Defining the Incremental Value of Passionate E-Mail Audiences

Jack MyersMedia Business Report proposes that targeted e-mail publications launch a trade association to advance standards and coordinate a campaign to institutionalize the differences and unique values of e-mail ad campaigns. This publication will be the first member. What's the value of content that audiences are passionate about and that is invited into a e-mail box every day, compared to content users typically discover accidently through search? What is the value of highly targeted, loyal and passionate audiences? Marketers and media agency buyers have yet to determine a standard formula for valuing an ad impression associated with e-mail content that readers invite in and religiously read compared to commoditized banner ad exposure on mass reach websites. A recent Business Week article reports on the diminishing impact of banner ads, with click-through rates declining to .2% and less. Yet e-mail subscriptions (not spam e-mail) continue to deliver response rates that range between .4% on the low end to as high as 4%.

An estimated ten percent of users to "mass appeal" sites are "regular" visitors according to data developed from various syndicated research services. The other 90 percent of the many websites that depend largely on search engine traffic is made up of occasional users and infrequent or one-time-only users. Subscription e-mail publication Daily Candy reaches an estimated two million subscribers daily, with a significant percentage opened and read each day. Daily Candy was acquired by Bob Pittman's Pilot Group for $3.5 million in 2003 and a stake was sold last year that reportedly valued the company at an estimated $135 million, or 13.5 times EBITDA. iVillage was acquired by NBC Universal for more than $600 million based on its 14.5 million unique monthly users at the time. iVillage was acquired by NBC Universal for $41.50 per unique monthly user according to comScore Media Metrix. It would not be unreasonable to value Daily Candy and other e-mail publications that reach targeted, passionate and loyal subscribers at significantly greater value per user. For trade e-mail publications that reach highly targeted vertical communities, the value is arguably even greater. Using the $135 million valuation and two million base, Daily Candy would be valued at $67.50 per user, but based on response levels and open rates it can be argued the value should be closer to $200 per subscriber, for a valuation of $400 million. But in media today, size still matters and the quality of a brand relationship between media and audiences continues to be undervalued by both advertisers and investors. Current marketplace values reward high traffic sites with small bases of loyal regular compared to e-mail publications with relevant brand equity and smaller bases of loyal regular readers.

The challenge for media buyers remains the issue of comparing the value of an e-mail that is being thoroughly read to an impression at a site when the user is there to find something very specific and leaves immediately if they don't find it. The press often compares e-mail daily distribution toa website'sunique monthly users without acknowledging the inherent differences between the two formats. The mail box is a protected place. There are not a lot of e-mails that are welcomed in and read daily. E-mail marketing should be recognized as a distinctive medium that delivers a halo effect of relevancy to advertisers.

If only ten percent of a typical website's audience are regular users, then advertising placements in e-mails that reach loyal readers in targeted vertical sectors (both consumer and business-to-business) will inevitably grow in importance to marketers as they focus increasingly on behavioral and contextual targeting, and as improved delivery capabilities emerge for enhanced e-mail targeting techniques. Today agency buyers still need to fit e-mail into a cost-per-thousand box in which values are defined by reach and impressions rather than impact.

Traditional media and websites that have tried to create subscriber-based e-mail products often realize what a small fraction of their audience is actually loyal enough to subscribe. The industry's future growth is going to come from the capability to target highly focused sites and e-mail publications that deliver passionate audiences. Companies interested in exploring the opportunities for a industry association serving the needs of targeted e-mail publications and their advertisers and investors can contact Jack Myers at jm@jackmyers.com.