Tech Industry

Newsletter authors reap banner profits

Major advertising networks, which typically sell online banners and sponsorships, are lowering their sights to include small-circulation email newsletters.

Major advertising networks, which typically sell online banners and sponsorships, are lowering their sights to include small-circulation email newsletters.

Subscriptions have long been the primary, if not only, source of revenues for newsletter authors. In recent months, however, several of the top Net advertising firms have created products and services that allow these ultra-niche publications to sell advertising space.

Flycast, owned by CMGI Engage, launched in January the eDispatch Newsletter Network--a program that lets companies advertise on targeted email lists using banners or text messages. Just before that, DoubleClick unveiled Dartmail to serve tailored ads on email newsletters.

Last month, 24/7 agreed to buy email marketer Exactis.com for about $490 million in stock to expand its email advertising services to include newsletters.

By signing on newsletters to their networks, these companies are validating what several major online publishers have known for years: email builds community, loyalty and return visits. But now it seems they offer one more plus.

"The money thing is an added bonus," said Andrea Mulder-Slater, who publishes the Kinder Arts Web site and newsletter. "We were receiving so many subscriptions, more than 8,000 names, and we were having a difficult time keeping track of them on our own, so we looked to Flycast."

Flycast sells ad space on Mulder-Slater's newsletter for up to $16 per thousand people who receive the email, which is sent about twice a month. KinderArts is just one of "hundreds" of smaller newsletters that receive tailored ads through Flycast; marketers pay for placements that rotate on related newsletter categories such as entertainment, family and health. Flycast receives 40 percent of the profits.

It costs on average $93 per thousand emails sent to sponsor an email newsletter, according to recent reports from Forrester Research, an Internet research firm based in Cambridge, Mass. This figure is commonly referred to in the industry as cost per thousand (CPM). The average click through rate, or number of times that someone clicked on the ad, is about 2.5 percent. In-house email promotion averages a click-through rate of 10 percent. That beats banner advertising click through rates by more than ninefold.

In 2002, companies are expected to deliver about 250 billion commercial permission email messages, the report found, an amount that will overtake the volume of third-class mail. Companies also plan to increase their email budgets by almost threefold in 2004.

"The online content players either have email newsletters or are going to have them, and it's partially driven by competition," said Michele Slack, an advertising analyst with Jupiter Communications. "Email (newsletters) are a way to lock in your consumers and remind them on a periodic basis of the value you provide."

Publishers and commercial companies alike usually send some kind of email communication to their audiences, whether its promoting a new product or content that the customer may like. USA Today, American Express, Expedia and Charles Schwab are just a few of the companies currently signed up with email outsourcing companies such as Exactis.com or Flow Networks to send and track their newsletters.

The costs involved with sending email newsletters are also much better than direct mail because they're sent without paper or postage. The cost to produce a direct mail program per thousand pieces of mail is $686 vs. $5 for email. The format also has more impact because it's a communication people request.

"Newsletters are to the Net what direct mail is to the offline world, and we're building on an already successful business model," said Lyn Chitow Oakes, chief operating officer of Flycast.