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Besieged by anti-spam laws and rising consumer mistrust, e-mail marketers and list professionals say that despite it all, prospecting isn't dead.

Several e-mail veterans gathered recently at Direct's offices to discuss the issues and challenges they face. Those in the consumer space have adapted to falling response rates by prospecting through additional channels and becoming hyper-concerned about consumer privacy. Meanwhile, business-to-business e-mailers have enjoyed steady response rates as long as they continued to invest in sustaining quality.

Spam and legislation enacted to combat it are the next hurdles all e-mail marketers must overcome. Though they hope for a reasonable federal anti-spam law, the newly signed California statute could have a crippling effect on their businesses. So they're developing tactics to cope with it, and long-term strategies to sidestep spam in the long run.

Bottom line: These pros believe that e-mail not only will survive these onslaughts, but will thrive once again.

(Note: The roundtable was held before the Senate voted on the Can-Spam Act, the federal anti-spam bill.)

Moderator: Ben Isaacson, privacy and compliance leader, Experian

Jay Schwedelson, corporate vice president, Worldata

Michelle Feit, president, e-Post Direct

Mark Evans, director of database and direct marketing services, CBS Sportsline.com

Geoff Smith, director of direct marketing, Software of the Month Club

Brad Shapiro, vice president of marketing and sales, Date.com

Chris Meerschaert, refinance marketing manager, Quicken Loans

ISAACSON: How effective is e-mail prospecting for marketers today?

MEERSCHAERT: I think the responsiveness to e-mail campaigns has a lot to do with not only the list but the industry you're in. In the mortgage industry, response rates have declined. Specifically in that business, as legislation continues to pass and consumers become more inundated with e-mail, we're probably going to fade away from e-mail the way we did with postal mail. Fewer people will use e-mail because response rates are diminishing and return on investment is decreasing. But marketers will start to get back into it. And hopefully, we'll see a resurgence of e-mail as an acquisition tool.

ISAACSON: Are marketers still prospecting?

SCHWEDELSON: It depends on the category. Business-to-consumer is very different from business-to-business. In B-to-B, marketers are still using e-mail very effectively as an acquisition tool. On the consumer side, there are certain categories that are no longer performing well at all — or never did — and there are others that are still holding fairly strong. And the reason they are holding strong is the cost for the list is so low that you're able to have a better ROI on the back end.

MEERSCHAERT: We're not using e-mail for acquisition, we're primarily using it for retention marketing. Our retention efforts are very strong, but I must say they're not limited to e-mail — we're online, we're offline and we're also using telemarketing as a piece of that. You can't just look at e-mail as a vacuum.

SHAPIRO: We tend to find that e-mail plays a much smaller role in our overall acquisition strategy, but we continue to use it. Margins have decreased, but it's still performing for us. Response rates have decreased pretty dramatically. The online space has been saturated [with many different] types of e-mail offers from the online dating industry. But more importantly, the lists we've traditionally used are not performing as well or they're not performing at all. I don't think it's necessarily because of the way the lists have been treated. Many times those lists are getting blocked, so the vendor might drop 5 million e-mails and we'll see 500 clicks. In the old days, 5 million e-mails gave you 50,000 clicks.

EVANS: The overreaction of the ISPs in filtering spam is a response to the proliferation of spam. For a variety of reasons the ISPs have taken a very strong stance in terms of bulk mailers. The other issue with the lack of responsiveness of e-mail is the saturation of e-mail to the customer. It's also a cost issue. There is zero to no cost for anybody to get into the e-mail marketing space and fill consumers' inboxes with e-mail messages. That's really what's underlying making this a viable medium.

FEIT: E-mail prospecting is still working. It's a big majority of my business and I know it's working because my business is growing and my clients are finding success. I think what's very different is that you can't keep the same strategy that you had a few years ago. You have to accept that this industry and this medium is evolving and changing, and unless you are really investing and keeping up with the changes it's no longer going to work.

ISAACSON: Mark, you have a lot of brand relationships with offline brand advertising and online properties. Are you still seeing big brand marketers using your data to do prospecting?

EVANS: Not as much as last year. But there are still a handful that feel it's a very effective tool for targeting quickly and efficiently. Those big brands that are trying to reach more specialized audiences are using e-mail as an acquisition tool. But a lot of them have pulled back a bit until the spam issue is really solved.

ISAACSON: Originally all e-mail was CPM (cost per thousand) and then moved toward performance. What is happening now, and what do you think is going to happen in the next year in list rental?

FEIT: There's a clear difference between consumer lists and business lists. Business lists have remained steady. They have not gone down at all. They have not gone in for the performance model, or the CPA (cost per acquisition) model. Part of why that is still working is the cost of the lists is high enough that not everyone can get into it. It's the serious business marketers who are entering into it and keeping the quality of the lists good and maintaining the response rates. For consumer lists, the quality is not there and it's all just a matter of ‘Can I make it work and get the price I want?’

SHAPIRO: I would say for the general consumer list, it's really based on price, if you're just going out to everybody. But with the internal lists we have on the market, because of our targeting capabilities our quality has stayed pretty good and our prices have remained pretty high.

SCHWEDELSON: There are lists that are cost-per-acquisition deals and some of them are decent lists. But the majority of the lists that have allowed CPA deals to take place are questionable files. You're trying to do the best you can to put together a set of data that's going to have a good target audience and be a hit for the marketer. You're not trying to put together a massive database that's going to cater to everybody and just slap it out there, and many times that's what these cost per acquisition files are.

EVANS: We try to keep our saturation rates to an acceptable, best-practices level, and the idea of actually letting companies touch that list without any guaranteed revenue to Sportsline, knowing that people are just going to unsubscribe, doesn't warm us up at all to the idea of CPA.

ISAACSON: So from what I'm hearing, the trend is that targeting, as it relates to e-mail prospecting, is critical to be able to hold a CPM.

SCHWEDELSON: Well, targeting and list source. There are plenty of lists out there that claim to hit a certain age group, income bracket or geography. But how are they actually getting that data? Is it some sort of sweepstakes, is it appending…where is it coming from? That's really more important than just what selects are available in the file.

SMITH: From the advertiser side, we ask more questions up front than we used to. How were the names collected? How often are they mailed? Are the e-mails solo versus endorsed, versus e-mail sponsorships?

MEERSCHAERT: I think it depends on the product you're pitching. The CPA model is more attractive to me because mortgages aren't something consumers buy every day. We're lucky if they purchase one every five to seven years. So when you're talking about targeting and getting to a specific user, just because it's targeted doesn't mean that that consumer has a higher propensity to transact with you. I hate to admit it — and this is probably why you see so much spam in the mortgage space — but the broader the net you cast, the more likely it is you'll reach your targeted return.

ISAACSON: How do you try to educate recipients on the difference between e-mail and spam and differentiate your company?

MEERSCHAERT: From a consumer perspective, I don't know that the brand necessarily plays an important role. I get 40 to 50 e-mail messages a day that I consider spam. The fact that an e-mail from Quicken Loans is in that mix doesn't really matter. I think the average consumer looks at their inbox and considers everything in there spam, not really taking into account the brands these e-mails are coming from or the integrity those brands may carry.

ISAACSON: Brad, you compete as a brand with a number of other online personals services, and you do acquisition. So how does your brand differentiate from the personals that are legitimate and those that aren't?

SHAPIRO: I guess the main difference between the legitimate dating services and the ones that are actually less legitimate is that as we build our brand, we're really catering toward the serious relationship and the 25-plus market. We're not going out there and saying, ‘Get lucky tonight — click here.’ In the past, we've had to get rid of affiliates because they've done their own marketing and it's been way too aggressive and risqué for us.

ISAACSON: The brand and content are one?

SHAPIRO: Oh, yeah.

SCHWEDELSON: I'm going to respectfully disagree with Chris and say a brand can be severely affected by an association with lists that are collected in a questionable manner. All of us get phone calls every day from these companies that say they have 100 million triple-opt-in lists. And I say, how can that be possible? I understand where Yahoo! gets 75 million addresses, or Hotmail does, or iWon.com, but where are all these other people getting hundreds of millions of triple-opt-in e-mail lists?

EVANS: From a consumer perspective, if I'm a registered user of Yahoo! and I'm getting marketing e-mail from them, I understand why I'm getting it. It's part of the value proposition of my services from that site. However, if I'm getting e-mail marketing from XK Mediacompany.com and I've never had a relationship with that firm, I take exception to getting that message. And I take exception to any message from any marketer associated with that company.

FEIT: What we're advising our clients is there's some basic, simple direct marketing. One, you want a very good quality list, where the list owner has a very strong relationship with recipients on the list. Two, the message and the offer should be relevant and targeted. Three, you can tell the difference between spam and a legitimate message. A legitimate marketer spends money on copywriting.

SMITH: That's true if they even open up the e-mail to be able to see that.

FEIT: They can see [it's a legitimate message] in the subject line because it isn't misleading, it's very clear and concise and it tells about the offer. A lot of people use the preview function in the e-mail and that helps a lot.

ISAACSON: I think a big assumption is that the e-mail is even getting to the inbox. How are you making sure this happens, and what techniques would you offer for people to follow?

SMITH: We monitor our name response. One of the big red flags we look at is if we have low metrics from any of the four major metrics that I call BOCU (bounces, opens, clicks and unsubscribes), we know we have a problem. Especially with the bounces. If you send out thousands and thousands of e-mails and you don't get any bounces, that tells me something isn't happening.

MEERSCHAERT: Is that on an acquisition-type campaign, or on a retention campaign?

SMITH: That's retention. And where we can, we do that on the acquisition side, too. But most companies don't provide those types of metrics.

SCHWEDELSON: I think one thing to keep in mind about filtering — I don't care who you are and whether you're doing a retention or prospecting effort — every e-mail campaign that goes out with any size list will be filtered to some extent.

EVANS: But the most dangerous filtering is being done at the ISP level. To make sure our mail gets sent, we have relationships with all the ISPs — or at least the major ones most of our e-mail goes through — and we're in virtually constant contact with them. It seems to be an uphill battle, not only for us, but for the ISPs, because it seems to get worse every day. Some of them are at a point where they don't care if you're a legitimate marketer or a marketing partner. They just want a solution.

SMITH: For those of us who use third-party providers, we have to rely on them to be diligent with the ISP. That's good, because hopefully they have the resources to dedicate to ensure across their client base that the e-mails are getting through the door. But that's bad, because if the ISP is getting blocked, you're getting blocked.

SHAPIRO: We have a privacy manager on board who has established a relationship with the ISPs to get us white-listed. But getting white-listed isn't the end of the food chain. We respond to every single consumer complaint and get back to the consumer or the ISP.

SCHWEDELSON: What if they complain about a bad date that they went on? [Laughter]

FEIT: On the B-to-B side, it's one step harder because you also have to be OK with every single corporation whose employees receive e-mail and understand every single filtering program out there.

MEERSCHAERT: In order for this vehicle to become more effective, you're going to need all the players to get on the same page and make a concerted effort to try to improve e-mail marketing.

ISAACSON: Have open rates declined? Is an open rate even a measurable metric today, or are we relying more on other types?

SMITH: The number one metric is conversion. It's the ROI.

SCHWEDELSON: At the end of the day, if you're not getting conversions, it doesn't matter. But it's important to remember with e-mail marketing and prospecting and retention, we're still in frontier town. There's an implosion taking place, but it's all going to settle down and this will become a viable medium to prospect in and do retention marketing in. But we have to get through the clutter and we're sitting knee-high in that mess right now.

MEERSCHAERT: I think when the dust settles, you're going to have the true players and the true list providers still standing. And the advertisers that have strong brands will get back in the game.

FEIT: They exist right now, you know. But you have to be able to tell who the good quality providers are versus everyone else.

EVANS: It's those who are spending money on a brand to acquire users in a particular category and doing it in a way that it provides a value proposition for the user.

FEIT: If you're saying spend money to do so, then I think there's actually a barrier to [entering the e-mail business successfully].

EVANS: There's a barrier to entry for sending a good list. There's no barrier for sending e-mail.

SHAPIRO: I think there is a barrier to entry over things like bandwidth. And when you start going below 10 cents or 5 cents CPM, then it's not making sense. And with these hundred million lists, most of them are trying to sell at these low CPMs but still make money. If they did it on a CPA, they might not make their money and they might not cover their costs.

FEIT: And again that's consumer.

ISAACSON: Where are conversions and clicks today — are they holding steady, are they declining? Are they decreasing because of multichannel?

SCHWEDELSON: We're seeing conversions in the B-to-B side doing well. Financial services are doing well. We're seeing a dip in some of the catalog offers and in some of the hard-sell offers on the consumer side.

DIRECT: Care to hazard an estimated response rate?

SCHWEDELSON: I don't like average response rates. They don't exist because there are too many variables.

FEIT: You have to break it down by how much the product costs. If you're selling a $1 million product, a one-tenth-of-a-percent response rate is absolutely fantastic.

SCHWEDELSON: Or, if you are giving away an automobile, and you don't get a 25% response rate, you're going to be really upset.

ISAACSON: Are their any vertical categories in B-to-B and consumer that you can share success stories about?

SCHWEDELSON: We see an incredible response rate in business-related and consumer services. Those tend to perform better than just product, hard-sell offers. Financial services, online brokers like a Fidelity or a Schwab, or any of those online services, they seem to have a better response rate than, say, those who are selling an online business newsletter.

ISAACSON: One barrier to entering the e-mail space is a new law — California Sen. Kevin Murray's anti-spam law. The way it's written requires expressed consent prior to the e-mail being delivered from an advertiser to a recipient. It affects anyone in California who's sending e-mail or anyone who's sending to the state of California. There is a civil right to action. Anybody in that state can take any marketer they feel is violating the law to court. It's not just the attorney general, it's not just the ISPs. So it's different from most of the other state laws and from the laws proposed in Congress. How do you feel this law might affect e-mail prospecting?

FEIT: As it stands now, it absolutely affects our business. This law is so regimented and fanatical that it doesn't even appreciate that it won't allow a publisher — The New York Times, for example — to send out its daily newsletter with a sponsorship in it.

DIRECT: In Utah, there have been some 1,400 lawsuits filed, mostly by two lawyers. And some of them have been thrown out of court because the court found out that the consumer actually opted into a Web site a couple of years ago.

SCHWEDELSON: It's positive that the legislation is not coming from Big Brother — the ISPs — but from a non-biased third party. I would say more than half of all the lists on the market are going to be affected because of the way the data was originally collected. The other big issue is most [e-mail files] don't have a geographic element. You can't assume they are not in California. We are treating those addresses the same way we're treating California addresses. We are advising our clients to go back and create a further relationship with the individuals on their lists to be able to adhere to the legislation.

SHAPIRO: All of our members tell us where they're from, so we know who's from California.

EVANS: Lists that are made in any way other than users going to a Web site and providing their information directly are going to have a hard time. To e-mail the consumer and say, ‘We got your e-mail from such and such a company, we'd like to send you mail. If you don't want it, opt out.’ That's a semi-illegitimate way of creating lists.

ISAACSON: There's a good possibility that there will be a federal law this year, and multiple federal laws are competing for stature in the committees. If we could wipe California out by pre-emption, do you believe this will deter spam or increase it, as some people are proclaiming it will?

SCHWEDELSON: The true, terrible spammers don't care what laws are passed. Most of them are in the Bahamas sitting on a beach anyway and couldn't care less.

FEIT: The legislation is not going to say, ‘ISPs, you can't filter e-mail anymore.’ But one federal bill is better than all these state bills. We can't run a business with all these states passing laws.

ISAACSON: Are you still in favor — even if there's more clutter in the inbox — because it lays out a road map for opt-out e-mail,?

SHAPIRO: I don't think a federal law is going to increase spam, but I don't necessarily think it will decrease spam.

EVANS: From the perspective of a company that has a direct relationship with the consumer it's sending e-mail to, I think federal legislation will be a benefit to us. But I can't imagine that legislation is going to solve this problem. It's really something that needs to be solved by technology.

ISAACSON: Do you see e-mail prospecting ramping back up to where it was a few years ago?

EVANS: I think marketers can expect costs to rise as they have to buy lists that are better managed with better data, and work with ISPs and the delivery process of white lists and e-mail clearinghouses.

SMITH: But at the same time, if I expect my costs to rise for external lists, I should also expect my performance to rise.

EVANS: If the e-mail box is filled only with a handful of messages from marketers you have a relationship with and third-party lists you have a relationship with, and not with 400 messages from spammers, I think you can expect that.

SCHWEDELSON: This is the year list owners, list providers, brokers, mailers and everybody gets their act together. It's going to be a year of maturation for the e-mail list marketing channel, which I think has been a long time coming.