Email marketing service firms seeing drop in revenues caused by global spam pollution

It's a problem we all face in the permission email marketing industry: how can people read their opt-in emails if they have to wade through endless reams of spam?

Digital Impact lost nearly $900,000 last quarter as a result of all this. They're hoping to make up for it with search engine optimization services, but there's little doubt that everyone in the email marketing industry is anxiously awaiting the implementation of a workable anti-spam solution that will overhaul email around the globe and make it impossible for spammers to operate.

From where I sit, the best solution remains the Puzzle Solution, which introduces friction into the sending of email. It's just enough friction to making spamming unprofitable, but not enough friction to stop the legitimate efforts of honest email marketers. In any case, the industry is likely to see even more revenue drops in the short term. But once spam is solved, all the companies in the industry -- Arial Software, Digital Impact, Lyris, Constant Contact, and so on -- will benefit from a rebirth of interest in legitimate, permission email marketing services.

• Despite glimmers of hope in stemming the flow of spam, Digital Impact said its business continues to suffer from the flood of unsolicited commercial e-mail clogging inboxes.
• The San Mateo, CA, e-mail service provider reported its fiscal first-quarter sales fell 5 percent from a year earlier, to $10.4 million.
• It lost $884,000 in the quarter compared with $293,000 a year earlier.
• The company reported a decline in its acquisition services business, with e-mail renewal rates in the quarter falling to 70 percent from 80 percent.
• "We believe we will more than make up for those losses in revenue [from e-mail] with the search engine marketing business of Marketleap," Digital Impact CEO William Park said yesterday during a conference call.
• Yet for the rest of the year, Digital Impact expects the search business to have only a marginal effect on its financial results, adding $1.5 million in sales.
• It expects revenue will decline slightly next quarter before picking up for "modest" full-year sales growth.
• Digital Impact said it expects prices for e-mail management will continue to decline, though not as quickly.
• Park said marketers increasingly would look to Digital Impact for a range of services around acquiring and keeping customers, including search, Web site services and e-mail campaigns.
• "We are optimistic because we are laying the foundation for growth," he said.