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Return Mail: Revenues Unknown!

Can money be made from e-mail services? Here's how.

By Aparna Ramalingam

The Indian Internet Space Age Of Unreason

Long before the World Wide Web spawned acronyms of commerce, there was e-mail. Remember, in 1983, MCI rolled out a service, MCI Mail. But then, in what qualifies as Grade A internet folklore, it took 10 long years for the concept to get accepted. It was only in 1996-when Sabeer Bhatia came up with Hotmail-that e-mail really exploded. And not that you didn't connect, but Indians love this effective, cheap communication mode. Note: an e-mail service provider has to shell out anywhere between $2.5-5 dollars per mailbox per year.

This is why: e-mail contributes 60 per cent of all traffic to Indian sites and accounts for over 40 per cent of the customer's surfing time. Close to cent per cent of Indian internet users have an e-mail account. Unlike chat-a pastime of younger surfers-e-mail cuts across age groups and demographic profiles. Numbers are not easy to get; only Rediff came up with a figure of 2.1 million users; msn India's Hotmail says it has over 2 million users; Yahoo! declined to give a breakup of its 6 million user- registrations from India. The issue then is how does one monetise what is essentially a free medium?

Particularly as it's quite clear that basic e-mail will remain a free service. Stickiness and scalability continue to be the mantra of all e-mail providers who insist that customers will not be charged. They will, instead, be served up to advertisers. Of course, e-commerce and e-mail services rest cheek-by-jowl in most portals. Hotmail, for instance, has links to its Passport-affiliate sites, where surfers can shop. Yahoo! has Yahoo Delivers. Rediff has the Rediff Marketplace. And so on.

Value-added Services

You've Got M@il!

e-mail service provider has to pay between $2.5-5 per year for each mailbox

Basic no-frills e-mail will continue to be a free service; stickiness and scalability are the mantras

Infrastructure issues dog potential value-added services like video, audio, mobile, and vern e-mail

The main revenues will come from delivering e-mail infrastructure services to client companies

Advertising revenues come from a small pie, but coupons and discounts have achieved marginal success

The big pie in the e-mail sky is permission-based marketing, but privacy will always be an issue here

The Holy Grail for e-mail service providers. Among the Big Four, only Yahoo! offers customers a heftier, paid-for in-box, for $19.95 a year. Yahoo Mail users can pay $35 a year to register their personalised e-mail address, a trend that has caught on with Indian e-mail forwarding companies-like prettyemail.com-with names like premche.com and loveshrithik.com. ''Our site has done well in terms of page views in the past four months,'' says Rajiv Hiranandani, Head (Sales), Yahoo! India.

Adds Microsoft India's Marketing Manager Karthik Padmanabhan: ''A host of value-added services will be offered over e-mail, which users will have to pay for.'' There's video, audio, and mobility, where a host of Indian firms are moving in. Take Navinmail, a global voice messaging service that provides voice message exchange over local phone lines. A primary user pays for the entire messaging-to call unlimited members of a calling group. Or there's Buzzcity, which summarises changes on selected websites and alerts subscribers-via e-mail, palm pilots, mobile phones, or pagers.

In both cases, revenues are supposed to flow in from advertising, and sharing with TELCOs. While there is potential in such services, technological and legal issues are hindering growth. Multilingual e-mail, provided by some like webduniya, is another area. Though English is still dominant, vern sites are bullish. However, they have to overcome issues of reach, hardware, and translation software.

e-mailing Companies

Revenues from value-added services will come mainly from clients. That's the premise behind Microsoft's Exchange 2000 Server, which plans to deliver next-generation messaging and business collaboration tools. Variations like unified messaging (e-mail to fax, fax to e-mail, e-mail to pager or cell) and group messaging are becoming the order of the day. Microsoft is trying to address issues of e-mail strategy, ranging from housing the infrastructure to licensing e-mail software. Other firms are working on delivering and tracking e-mail campaigns.

Buzzcity charges clients to develop company-specific newsletters, and delivers it to mobile audiences. Intercept Consulting, a Chennai-based Rs 1.5-crore online marketing solutions company, serves up e-advertisements. Or there's enmail.com, targeting small and medium-sized companies. The payoff: value-added services like scanning attachments and attacking SPAM. Says Karthik Iyer, Managing Director, enmail : ''We are a Hotmail for corporates. There is a big gap for small companies regarding their e-mail requirements.''

Another growth area is e-mail answering services. Here, the challenge for companies like Daksh Technologies (which answers Amazon.com's mail) and iseva.com is to climb the value-chain and offer services like voice, text-chat, and co-browsing for visitors to their clients' websites.

Targeted Advertising

Logically speaking, large e-mail providers bet on advertising to serve up to focused audience groups. And while it's true that major e-mail providers do get their fair share of ads, the default click rate for most banners range between 0.2-0.3 per cent. ''Banners on mail boxes is dead, it's interruption marketing,'' says Alok Kejriwal of Contests2win. It doesn't help matters that the Net advertising pie's size is a minuscule Rs 45 crore. Some e-mail providers-like moneyinmail, chequemail, and elabh-have tried to build up volumes by sharing advertising revenues.

Similar experiments in the West have a chequered past, with instances of hackers developing programmes to milch the system. Coupons and discounts attached to email are another potential source of revenue. ''The coupon model works best on shared revenue,'' says Kejriwal, who points out that e-mail contributes 10-15 per cent of contests2win's revenues. Another example: e-mail accounts for 32 per cent of ZDNetIndia's Rs 1.2 crore turnover to date. ''For a niche site, e-mail and databases as a source of revenue have worked, as such sites very little distractive content,'' reveals Anurag Gour Head of Sales ZDNetIndia.

Permission-based Direct Marketing

This is the big pie in the e-mail sky, and everyone is tip-toeing around potential privacy issues. Thanks to e-mail, it's possible for companies to build customer profiles of complexity and subtlety. ''E-mail marketing is the most potent tool of marketing that internet can provide,'' says Yahoo!'s Hiranandani. The usual media is newsletters (where click-throughs are 3-10 per cent), and alerts. Points out Microsoft's Padmanabhan: ''Alerts dovetails into our .net strategy.''

The stark fact is that there is a huge illegal market for databases right now. Says Padmanabhan: ''It's an evolution process. Right now we are seeing hardsell like Spam, but eventually it will move onto helpful selling.'' Adds Meena Ganesh, Director (Service Delivery), customerasset.com: "There is always a privacy issue that comes up. The direct marketing segment is still very much at a nascent stage in India. Once it reaches a critical mass, it will get more exciting.'' Already 115,000 users of ZDNetIndia have given their assent to being sent third-party communication. Walking the fine rope between permission and privacy holds the key in the race for revenues from e-mail.

-Aparna Ramalingam

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