RESEARCH BRIEF (The Impact of SPAM on ) Date: 6/1/2005

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1 RESEARCH BRIEF (The Impact of SPAM on ) Date: 6/1/2005 Topic: The Impact of SPAM on We investigate the new CAN-SPAM law and find how one major retailer risked a minimum $41,500 fine just by sending holiday s to its customers. We recently released the audio recording of our clinic on this topic. You can listen to a recording of this clinic here: Windows Media Audio: RealMedia: This research brief will answer the following questions: 1. How much are you risking when you send a marketing ? 2. How much does SPAM impact the productivity of businesses? 3. What are the laws on SPAM and how can you be compliant? 4. How can you improve your marketing and avoid sending SPAM to your customer base? 1. How much are you risking when you send a marketing ? Not all SPAM comes from criminals in some abandoned warehouse. During the course of our research we came across a U.S. retailer who had unknowingly received more than 80 SPAM complaints in the past three months. They were simply sending periodic specials and updates to their past customers. As the performance of these s started to diminish, we found that much of the was not even reaching their customers, let alone being opened, read, and acted upon. Page 1 of 11

2 U.S. Retailer Three-Month Study Metrics Campaign A Campaign B Campaign C 3 Month Total Messages Sent 17,042 20,734 20,944 58,720 Messages Returned 2,792 6,626 6,356 15,774 Percent Returned 16.38% 31.96% 30.35% 26.86% Messages Opened 2,515 2,465 3,407 8,387 Percent Opened 14.76% 11.89% 16.27% 14.28% Clicks ,027 Click-Through Rate 2.36% 3.40% 4.40% 3.45% Spam Complaints Potential Fine $10,000 $10,500 $21,000 $41,500 Risk Per Click $24.87 $14.90 $22.80 $20.47 What You Need to Understand: This U.S. retailer received over 80 SPAM complaints in the last three months. The most alarming factor in these campaigns was the automatic $41,500 in state fines that could have been imposed by the State of Florida if these 83 SPAM complaints had all been pursued. Most illegal unsolicited still goes unpunished. While we wait for technology to catch up with legislation there will very likely still be a large amount of SPAM. International SPAM coalition SpamHaus reports that 80% of all SPAM comes from just 200 sources. State and federal agencies are beginning to team up with ISPs to bring down these SPAM rings. Recent busts have resulted in many years in prison and millions of dollars in fines. Your business may not be at risk of getting slapped with a million dollar lawsuit because of your latest offer, but you could be breaking the law, and if prosecuted, you could be liable. Each state has adopted its own legislation to handle SPAM. But to give an idea of the potential risk, imagine that you SPAM someone in Michigan and the font size of your unsubscribe instructions is smaller than the main body of your message. Use our free SPAM fine calculator to see what your maximum fine could be: 2. How much does SPAM impact the productivity of businesses? $20 Billion would provide food, shelter, clothing, and an education to each of the 83 million homeless children in India for the next 10 years. Page 2 of 11

3 $20 Billion is also the amount that the world spends each year in lost productivity and technology as a direct result of SPAM, or Unsolicited Commercial (UCE). No one likes SPAM, with the exception of those few marketers who generate it. They thrive on a miniscule % conversion rate because the majority of the real costs are incurred by the recipients of SPAM. The amount of SPAM that many people receive is overwhelming, prompting them to switch ISPs or addresses or implement commercial SPAM-blockers that create yet another cost of doing business online. Each of us becomes increasingly aggravated by the amount of SPAM we receive. We are especially concerned with the impact that SPAM has on the newsletter publishing community. With over 50% of the world's taking the form of UCE, legitimate newsletters are getting lost in a sea of junk. We are also concerned about the amount of time and energy we spend processing junk each day. We were curious about just how much SPAM costs the average U.S. company, so we sampled two groups of incoming s. This is what we discovered: SPAM vs. Legitimate SPAM Regular Group A 67% 33% Group B 70% 30% What You Need to Understand: On average 68% of all our test groups received was SPAM. A further analysis of the content of the SPAM revealed the following ratios: Distribution of SPAM by Content Category (Group B) Type of Message Percentage of Total Good 30% Product Offers 22% Prescription Drugs 16% Pornography 9% Miscellaneous 8% Personal Ads 4% Travel Offers 4% Credit Cards 4% Money Laundering 3% Page 3 of 11

4 What You Need to Understand: Illegal prescription drug offers, pornography, and product offers made up 47% of all of the SPAM our test groups received. It's not hard to imagine that other companies are experiencing a similar loss in productivity due to junk . With over 50% of the world's being SPAM, it's probably costing each of us a lot more than we think. 3. What are the laws on SPAM and how can you be compliant? The CAN-SPAM law refers specifically to Federal Senate Bill 877, which was signed into law by President Bush in December of This bill should be taken seriously and already it has resulted in hundreds of millions of dollars in lawsuits and even jail time for some spammers. The primary purpose of the CAN-SPAM law is to put some regulations in place around marketing. CAN-SPAM is not just designed to protect consumers from SPAM but also helps legitimate marketers to get messages in front of their customers. If CAN-SPAM helps to curtail SPAM, then legitimate marketing will receive more attention from recipients. We offer a number of tips on complying with CAN-SPAM in the next section. The full legislation is available here: The FTC website also provides a number of resources for becoming CAN-SPAM compliant: KEY POINT: The CAN-SPAM legislation has laid out some very clear guidelines for commercial marketing. It is important to be CAN-SPAM compliant to improve marketing effectiveness as well as to avoid significant financial penalties and even prison. In addition to federal law, most states have enacted their own legislation and automatic penalties for spammers. 4. How can you improve your marketing and avoid sending SPAM to your customer base? To answer this difficult question we enlisted the help of Tom Kulzer, CEO of marketing firm AWeber Systems. Tom has certainly seen a lot of in the seven years his company has been in the marketing solutions business. He contributed significantly to the following advice: Page 4 of 11

5 1. Be Aware of Filters SPAM filters have made it increasingly difficult to get your permissionbased delivered to your audience. O pen rates and click-through rates are affected by as much as 20-30% due to incorrect SPAM filter settings. The best thing you can do is attempt to educate your subscribers to put your domain on their "white list". Your best (and perhaps only) opportunity to do this is when they first subscribe or place their initial order with you. Otherwise they may never know they are blocking your Get Unambiguous Permission Make sure that the people who ask for your information have actually requested to be on your list. This is the number-one step in the battle for deliverability. For most publishers and marketers, "confirmed" or "verified" opt-in is recommended. This means that a new list member is sent an message when they are added; they must click a link or reply to this message to actually be added to your list. This guarantees that the recipient was the individual who requested to be added to your list. 3. Get Good Subscriber Addresses As your website visitors opt-in, ask for their "real" or "primary" address instead of a free address (like Yahoo or Hotmail). Free addresses tend to be throw-away accounts and typically have a shorter lifetime than a primary ISP address. 4. Maintain Your List Always promptly remove undeliverable addresses that bounce when sending to them. An address that bounces with a permanent error two or three times in a 30 day period should be removed from your list. Some ISPs track what percentage of your messages bounce and may block you if you continually attempt to deliver messages to nonexistent mailboxes. 5. Plan Your Message Format Using HTML messages to allow for text formatting, multiple columns, images, and brand recognition is growing in popularity and is widely supported by most client software. However, most SPAM is also HTML-formatted as well; permission-based and SPAM HTML messages can often be difficult to differentiate in the mind of the recipient. If you do send HTML, it is important to always send a plain-text alternative message (also called text/html multi-part MIME format). In recent testing, we discovered that HTML s actually bounced more often than text-based messages. Page 5 of 11

6 Plain Text vs. HTML Deliverability HTML Text Bounce Rate 2.30% 1.15% Open Rate 2.03% 4.70% What You Need to Understand: HTML gets rejected by ISPs and SPAM filters twice as often as plain-text . Bounce Rate Source: 2004 Study of over one million messages by AWeber Systems, Inc. Open Rate Source: MarketingSherpa Send Legitimate Content Many ISPs filter based on the content that appears within the message text. Therefore, you should be very careful when creating the copy for your marketing messages. The following guidelines should be kept in mind: Website URLs: Research potential newsletter advertisers before allowing them to place ads in your newsletter issues. If they have used their website URL to send SPAM, just having their URL appear in your newsletter could cause the entire message to be blocked or filtered. Words/phrases: Choose your language carefully when crafting messages. Avoid topics often found in SPAM such as medication, mortgages, making money, and pornography. If you do need to use words that might be filtered, don't attempt to obfuscate words with extra characters or odd spelling; you'll just make your messages appear more like SPAM. Images: Avoid creating messages that are made up entirely of images. Use images sparingly, if at all. Much open-rate tracking technology uses images to calculate the number of opened messages. You may choose to disable this kind of tracking to avoid being filtered based on image content. Attachments: With viruses running rampant and spreading through the malicious attachments, many users are wary of attached documents. It's usually better to use a website URL to link to files; this will eliminate fear of attachments on the part of recipients and also reduce the overall message size. 7. Make Sure You Are CAN-SPAM Compliant The Federal CAN-SPAM law introduced a number of rules regarding the delivery of . It's important you have your legal counsel review your practices and ensure you are in compliance. Anne Mitchell is CEO of the Institute for SPAM and Internet Public Policy < Anne was kind enough to provide a quick Page 6 of 11

7 outline for marketers who want to make sure they are CAN-SPAM compliant: A. There must be a way for the recipient to opt-out permanently from your list. The key word here is "permanent", which goes beyond simply "unsubscribing". In other words, you will have to maintain some kind of "purge" file that will prevent these permanently opted-out users from being added back to your list. B. While a user does not specifically need to "opt in" to your list, you may not send to lists you purchased, stole, or compiled unethically. In other words, only contact your customers or those who have specifically requested information. C. You must include a physical mailing address (street address) in every message indicating who you are and how you can be contacted. D. If the is an advertisement, it must be clearly marked as such, in either the subject line or the first lines of the body of the message (or both). E. Sexually orientated material must be clearly marked as such in the subject line. F. You may not mask where your is being sent from. This regulation also precludes using fake names or illegal servers to send . These six points cover most of the major regulations for marketers. However, to be sure that you are fully compliant with CAN-SPAM, you should have your legal counsel review the full legislation here: 8. Join a Reputation Service Reputation services are often used by large ISPs as a way to vet senders regarding their practices and policies. Businesses listed with these services are then given less stringent filtering or no filtering at all. Several reputation services are: Get on the Whitelists It is essential to contact major ISPs and providers about your permission-based . Many large providers such as AOL and Yahoo! have specific whitelisting programs and postmaster website areas to ensure your is delivered as long as you meet their opt-in list policies and procedures. Page 7 of 11

8 While no single tip will enable you to get 100% of your delivered, each one can go a long way to reaching that goal. deliverability is about combating the effects of SPAM to ensure that legitimate, CAN-SPAM-compliant is delivered to the intended recipient. The above techniques will help you do just that. SUPPLEMENTARY SOURCES:: Aweber Systems, Inc. Anne Mitchell, Esq. SpamHaus.Org MEC Spam Research State Spam Laws RELATED MEC REPORTS: Linking Strategies Tested: Long Copy vs. Short Copy Tested: Page 8 of 11

9 Website Awards Tested: Comparison Search Engines Tested: DealTime Tested: Yahoo! Store Changes Tested: ebay Basics: Landing Pages Tested: Order Process Tested: Order Recovery Tested: Transparent Marketing: As part of our research on this topic, we have prepared a review of the best Internet resources on this topic. Page 9 of 11

10 Rating System These sites were rated for usefulness and clarity, but alas, the rating is purely subjective. * = Decent ** = Good *** = Excellent **** = Indispensable The CAN-SPAM Act: Requirements for Commercial ers **** CAN-SPAM Act of 2003 **** Spam Laws U.S. Federal and State, International **** Accused Spammer Sues Individual Who Reported It *** Inside the SPAM Cartel *** SPAM Wars *** Anti-SPAM Toolkit *** Marketing with *** Permission-Based Marketing *** Effective Marketing *** Page 10 of 11

11 Advanced Marketing ** Learning to Market Through SPAM ** Marketing Articles ** About.com: Marketing ** About.com: Marketing Tips ** Marketing Ethics and SPAM Reporting ** Credits: 1. Editor Flint McGlaughlin 2. Writer Jalali Hartman 3. Contributors Brian Alt Tom Kulzer Anne Mitchell Sarah Baldwin 4. HTML Designer Cliff Rainer Page 11 of 11

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