Ice Storm

Mailing list brokers are not comfortable working with e-mail service providers – and the feeling is mutual. Their differences came out last month during a testy Direct Marketing Association List Leaders forum, and in later interviews.

For one thing, heavily financed dot-coms are gobbling up list talent with lucrative sign-on bonuses, hefty salaries and stock options, the traditional brokers complained. And demands for broker guarantees and prepayments have reached an all-time high as mailers try to protect themselves from chronically late payments by the financially volatile online firms.

Even worse is the fact that brokers now perceive the e-mail service providers as a competitive threat.

Jonathan Shapiro, senior vice president of DoubleClick unit Abacus Online, was asked some tough questions about DoubleClick’s new e-mail brokerage division, Opt-in E-mail.com. Shapiro admitted, “We’re competitors with you guys.”

The brokers also said they dislike DoubleClick’s policy of not commissioning brokers on names from its e-mail alliance (the same policy it has for direct mail names in the Abacus Alliance database). Chris Ragusa, president of Estee Marketing Group Inc., commented: “Maybe we should exclude you from our managed properties.”

Pressured to show that DoubleClick is willing to include brokers, Shapiro asked those present if they would like to sell banner ads for DoubleClick. He offered a 15% commission, 5% less than the regular list brokerage commission. Linda Huntoon, client management officer for the New York division of The SpeciaLists, said later that the commission rate was not a deal breaker “if it’s a decent application for my client.” But overall, the offer failed to satisfy brokers, who still worry about the competition.

“A lot of mailers will not want to deal with two brokers and will say, `Well, I’ll just go to the DoubleClick brokers where they can handle all of my business,'” said Ragusa.

And the competition clearly is increasing. A number of Internet marketers are offering or planning to offer brokerage services, including 24/7 Media, Exactis.com, NetCreations Inc. and Message Media. Panelists representing these firms stated that their hope was to work together.

Scott Wolf, senior vice president of sales and business development for NetCreations, said that a little more than 50% of his firm’s business is now sold through outside brokers who are commissioned at the traditional rate of 20%. NetCreations splits list rental revenue 50-50 with mailers, and pays outside broker commissions from its 50%. When asked whether mailers were pressuring the company to lower its commission, Wolf said, “We’re getting pressure but we hold every time. It’s not a flexible point in the negotiations. It’s the only deal we offer anybody.”

Regina Brady, vice president of strategy and partnerships for e-mail transmission service bureau FloNetwork, said that while her firm has no plans at present to offer list brokerage services, cooperation among brokerage firms is flourishing. She refers clients to traditional list firms and in turn receives business from those whose clients want to transmit e-mail promotions. “We would be cutting off our nose to spite our face if we were in direct competition with list brokers,” she said. Brady added that the brokers’ reaction took her by surprise. “Obviously,” she said, “they think we’re a threat and we want to be anything but that.”

But others said the cooperation among brokers isn’t always amicable.

Leslie Price, list services manager for Exactis.com, said that she doesn’t get support from traditional brokers when she calls them.

David Ahl, channels and affiliates director for Message Media, which acts as a service bureau and lettershop for its clients, told the group that while the company has no plans to act in a list management capacity, it has recently begun to offer brokerage services.

“The customer drives the business,” said Ahl. “If our clients are asking us to help build the house file, we will fill the role as broker.”

The SpeciaLists’ Huntoon saw the competition as a positive. “There is certainly more competition, but also more opportunity than there’s been in years because there are all kinds of new lists and all kinds of new mailers.”

She added, “It’s hard to walk into a meeting from the perspective of someone who has been in direct marketing for 15 or 30 years and not be the expert in the room, or even familiar with the terminology. But if you have the courage to sit and listen, you realize it’s the same knowledge base – just a different medium.”

Brokers and managers also slammed panelists over the lack of information on e-mail data cards. One attendee called them worthless and embarrassing. “How are we supposed to show them to our clients?” he asked.

“Frankly,” said NetCreations’ Wolf, “we need to do a better job of giving the brokers what they’re asking for.” He added that NetCreations is revamping all of its data cards to include descriptive list segments.

While all agreed there is a need to build files that include online behavioral and transaction data, capturing that data can be a challenge, said Michael Tuohy, vice president and national sales manager of 24/7 Mail at 24/7 Media Inc.

Tuohy claimed that asking too many questions on an online registration form or survey can have a negative impact on sign-up rates. And because 24/7’s database is populated with data from numerous Web sites, he explained: “I’m relying case by case on what the sites feel comfortable asking.”

FloNetwork’s Brady said that the situation is improving as more companies employ “fairly sophisticated” reporting and tracking systems. FloNetwork has a patent pending on technology it offers its customers to track click-through and pass-along rates in real time, as well as the number and total dollar value of transactions. She said that about 60% of FloNetwork’s clients are using the technology, but they’re not always willing to share the information.

NetCreations’ Wolf added that while behavioral and transactional data is coming slowly, click-through rates are still an important measurement and help to build databases of responsive people.

“A click-through doesn’t necessarily mean a buyer, but it does mean there’s interest on the part of the person in the offer,” he said. “So even if they don’t buy this time they may buy the next.”

Another issue that surfaced was the use of broker guarantees and prepayments that have skyrocketed over the past few years as list owners tire of chronically late payments or none at all. And fears persist that seemingly stable companies are at increased risk of shutting down, as The Kleid Co. did in 1998.

As a testament to that concern, Estee Marketing has set up an accounting policy that defines when guarantees or prepayments are required. And while the policy is crucial to ensuring payments, it can also hinder sales, said Estee’s Ragusa. “The nature of the accounting department is to protect the company and not produce sales – and sometimes that restricts sales,” she said.

While most agreed that the basic policy should be to request guarantees or prepayments with any new mailer, NetCreations CEO Rosalind Resnick cautioned that “the [dot-coms] may have round-one financing, but will they get round two?”

Many attendees were very concerned about the struggle to retain staff and recruit new people as the dot-coms draw off talent and the economy continues to flourish. And while the trading of talent is nothing new to traditional DMers, the stakes are higher as the dot-coms lure workers with incentives.

David Schwartz, president of 21st Century Marketing and moderator of the List Leaders forum, suggested that a possible solution might be to counter with stock options and profit-sharing plans for key employees. “As entrepreneurs, we never had to deal with this. It’s a bear to wrestle with.”

Tim Falvey, senior vice president of client development at AZ Marketing Services Inc., recommended identifying and preparing talented support staff to slip into jobs vacated by dot-com defectors. “It’s a strategy you can employ to keep the flow moving, at least.”

Other suggestions include providing technical staff with top equipment that competes with the dot-coms’ high-tech edge, and developing college recruiting efforts to attract staff.