTML fee, a suppression charge and fees for image hosting, extra tests above a certain minimum, tracking URLs beyond a set number and personalization. That doesn’t even include the price of selections. Plus, they have to pay staff and maintain equipment.

“I don’t think the mailer can sustain a $500 to $600 CPM,” said Michelle Feit, president of e-Post Direct, a list brokerage and management firm in Pearl River, NY. “You just can’t keep charging.”

The biggest constant charge added to the list price on every invoice is a transmission or e-mail-deployment fee — generally about $100 per thousand on top of the base.

It covers setup of the e-mail message and creative; checking that links to Web sites and unsubscribes are correct and live; that the names ordered are fulfilled and properly segmented; that tests are performed; and that the manager and mailer have approved them. Then, the e-mail performance must be tracked, blocked e-mail pushed through, bounce-backs and unsubscribes handled, and reports sent to the mailer.

List management firms say the $100 transmission fee and add-ons are justified: Since the e-mail file is never in the mailer’s possession — as a postal file would be — the e-mail manager has all the responsibility for executing a campaign. “No one knows what it takes to get an e-mail out the door,” said Jay Schwedelson, corporate vice president of Boca Raton, FL-based Worldata.

List brokers say phooey. “The truth is, to broadcast an e-mail costs pennies on the thousand,” said Linda Huntoon, executive vice president of Direct Media Inc., Greenwich, CT. “Managers say they’re paying for equipment, software, hardware, footprint, air conditioning and staff. That’s their cost of doing business — they have to do that to maintain their own file.”

Mailers say they are over a barrel. “You can look at in two ways: Do you want to shop transmission charges, or do you want to shop quality of the list?” said Joe Neary, customer database manager at Advantech Automation Corp., Cincinnati.

Advantech ceased direct mail in favor of e-mail last year and found the learning curve steep and expensive.

“It probably costs seven to eight times more to get a lead with e-mail than with direct mail,” Neary said. “And you get the same response rate — 1% to 2%.”

Transmission fees also vary dramatically from manager to manager, and some firms, like Worldata and Lake Interactive, of Rye, NY, have transmission prices that vary from list to list.

At Worldata, the transmission charge ranges between $50 and $115.

“The price also has a lot to do with the manager’s relationship with the list owner,” Schwedelson said. Some list owners manage the entire service-bureau side of the process and take a cut. Others leave it all up to the list manager and never see a penny of the transmission fee.

Economist.com gets a percentage of the base price for its $300/M file, but manager Lake pockets the add-ons. “We don’t have the luxury of worrying about each additional charge,” said Paul Rossi, publisher of Economist.com. “As a start-up dot-com, net revenue is all-important to me.”

IDG List Services in Framingham, MA, bills $100/M for text e-mail and $115/M for HTML e-mail for processing and delivery, on behalf of an outside service bureau. “There’s an extensive amount of labor in e-mail processing,” said president Deb Goldstein. “The list manager and service bureau work very hard for that money.”

Worldata and e-Post Direct have established in-house service bureaus and charge about the same as IDG.

Few dispute that transmitting e-mail costs hard dollars. But many challenge how much it costs.

Consumer Reports sends millions of messages a year to its 1 million-name customer file. “If you know the economics of e-mail, you know it’s not that costly,” said Michelle Rutkowski, marketing director at the Yonkers, NY publisher.

“It’s a buried profit center,” added Reggie Brady, president of Reggie Brady Marketing Solutions LLC, Norwalk, CT. “It’s more like $20/M.”

Twenty dollars is exactly what New York’s NetCreations charges for transmissions. And Chicago-based Yesmail, which launched a brokerage business last year, charges $50 per thousand. “That covers the hard costs of transmitting e-mail,” said Yesmail COO Scott Stephen. “It doesn’t cost $100 per thousand. They’re crazy.”

“At least twice a day, mailers say, ‘Whoa! That’s expensive!’ But there’s a cost to handling the data,” said Lake Interactive vice president Vince Lemma.

Brokers, meanwhile, have to do extra work to get an e-mail campaign out the door, too, but they are choked out of getting commission for transmission fees and add-ons.

Some brokers complain to managers, but others assume that transmission charges and add-ons are in the same category as magnetic-tape fees in the postal space, and don’t expect to get commission.

Decision Maker Media Management (DM2) in Chicago folds a $100 transmission fee into the base price for each of its business-to-business files — and offers commission. The lists price now ranges from $400/M to $475/M. “Our lists are priced at a premium,” said Jeff Moriarty, director of sales and marketing. “I wanted to give the list broker more of a commission.”

That commission is affected by broker negotiations. In the consumer space, add-ons are routinely negotiated down — and sometimes out.

The extra fees will not increase more than the market will bear, said Huntoon. “In the ’80s, the mag tape fee started at $10 and kept going up. But when it got to $25, people refused to pay more.”

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