February 4, 2006
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Companies will soon have to buy the Web equivalent of a postage stamp if they want to be certain that their e-mail will be delivered to many of their customers.
By Saul Hansell
America Online and Yahoo, two of the world's largest providers of e-mail accounts, are about to start using a controversial system that gives preferential treatment to messages from companies that pay from 1/4 of a cent to a penny each to have them delivered. The senders must contact only people who have agreed to receive their messages, or risk being blocked entirely.
The Web companies say that this will help them identify legitimate mail and cut down on junk e-mail, identity-theft scams and other scourges that plague users of their services. The two companies also stand to earn millions of dollars a year from the system if it is widely adopted.
AOL and Yahoo will still accept e-mail from senders who have not paid, but the paid messages will be given special treatment. On AOL, for example, they will go straight to users' main mailboxes, and will not have to pass the gantlet of spam filters that could divert them to a special bulk e-mail box or strip them of images and Web links.
Yahoo and AOL say the new system is a way to restore some order to e-mail, which, because of spam and worries about Web scams, has become an increasingly unreliable way for companies to reach their customers, even as Web transactions are becoming a crucial part of their businesses.
"The last time I checked, the postal service has a very similar system to provide different options," said Nicholas Graham, an AOL spokesman. He pointed to services like certified mail with return receipts, "where you really do get assurance that if what you send is important to you, it will be delivered, and delivered in a way that is different from other mail."
But critics of the plan say that the companies risk alienating both their users and the companies that send e-mail. The system will apply not only to mass mailings but also to individual messages like order confirmations from Web stores and customized low-fare notices from airlines.
"AOL users will become dissatisfied when they don't receive the e-mail that they want, and when they complain to the senders, they'll be told, 'it's AOL's fault,' " said Richi Jennings, an analyst at Ferris Research, which specializes in e-mail.
As for companies that send e-mail, "some will pay, but others will object to being held to ransom," he said. "A big danger is that one of them will be big enough to encourage AOL users to use a different e-mail service."
In a broader sense, the move to create what is essentially a preferred class of e-mail is a major change in the economics of the Web. Until now, senders and recipients of e-mail--and, for that matter, Web pages and other information--each covered their own costs of using the network, with no money changing hands. That model is different from, say, the telephone system, in which the company whose customer places a call pays a fee to the company whose customer receives it.
The prospect of a multi-tiered Web has received a lot of attention recently after executives of several large telecommunications companies, including BellSouth and AT&T, suggested that they should be paid not only by the subscribers to their Web services but also by companies that send large files to those subscribers, including music and video clips. Those files would then be given priority over other data, a change from the Web's basic architecture which treats all data in the same way.
This Tuesday, the Senate Commerce Committee will hold a hearing to consider legislation for what has been called Net neutrality--effectively banning Web access companies from giving preferred status to certain providers of content. The concern is that companies that do not pay could find it hard to reach customers or potential customers, threatening the openness of the Web.
AOL and its parent, Time Warner, which also owns a large cable system offering high-speed Web access, have not taken a public stand on the principle of Net neutrality. Neither has Yahoo, which has close relationships with AT&T and Verizon. The issue of e-mail postage has not yet come up in the debate over Net neutrality. In the next two months, AOL will start accepting e-mail processed by Goodmail Systems, a company in Mountain View, Calif., that will collect the electronic postage and verify the identity of the sender. Goodmail has tested the system with the participation of a few companies, including the American Red Cross and The New York Times.
Paying senders will be assured that their messages will be delivered to AOL users' main in-boxes and marked as "AOL Certified E-Mail." Unpaid messages will be subject to AOL's spam-filtering process, which diverts suspicious messages to a special spam folder. Most of these messages will also not be displayed with their original images and links. Users will be able to specify that unpaid messages from a particular person or company should never be treated as spam, as they can do now.
Yahoo will start trying out Goodmail's system in coming months, but it has not decided how paid mail will be differentiated from unpaid, said Brad Garlinghouse, vice president of communications products at Yahoo. Goodmail will charge 1/4 cent to 1 cent per message, with high-volume mailers getting the biggest discounts. It will give more than half of that amount to the e-mail service provider.
When AOL started to explain the details of its plan last month to companies that send a lot of e-mail, many quickly raised objections.
"No one wants Goodmail or any other provider to set up a tollbooth that makes it cost-prohibitive for legitimate mailers to reach the in-box," said Matthew Moog, the chief executive of Q Interactive. The company runs a marketing service called CoolSavings that sends e-mail to 10 million people a month who have requested it.
Moog said that he was very much in favor of systems that helped distinguish the mail he sent from spam. But Moog added that he wanted AOL and other Web providers "to offer several competing services to ensure that innovation continues and there is a competitive market to drive fair pricing for the service."
For example, he said that CoolSavings already works with Bonded Sender, a company used by Microsoft's Hotmail service and other providers to identify sources of legitimate mail. Bonded Sender charges a flat fee of no more than $20,000 a year to the highest-volume senders, a fraction of what they would pay through the Goodmail system. Moog said that the Goodmail system would at least double the cost of an e-mail campaign. "I don't think the economics work," he added.
Matt Blumberg, the chief executive of Return Path, the New York company that runs Bonded Sender, said there was no need for the Goodmail price to be so high.
"From AOL's perspective, this is an opportunity to earn a significant amount of money from the sale of stamps," he said. "But it's bad for the industry and bad for consumers. A lot of e-mailers won't be able to afford it."
But Garlinghouse of Yahoo said that by making senders pay for each message, they will be forced to be more discriminating in whom they send e-mail to, which will benefit users.
"Because the cost of sending e-mail is so low, some players are not as good at keeping their lists clean," he said. "I still gets e-mails from lists I signed up for three years ago, but I haven't responded to a single one."
As spam has started to clog millions of mailboxes, particularly over the last five years, some people have suggested that requiring all e-mail senders to pay some sort of postage would drive out spammers, who can profit even if they sell their wares to a very small percentage of mail recipients.
But in recent years the volume of spam has leveled off, in part because of a new federal law that imposes penalties for many deceptive e-mail practices. Moreover, most major e-mail providers have built sophisticated filters that divert much of the spam. AOL says that spam complaints from its members are down 75% since their peak in 2003. (These filters also capture about 20% of legitimate mail, according to Ferris Research.)
A more troublesome problem now is phishing, messages that appear to be from a bank or an online payment service and that seek to fool recipients into divulging their passwords or credit card numbers. Phishing has led Web providers and other companies to look for ways to help people identify legitimate mail.
Goodmail was founded several years ago with the idea that it would charge postage for all mail, but it has narrowed its focus to mail sent by companies and major nonprofit organizations, which will pay a reduced rate. It does not envision that individuals will pay to have their e-mail delivered.
"The e-mail in-box is a potentially dangerous place," said Richard Gingras, the chief executive of Goodmail. "There is a tremendous need for a class of certified e-mail that can convey to consumers that a message is authentic."
Gingras argued that companies will be glad to pay the postage fee because their customers will have more trust in their e-mail and thus will buy more from them.
Mr. Graham of AOL added that the portion of the postage it will receive is justifiable compensation for the costs it has incurred in developing systems to combat spam.
"We have some prerogative to move to a system that asks for other people to participate and share the financial burden in making a clean e-mail environment on the Web," he said.
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