The two could earn millions but claim fee will reduce spam
America Online and Yahoo Inc. will begin charging businesses to send commercial e-mail to its users in the first wide-scale use of authenticated e-mail to reduce spam. But some marketers affected by the plan, set to start in several weeks, call it e-mail taxation designed to create a new stream of revenue for the two.
The Internet companies say that this will help them identify legitimate mail and cut down on junk e-mail, identity-theft scams and other scourges that plague users of their services. The two companies stand to earn millions of dollars a year from the system if it is widely adopted.
Soon companies will have to buy the electronic equivalent of a postage stamp if they want to be certain that their e-mail will be delivered to many of their customers.
The service, provided in partnership with privately held Goodmail Systems, would allow the world’s two largest e-mail providers to certify e-mail and better protect its customers from online fraud, spam and phishing attacks, Goodmail Chief Executive Richard Gingras said.
The main point we want to get across is that you cannot pay to spam or that consumers will have to pay to receive e-mail, Gingras said.
The service will be optional on AOL, a Time Warner Inc. unit, and Yahoo. Fees would only apply to senders such as large financial institutions where it was critical for e-mails to arrive promptly to the intended recipient, Gingras emphasized.
By serving two of the three biggest providers of consumer e-mails, Gingras said, the partnership marked an important step in protecting businesses and consumers from spam and other forms of unwanted electronic messages.
The certified e-mail system would require advertisers to pay $2 to $3 per 1,000 messages. The plan is optional, though AOL and Yahoo will still accept e-mail from senders who have not paid, but the “Paid Messages” will be given special treatment. On AOL they will go straight to users’ main mailboxes, and will not have to pass spam filters that could divert them to a special bulk e-mail box or strip them of images and Web links.
AOL and its tech partner, Goodmail Systems, cannot guarantee that all non-certified e-mail with Web links and images will be delivered.
Certified e-mail has become a hot topic in e-mail circles because many ISPs — out of security concerns — block messages with images and Web links. The AOL system would ensure such messages pass its stringent e-mail defenses and reach its 25.5 million subscribers worldwide. Gingras compares the system to certified postal mail.
Yahoo and AOL say the new system is a way to restore some order to e-mail, which, because of spam and online scams, has become an increasingly unreliable mode of communication even as it has become more important in people’s lives.
The last time I checked, the Postal Service has a very similar system to provide different options, said Nicholas Graham, an AOL spokesman. He pointed to services like certified mail with return receipts, “where you really do get assurance that if what you send is important to you, it will be delivered, and delivered in a way that is different from other mail."
This will be painful for marketers in the beginning, but it is a positive step in forcing them to be more selective in who they e-mail, says Jupiter Research’s David Daniels. Many now just blast e-mail rather than target an audience.
If successful, the plan could entice other Internet service providers to follow. Yahoo plans to test Goodmail’s system to certify e-mail for transactions such as financial statements and shipping confirmations. Yahoo spokeswoman Karen Mahon said her company planned to accept certified e-mail from Goodmail to compliment Yahoo’s existing range of e-mail services.
Our goal is to provide additional projection against spam and phishing scams to our customers, Mahon said.
The Goodmail service, which will undergo testing over the next several months, should be introduced in the coming year and be mainly targeted at large companies, she said.
AOL’s Graham said the company decided to employ the service after many of its members asked for more tools to combat spam. He also made it clear that consumers will bear no financial cost for the service.
For our members this is an easy and welcome way to identify mail they want to get more quickly and easily into their in-box, Graham said.
But critics of the plan say the companies risk alienating both their users and the companies that send e-mail. The system will apply not only to mass mailings but also to individual messages like order confirmations from online stores and customized low-fare notices from airlines.
AOL users will become dissatisfied when they do not receive the e-mail that they want, and when they complain to the senders, they will be told—It is AOL’s fault, said Richi Jennings, an analyst at Ferris Research, which specializes in e-mail.
As for companies that send e-mail, "some will pay, but others will object to being held to ransom," she said. A big danger is that one of them will be big enough to encourage AOL users to use a different e-mail service.
Still, the revamped commercial e-mail system could have unintended consequences for some marketers and consumers.
It is taxation of the good guys with cash, and it does nothing to help the good guys who cannot afford the cost or to deter the bad guys, who spam anyway, says Matt Blumberg, CEO of Return Path, an e-mail services company. "Baloney," says AOL’s Graham, scoffing at suggestions the e-mail system amounts to taxation. "That is competitive chatter and sour grapes."
This takes a system that works and shoves a stick in the flywheel of communication, says Jordan Ayan, CEO of SubscriberMail, an e-mail service provider for high-tech, media and sports companies.
Consumers, meanwhile, may discover that some commercial e-mail they previously received, and wanted, no longer arrives if advertisers opt not to pay AOL, some e-mail marketers warn. E-mail users would need to retrieve them from a spam folder.
The prospect of a multi-tiered Internet has received a lot of attention recently after executives of several large telecommunications companies, including BellSouth and AT&T, suggested they should be paid not only by the subscribers to their Internet services but also by companies that send large files to those subscribers, including music and video clips. Those files would then be given priority over other data, a change from the Internet’s basic architecture, which treats all data in the same way.
The Senate Commerce Committee will hold a hearing to consider legislation for what has been called "Net Neutrality" — effectively banning Internet companies from giving preferred status to certain providers of content. The concern is that companies that do not pay could find it hard to reach customers or potential customers, threatening the openness of the Internet.
AOL and its parent, Time Warner, which also owns a large cable system offering high-speed Internet access, have not taken a public stand on Net neutrality. Neither has Yahoo, which has close relationships with AT&T and Verizon. The issue of e-mail postage has not yet come up in the debate over Net neutrality.
Anyone can apply for the program. Goodmail determines if applicants are legitimate companies with pristine e-mail standards. AOL has final approval. E-mail of approved companies will come with digital tokens recognized by AOL security defenses. AOL subscribers will still be able to block mail from certified senders by adjusting anti-spam tools on their accounts, said Graham.
Paying senders will be assured that their messages will be delivered to AOL users’ main in-boxes and marked as "AOL Certified E-Mail." Unpaid messages will be subject to AOL’s spam-filtering process, which diverts suspicious messages to a special spam folder. Most unpaid messages will also not be displayed with their original images and links.
Gingras also said similar partnerships with other e-mail providers would likely follow and that Goodmail would also target business e-mail providers. Yahoo and AOL will also share in revenue as part of the deal with Goodmail.
AOL says The New York Times and American Red Cross have signed up for the service. Spending on e-mail marketing is expected to jump 24%, to $1.1 billion, by 2010 from $885 million in 2005, Jupiter Research estimates.