THE BIG REWARDS OF SMALL DELIVERABILITY IMPROVEMENTS. The Impact on Revenue of Choosing the Right Provider. By Len Shneyder

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1 THE BIG REWARDS OF SMALL DELIVERABILITY IMPROVEMENTS The Impact on Revenue of Choosing the Right Provider By Len Shneyder From the revenue generated by marketing to increased customer engagement and reduced call center expenses, has evolved to become a significant contributor to a company s bottom line. But in order to capitalize on the benefits of , it first needs to reach the intended recipient. Proactive approaches to deliverability are often put on the back burner and only revisited when a crisis arises, prompting the phrase no one cares about until it doesn t arrive. In fact, according to deliverability services provider Return Path, 17% of all sent goes missing or lands in the spam folder. When you consider the impact of improved deliverability increased revenue, customer growth and improved brand stickiness deliverability pretty quickly moves up the priority list. However, ensuring the successful delivery of to thousands of mailbox providers and ISPs is no easy task it requires a highly specialized sending infrastructure built for today s needs. In this guide we ll explore deliverability in today s cloud and transactional services market, the visible differences between delivery platforms, and what those differences mean for a sender s bottom line. FROM THE COMPANY TRUSTED BY TECHNOLOGY LEADERS TO SEND OVER 25% OF THE WORLD S LEGITIMATE . 1

2 EXECUTIVE SUMMARY The Direct Marketing Association of the UK attributes 18% of total company revenue to marketing. According to Return Path, an average of 17% of all legitimate lands in the spam folder or doesn t arrive at all. Poor deliverability can be directly correlated to decreased revenue. The negative impact on revenue needs to be communicated clearly to build the business case for an optimized delivery platform. SparkPost is the industry s leading delivery service with nearly 98% inbox placement 15 points higher than the industry average, and 8% higher than the next best cloud infrastructure vendor (based on 3rd party data). SparkPost is from Message Systems, whose platform drives 25% of the world s legitimate . Think about what 1% of delivered to the inbox is worth. What about 3%? How about 8%? What would you do to improve your deliverability by 8% if you knew that would be worth $100,000, $500,000, what about $1,000,000? To the top ten Internet retailers, an 8% increase could mean upwards of $13 Billion! But more on that in a moment... A SHORT HISTORY OF DELIVERABILITY In the late 1990s, ISPs were contending with a massive increase in the volumes of spam torrents of unsolicited commercial flowed from botnets and unscrupulous senders, all the while growing exponentially. As a deliverability foot soldier, it wasn t unusual to receive a call from AOL s postmaster team asking you to back off, or limit connections, because they were contending with a massive backlog of spam that was crushing their gateway servers. These really were the dark ages for mailbox providers, ISPs and deliverability personnel. Weekly and sometimes daily anti-spam filter changes and updates by ISPs and mailbox providers turned delivery into an ever-shifting jigsaw puzzle. Legitimate senders were routinely caught in the crossfire, false positives abounded and the chore of protecting, let alone improving, deliverability to the inbox, was priority number one for a great many companies and Service Providers (ESPs). ESP customers often blamed the ESP for situations completely out of their control the problem was exacerbated by mailers frequently switching their ESPs, mailing IPs and domains in hopes of improving their chances of landing in the inbox. In the mid 2000s, following the passage of CAN-SPAM and widespread adoption of spam buttons, deliverability truly became top of mind for companies that regarded digital marketing as the future of their business. Simultaneously, ISPs and mailbox providers established tools like the Smart Network Data Service (SNDS i ) and Junk Mail Reporting Partner Program (JMRPP ii ) to make it easier for legitimate senders to communicate with postmaster teams and take advantage of ESP-centric tools that increased transparency and ultimately deliverability. All of this was aimed at improving the satisfaction, security and inbox experience of the end user, a mutual customer for ISPs and ESPs. 2

3 Now, in the mid-teens, deliverability seems to have come to a point of stasis titanic volumes of spam are managed through improved technologies that rely on user input (the democratization of inbox delivery), sophisticated algorithms that better identify botnet traffic, authentication, proprietary and/or third party black lists iii, sending reputation and other data-rich inputs that help ISPs discern ham from spam. However, the fact still remains that some portion of never arrives to the intended recipient. Year after year, companies such as Return Path iv, IBM and 250OK report that anywhere from 17% - 25% of legitimate lands in the junk folder or goes missing. Missing 11% Spam 6% Inbox 83% The truth is that the industry has accepted its own futility marketers are content delivering just 83% of their to the inbox. Even if they re in the 90th percentile, there s still room for improvement. Upon further examination, the deliverability shortfall is nothing short of the willful abandonment of billions of dollars because senders don t realize there are better routes to market. One option that can greatly impact a senders deliverability is the choice of sending platform. They re not all alike, and its incumbent upon companies to understand the differences between in-house systems, ESPs and the new crop of cloud providers that tout DIY API driven services. 3

4 UNDERSTANDING THE IMPACTS OF DELIVERABILITY Although sometimes considered the hot-button topic of five years ago, deliverability is not an outdated buzzword, it remains the chief concern of anyone sending today. Engagement begins when arrives it s where everything starts. From the en vogue idea of a 360+ degree view of the customer to multi-channel journeys, the common denominator of in the inbox permeates all marketing strategies. If we forget for a moment about the revenue driven through successful marketing programs and focus on transactional then we have to view as: A cost-effective building block for startups A tool to automate customer service A system of record underscoring e-commerce A platform for customer and product education A political life line A civic and emergency alert medium The world s most widely used communication channel The most basic form of digital identification on which an internet persona is built is truly cross-platform, cross-device and crosschannel given the reliance of other channels on and its highly portable format. The importance placed on by startups can be clearly seen in how newly-minted companies nurture their nascent customer bases through simple transactional messages like welcome s or the one-off announcement/newsletter. You can track the progress of companies based on the sophistication of their programs to compete in today s market, and more importantly, in today s inbox, you need data and you need to action that data. When data is actioned, companies transform their transactional messages into focused, data-driven triggers aimed at conversion and monetization. At this point, a company s digital messaging has truly come of age as it leverages customer behavioral insights harvested from the web, previous purchase history, social and mobile triggers like platform, cross channel intel, demographic and psychographic data to create contextually aware communications. No amount of data or analytics leveraged to create one-to-one targeted will help if your doesn t arrive. If it s in the spam folder you have a reputation or content problem or both. More importantly, if it s in the spam folder you have a revenue issue, making your choice of delivery platform a critical one for your business. 4

5 METHODOLOGY Before diving into the data, it s important to step back and understand what we re looking at. Most companies and marketers use a combination of deliverability seed testing v, click-through rate tracking and conversions as a measure of campaign and marketing efficacy. Seed testing provides a reasonable estimation of actual performance, however, there s no substitute for actual customer inbox data. For this report we sourced data from edata Source across all known transactional services providers. These are actual production s that landed in the inbox vs. the spam folder across a broad cross section of North American users. We tallied up the total number of records to understand the size of the sample we were actually working with, and this study is based on more than 75 million unique records from actual customer inboxes. Our goal was to understand how deliverability changed from provider to provider across 3 major ISPs: Gmail, Yahoo! and Outlook.com (Hotmail). These three free mailbox providers are the largest mailbox providers on the planet and according to data from The Radicati Group vi, account for nearly 30% of all accounts globally. Most B2C mailers will have anywhere from 40-75% of their addressable mail file composed of the big three, representing not only B2C consumers but also hosting small business domains and their corresponding mailboxes. Gmail 425,000,000 / 38% Hotmail 420,000,000 / 37% Yahoo! 281,000,000 / 25% Number of mailboxes by free Mailbox Provider 5

6 DELIVERABILITY MEASURED THE RESULTS Looking across the industry there are many different flavors of infrastructure. From traditional ESPs that have grown complex segmentation and list management front-ends, combined with a wide array of strategic marketing services, to no-front-end, pure-api tools for sending -at-scale, has definitely come of age. However, not every innovation has yielded stellar results, nor delivered the kind of performance that prevents revenue loss and customer attrition. The chart below covers the gamut of API-driven transactional providers that either focus solely on transactional messaging or have evolved to provide both commercial and transactional services. The common thread among this group is the freemium model most of them employ, and the lack of both the rich GUI front-ends and the marketing and strategic services that define a white-glove approach at the top of the ESP market. Each of the providers we reviewed employs one or more MTAs vii as their underlying delivery mechanism. They are not only challenged with solving the delivery of -at-scale, but are facing deliverability-atscale problems associated with sending for many small mailers. From shared pools to reserved IPs for their marquee customers, every company involved in third party delivery is forced to adapt their systems to meet their customers needs while complying with the complex practices, acceptable use policies and terms of service that define the many receiving domains hosting the world s inboxes. Based on the analysis of recipient inbox data sourced from edata Source, we see a rather wide range in terms of inbox placement between Message Systems SparkPost on the high end of the scale and other transactional providers. Cloud Provider Deliverability viii Cloud Provider Deliverability vi 97.8% SendGrid Dyn Mandrill Amazon SES 89.5% 87.2% 86.9% 83.6% Mailgun Google App Engine 69.8% 68.6% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Inbox Placement Percentage 6

7 SparkPost, the cloud delivery service from Message Systems, delivers incredible performance at the rate of 97.8% inbox placement. This puts SparkPost deliverability 8% above the next cloud infrastructure provider, and 15% higher than the average inbox placement defined by Return Path. Senders leveraging SparkPost see more of their reaching their intended recipients this kind of successes manifests as improved deliverability and a higher return on investment. Maintaining world-class deliverability at scale requires a level of competence in understanding the characteristics of in transit, the signals ISPs read to identify spam, and architecting systems compliant with industry established best practices. In addition to over 15 years of development insight, experience and success, Message Systems built the Adaptive Network (AEN) ix to help automate delivery to the more than 12,000 global ISPs and mailbox providers. The AEN intelligently categorizes bounces, throttles traffic in real time in response to sending conditions as they arise, and maintains over 2000 rules that optimize the delivery and sending of . THE DOLLARS & CENTS OF DELIVERABILITY IMPROVEMENTS The underlying mechanisms, platforms and service you use to send your matters not only does it matter, it can be measured and contextualized based on lost or potential revenues. To understand the revenue opportunity embodied by undelivered we have to understand the contribution marketing makes to total company revenues. The Direct Marketing Association of the UK conducted a study x in which they found the mean attribution of to total digital revenues to be 30%. Additional findings within the paper position marketing revenues as 18% of total company revenue. What does contribute to the business as percentage of digital business revenue? 100% 90% 80% Mean percentage of digital revenue: 2013: 30% Porportion of respondents 70% 60% 50% 40% 30% 20% 10% 27% 44% 11% 15% 18% 8% 10% 5% 13% 10% 21% 18% 0% 10% 20% 30% 40% 50% 60% or more Porportion of revenue to total digital revenue 7

8 Further evidence on the role that marketing plays can be found in the last Relevancy Relevancy Ring Report xi. According to their findings about 15% of marketers attribute 15-20% of their revenue to 12% 4% 14% Less than 5% 5.1% to 10% 10.1% to 15% 9% 12% 15.1% to 20% 20.1% to 25% 25.1% to 30% Greater than 30% 16% 17% Not sure 15% Now that we have a solid metric on which to base our calculations, 18% attribution to total company revenues, we can measure the revenue impact of undelivered on the Top 10 Internet Retailers xii on the planet: Deliverability Total Company Opportunity = { 0.18 } Revenue x (TCR attributed to ) x 0.08 (Deliverability Lift of SparkPost over competitors) 8

9 Top 10 Internet Retailers Rank Company Revenue Average Derived Revenue 8% Deliverability Lift Could Yield 1 Amazon $88,990 M $16,018 M $1,281 M 2 Apple $199,800 M $35,964 M $2,877 M 3 Staples $22,490 M $4,048 M $323 M 4 Walmart $485,650 M $87,417 M $6,993 M 5 Sears $31,200 M $5,616 M $449 M 6 Liberty Int. $10,500 M $1,890 M $151 M 7 Netflix $5,500 M $990 M $79 M 8 Macy s $28,100 M $5,058 M $404 M 9 Office Depot $16,100 M $2,898 M $231 M 10 Dell xiii $56,940 M $10,249 M $819 M Total Potential Retail Revenue Due to Improved Deliverability: $13,611,888,000 s value extends well beyond branding and awareness; is a primary driver of revenue. An 8% lift in deliverability could translate into more than $13 billion worth of potential sales! The question that marketers have to ask themselves is how much is deliverability worth to me? Just a 1% lift in deliverability across the top 10 Internet Retailers results in over $1.7 billion worth of potential revenue. Most companies we work with already know the value of , or they at least have some idea as to how much revenue drives for them. However, not everyone thinks about the lost opportunity of revenue from undelivered . We routinely see happy customers enjoying a significant lift in their deliverability and revenue, pushing toward 10% which at the end of the day is the difference in performance between SparkPost and the next cloud service provider. In today s cloud-centric SMTP/API world change isn t as hard as it used to be. Achieving significant lift and tangible business results can be achieved in a matter of months, if not less, even for senders with volumes in the billions of s per year. Even if your volume hasn t reached the billion mark, best-of-breed platforms like SparkPost provide cost savings that manifest in the form of fewer resources necessary to improve deliverability through automated systems and almost 2 decades of experience xiv. 9

10 SparkPost is also the industry s most powerful API infrastructure for building in the cloud. Read our in the Age of APIs white paper to learn why SparkPost by Message Systems is the clear choice to power your company s communication initiatives. ABOUT LEN SHNEYDER Len Shneyder is a well known figure in the community, with over a decade of experience in digital messaging, campaign management and deliverability. His experience ranges from working with ESPs helping Fortune 500 brands improve their deliverability to acting as industry liaison between the world s largest ESPs and box providers. Now, as Director of Industry Relations at Message Systems, Len has taken his knowledge, understanding and love of digital messaging to the world s leading provider of infrastructure software to help the world s biggest brands and senders better communicate with the global village. ABOUT SPARKPOST SparkPost is built by Message Systems, the world s number one infrastructure provider. Customers such as Facebook, LinkedIn, Twitter, Groupon, Salesforce, Marketo, Pinterest, Zillow and Comcast send over three trillion messages a year, over 25% of the world s legitimate . These companies choose us to provide the deliverability, speed and insight they need to drive customer engagement for their business. Follow us on or go to sparkpost.com. Take SparkPost for a test drive and send 10,000 free s a month. Sign Up now at 10

11 i SNDS The Junk Mail Reporting Partner Program from Microsoft gives mailers the ability to see performance data based on their outbound mailing IPs a day in arrears. ii JMRPP Junk Mail Reporting Partner Program is a feedback loop established by Hotmail/Microsoft that allows companies that have been vetted to receive feedback loop complaints to suspend mailings to users who no longer want to receive or have marked a message as spam. iii Most major ISPs and mailbox providers maintain their own internal blacklists. Landing on one of these blacklists is considered to be extremely problematic and indicative of poor mailing practices. On occasion a 3rd party blacklist such as Spamhaus.org is employed to further augment a mailbox provider s ability to better identify abusive senders and curtail spam to the user s inbox. iv v Seed Testing is the act of including a batch of seed addresses, commonly 10 per ISP that is to be tracked or tested, with a campaign, or before a campaign, to test the deliverability of a particular template or campaign at a given set of ISPs. These specific addresses are then checked, by automated means, and the results aggregated to show the deliverability of a particular to a series of ISPs via test accounts. See also Returnpath, 250OK and IBM Optimization. vi pdf vii MTA Message Transfer Agent (Also known as a Mail Trasnfer Agent) This is the actual software that handles the delivery of by establishing a connection between itself and a receiving or destination server/end point. More on MTA s here: https://en.wikipedia.org/wiki/message_transfer_agent viii Based on providers with at least 100,000 records in the April, 2015 data set. ix More information about the AEN can be found here: https://www.messagesystems.com/services/ adaptive- -network x Direct Marketing Association of the UK National Client Report, February uploads/national%20client%20 %20report%202014_53f6ffec5e966.pdf xi xii https://www.internetretailer.com/top500/top10/ xiii Dell revenue based on 2013 data pre-private equity buy-out of public entity. xiv 11

12 Message Systems, Inc. 301 Howard St. Ste. 1330, San Francisco, CA tel: messagesystems.com 2015 SP_Big-Rewards-EDS-WP_0615

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