February 5, 2006
Postage Is Due for Companies Sending E-Mail
By SAUL HANSELL
Corrections Appended At The End of Page
Companies will soon have to buy the electronic equivalent of a postage stamp
if they want to be certain that their e-mail will be delivered to many of
America Online and Yahoo, two of the world's largest providers of e-mail
accounts, are about to start using a 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 promise to contact only people
who have agreed to receive their messages, or risk being blocked entirely.
The Internet 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. They 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 junk-mail folder or
strip them of images and Web links. As is the case now, mail arriving from
addresses that users have added to their AOL address books will not be
treated as spam.
Yahoo and AOL say the new system is a way to restore some order to e-mail,
which, because of spam and worries about online scams, has become an
increasingly unreliable way for companies to reach their customers, even as
online 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, "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 two 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 commercial messages like order
confirmations from online stores and customized low-fare notices from
"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 Internet. 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 multitiered Internet 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 Internet 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
Internet'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
Internet 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 attract new ones, threatening the openness of the
AOL and its parent, Time Warner, which also owns a large cable system
offering high-speed Internet 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.
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. Goodmail does not envision that individuals will
need to pay to have their e-mail delivered to Yahoo or AOL accounts.
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.
Mr. Moog said that he was very much in favor of systems that helped
distinguish the mail he sent from spam. But Mr. Moog added that he wanted
AOL and other Internet 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. Mr. 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
"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 Mr. 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 percent since their peak in 2003. (These filters also capture about
20 percent 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 Internet
providers and other companies to look for ways to help people identify
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.
Messages from paying customers will bear a special symbol to indicate that
they are not fraudulent.
"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."
Mr. 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.
And 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 Internet," he said.
Correction: Feb. 7, 2006
An article on Sunday about a plan by America Online and Yahoo to charge
companies for delivery of e-mail to their customers referred incorrectly in
some copies to an analyst at Ferris Research who commented on the decision.
The analyst, Richi Jennings, is a man.
Correction: Feb. 8, 2006
An article on Sunday about a plan by America Online and Yahoo to charge
companies for delivery of some e-mail to their customers misstated the
background of a business that will process the messages. That company,
Goodmail, was founded on the premise of charging postage for high-volume
e-mail, not for all e-mail; it has narrowed its focus to companies and
organizations that get permission from users to send them mail. The article
also misstated the progress of Goodmail's relationship with two clients, the
American Red Cross and The New York Times Company.