Peter WilsonLashBack, LLC

Affiliate Summit EastEmail Evolved: Compliance and DeliverabilityPhiladelphia, PAAugust 20, 2013

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Introduction Peter Wilson, CEO of LashBack Leading provider of compliance services, brand protection, and marketing

intelligence to digital marketers We provide critical visibility on compliance and email marketing to our

clients Growth business, celebrating our 10th year We have unique products and deep expertise in the email market

ComplianceMonitor and BrandAlert used by major brands, agencies, and networks

Heavily investing in technology Review millions of B2C emails on a weekly basis Hold a U.S. patent for processing unsubscribe requests Manage a large database/blacklist based on sender reputation

Member of the PMA’s Compliance Council and the Leadership Council of the Online Trust Alliance

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Key questions With all of the focus on social media and other channels, how important is

email anyway? Does email marketing still work? How is email changing? What are the key compliance issues? What are the key deliverability issues? How are compliance and deliverability related?

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What does the email market look like?

Social mediaSearch

Integrated, cross-channel branding

Email

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What does the email market look like? Email is not dead or dying, but the market is evolving significantly. "The rumors of my death have been greatly exaggerated“ -- Mark Twain It is, in fact, HUGE.

Over 3 billion active email accounts 95% of adult Internet users use email

72% have more than one address More than 90% of Internet users between 18 and 72 said they send and

receive email daily (Pew Internet and American Life Project)

For the most part, EVERYONE RELIES ON EMAIL.

“Not having an email address is the digital equivalent of being homeless”“Facebook is the largest email sender in the world”

Dela Quist, Alchemy Worx

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Email is a priority for most people

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Email dominates online communication

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Email is the #1 use of smart phones

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Email is the #1 use of tablets

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Email is a trusted channel

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Email’s core dynamics Email is ubiquitous and easy to use It is a market dominated by 4 providers

In general, there are a few key types of mail Commercial (3rd party)

CAN-SPAM defines a “commercial message” as “any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service”

Acquisition mail - Offers sent to lists of consumers that have provided permission

Spam – “Unsolicited commercial email” or “unsolicited bulk email”, email sent without consent

Transactional (1st party) Messages that relate to existing business relationships or transactions

(customers/subscribers) Also known as relationship or retention mail Receipts, follow-up messages and information, coupons, newsletters

Other Personal and corporate

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Email marketing works

72% of survey respondents described email's ROI as excellent or good.Econsultancy

Promotional emails are one of the top influences of retail website visits.

ForeSee Results

57% of global consumers say they are more likely to buy a product in a store after receiving a marketing e-mail about it.

eDialogue

More than 50% of consumers make purchases as a direct outcome of email. It also drives more ROI than any other channel including social media and PPC advertising.

ExactTarget

Email brought in $39.40 for every dollar spent in 2012.Direct Marketing Association

44% of email recipients made at least one purchase last year based on a promotional email.

Forrester Research

Customer acquisition via email has quadrupled over the last four years.Custora

Most of the $690 million Obama raised online came from fundraising e-mails.BloombergBusinessweek

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Email marketing works (July 2013 update)

Direct Marketing News - July 10, 2013 Email services provider AWeber stated it expects 85% of SMBs to

increase use of email in 2013.

TIME Magazine - July 29, 2013: In a new survey from Forrester Research and Shop.org, a division of

the National Retail Federation, 80% of retailers said they planned on spending more this year on e-mail marketing campaigns.

WIRED - July 1, 2013: “Email is Crushing

Twitter, Facebook for Selling Stuff Online”

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Email players and issues The cost of sending is so low and the information/access so great that there is a TON

of mail, much of which consumers hate Users feel it is a “personal” and constant channel, and want it simple and

uncluttered Providers try to filter and organize (like the new Gmail tabs) Senders try to increase relevancy or get around the filters (and, now, the tabs) Regulators try to enforce standards and litigators try to profit from

noncompliance Often the only options available to a consumer are:

Read, ignore, delete, report as spam Senders with permission have generally done a poor job of establishing relevance

I get too much of this… I don’t want it… I don’t remember signing up for it… Often consumers don’t realize that they did provide consent and label messages as

spam as the easiest way to stop them (even though they are not spam) Significant issue for legitimate advertisers and senders Senders must keep a good record of opt-ins

Senders have to deal with unpredictable changes in mail filters “Gaming the system” has become increasingly difficult Focus needs to be on engagement and relevance

Senders also have to deal with undelivered mail According to Return Path, more than one in five opt-in messages don’t get to the

subscriber’s inbox

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Few clear trends in performance

SilverpopMean

2010 Report(2009 data)

2012 Report(2011 data)

2013 Report (2012 data)

Unique open rate

22.2% 20.1% 19.7%

Gross open rate

42.1% 44.9% 38.6%

Click-through rate

4.5% 5.2% 3.6%

Click-to-open rate

18.5% 19.3% 18.0%

Hard bounce rates

5.5% 2.1% 2.2%

Unsubscribe rates

0.21% 0.31% 0.25%

Complaint rates

0.09% 0.08% 0.07%

Epsilon Q42009

Q4 2011

Q1 2013

Q1 2013 Acq. only

Open rate 22.0%

24.8%

31.1%

24.5%

Click-through rate

5.9% 5.2% 5.1% 2.9%

Click-to-open rate

11.8%

Bounce rates

3.7% 3.6%

“People have lives… If you want a 100 percent open rate, send one email to your mother.”

Dela Quist, Alchemy Worx

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How is email evolving? “If you don’t like change, you’re going to like irrelevance even less.”

General Eric Shinseki, retired Chief of Staff, U. S. Army

Inbox organization solutions are proliferating Changing the visibility of offers beyond the existing bulk versus inbox

paradigm Messages must be designed for mobile and multiple screens/devices

Consumers have little patience for slow or incorrect rendering Increasingly customized and dynamic multi-channel messages

Optimization - customer profile, behavior, and location impact message content, timing, and frequency

Integration with social Real-time testing Providers like: AdStack, LiveIntent, Movable Ink, Sailthru

Filters are increasingly effective Filter changes are coming more frequently and are more effective and, as a

result, some email publishers are struggling with consistent deliverability DMARC and other authentication protocols are increasingly important IPv6 is coming and likely shifts the reputation focus toward domains

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Takeaways The good

Email is universal and not going be displaced anytime soon Billions of non-spam messages every day

Email marketing is very effective The bad

Consumer frustration with clutter Evolving rules for deliverability Insufficient focus on compliance

The ugly 70-95% of all email sent is spam 50+ billion spam messages daily

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Compliance

Failing to comply can be very costly in terms of reputation, delivery, relationships, fines and

other costs

Compliance is a critical piece of email marketing

“Compliance is the foundation of best

practices that shapes reputation and drives

profits and deliverability”

“Responsibility and Results”, two critical aspects of success in

direct marketing

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Regulation and compliance Regulation

CAN-SPAM California Business & Professions Code

All publishers who market to an individual residing in California need to comply Other state-based regulation Canada’s Anti-Spam Legislation (CASL)

Applies to anyone sending to an address in Canada Serious questions about its future

Industry-based standards and best practices Such as in the education and lending industries

“OLA takes compliance seriously and we expect all of our Members to as well” Corporate policy Specific advertiser requirements

Obligation to monitor your partners Consumers often don’t distinguish between advertiser, sender, list owner, network, etc. Responsibility and exposure can’t be delegated, and that indemnification likely isn’t

worth what you think it is Per the FTC: “you can’t contract away your legal responsibility to comply with the

law”

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CAN-SPAM basics Content compliance

Message contains no false or misleading header information - “From”, “To”, “Reply-To”, and routing information must be accurate, and not deceptive or misleading

“Subject” line should be relevant and not misleading Message must be identified as an advertisement Message must include a valid postal address for the sender (note: “sender” is the

party who’s product, service or site is advertised or promoted by the message) Best practice: should contain two valid postal addresses (sender and publisher)

Unsubscribe compliance Message must include an opt-out mechanism for the sender

Best practice: should contain two visible, functioning, hyperlinked opt-out addresses (sender and publisher)

Unsubscribe requests must be honored within 10 business days No suppression list abuse

Sending & data compliance Message not sent through open relay Message not sent to harvested email

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Examples of industry-specific compliance issues

Education Employability cannot be guaranteed All citations and sources for school statistics must be present and up to date

Credit reporting “Subject” line should not offer to improve consumers’ credit ratings, credit history,

or credit record, nor give advice or assistance to consumers on how to improve their credit ratings, credit history or credit record

Jobs “Subject” line should not imply guaranteed income

Lending “Subject” line should not offer amounts in excess of $1,000 or same day credit

Grant offers used to promote education, job, or business opportunities and advertising easy access to cash are a major red flag, as evidenced by recent FTC action.

In May, the FTC began mailing refund checks totaling $1.7 million to more than 20,000 consumers that were defrauded by a group that falsely claimed they could help consumers get free government grant money.

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Impact of non-compliance Per CAN-SPAM, each separate email in violation can generate a fine of up to

$16,000 FTC, FCC, State Attorneys’ General

Multiple recent prosecutions (e.g., Acquinity) and fines involving email marketers, affiliate marketers, text messaging, online advertisers, and merchant processors

Often personal liability Class action suits, litigation, and threats

Attorneys – such as the precedent setting victory by Dan Balsam against Trancos

Corporations – such as “Utah Court Issues $1.6 Million CAN-SPAM Judgment” in favor of Zoobuh

Consumers – such as “Dear CEO, you have sent me messages without permission, I have documentation, send me ‘X’ thousand dollars by ‘Y’ date or I will file suit”

If you work with lead aggregators and focus only on whether the lead works, you are overlooking your real exposure. How was that lead driven to the form? An education lead that originated with a misleading grant email comes with significant liability to all of the parties.

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Aggressive does not equal non-compliant Direct marketing requires a strong message/call-to-action People often wrongly equate “compliant message” with “weak or ineffective message” It is important to recognize that acquisition email can be both compliant and effective, if

not aggressive The key threshold is that the message cannot mislead Subject lines like this are compliant and effective:

“Free credit scores with enrollment” “Financial aid is available for those who qualify”

Further, the use of personalization and geo-location (“merge tags”) in subject lines are not a violation of CAN-SPAM “Bob, you may qualify for financial aid” “Philadelphia area auto coverage”

A commitment to compliance does not mean that messages can’t be strong and aggressive, it just means that they can’t mislead

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Deliverability

“Is this really that big of an issue?... I've learned the answer is a resounding

‘yes’.”

“Deliverability is an issue that keeps many email marketers awake at night.”

“Deliverability remains the biggest

challenge faced today”

“Email deliverability is the single most critical

factor to the success of email

campaigns.”

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Deliverability myths From a June posting on Deliverability.com, by Spencer Kollas, the head of delivery for

CheetahMail: “… despite the vast amount of information available on the subject, email

professionals and marketing experts alike still have many questions around deliverability.” “Deliverability is all about who you know, if you have the right contacts at the

right ISPs, you can get all of your clients mail through to the inbox -- FALSE” “I can’t use certain words in my emails, especially not in my subject lines --

FALSE” “Deliverability is a black art that only a couple of people really understand, and

those people want to keep it that way -- FALSE” “Deliverability folks are always working for the ‘other team’ -- FALSE”

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What determines deliverability? Factors impacting deliverability (inbox versus bulk versus blocked versus

promotions folder) The components and intent are straightforward, but the details are constantly

evolving Reputation

Complaints (unrecognized, unexpected, unwanted) Working unsubscribe Bad addresses

Invalid addresses/unknown users and rejected/bounces (list source, hygiene) Spam trap hits (list source, hygiene)

Sending infrastructure (IP address/domain, trusted sender/whitelists/blacklists) Sending stability (size, volume, frequency, timing)

Engagement (open, read, clicked, moved from spam folder) Right message - Good, relevant content Right design - Good design, rendering Right time Right frequency

Authentication DMARC, SPF, DKIM

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Varied approaches to delivery

Gmail Yahoo Outlook AOLReputation and engagement

• Most aggressive at blocking bulk commercial mail

• No whitelist

• SpamGuard looks at complaints and engagement

• Whitelist

• Reputation metrics

• Subscriber “safe” lists

• Reputation data via Smart Network Data Services (SNDS) program

• Symantec/Brightmail Probe Network

• Smartscreen filtering

• Proprietary content-level filtering

• Whitelist

• Spam filter (complaints, content, traps, etc.)

• Spamhaus

Authentication • SPF, DKIM, and DMARC

• SPF • DKIM

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Trends in deliverability Vast majority of commercial messages sent are spam and blocked

According to Kaspersky estimates, the percentage of spam in email traffic in June was up 1.4 percentage points and averaged 71.1% (this compares to 71.9% a year earlier)

Commtouch estimated daily spam messages at approximately 54 billion in June, the lowest level in years, and the share of spam in the entire email volume at 81.2 percent in Q2

Of worldwide commercial, permissioned mail during the first half of 2013, Return Path has estimated: 18% was blocked or missing 4% went to spam folders 78% was delivered to the inbox (down 4% from a year earlier) In the U.S., 86% was delivered to the inbox (unchanged from a year earlier)

Anecdotally, delivery of acquisition mail is getting much more difficult Filters are more sophisticated and changing more frequently

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The links between compliance and deliverability In many respects, both deliverability and compliance are about the

quality and perception of the message A message that isn’t misleading, has a relevant subject line, and

contains clear postal and opt-out addresses, is likely to be compliant and more engaging, and result in fewer complaints The opposite is also true – a message that doesn’t contain these

elements is more likely to be dismissed by the consumer, labeled as spam, and negatively impact delivery

Ensuring that messages sent (by you or on your behalf) are compliant will not only protect your interests in terms of CAN-SPAM and other requirements, but should also improve delivery

In a February 2012 MAAWG presentation called “Case for Compliance”, iContact described how an increased focus on compliance dramatically increased their delivery and profitability. Tighter controls have helped them to reduce complaints, “turn the ship around” in terms of delivery, and “dodge a bullet”.

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Unsubscribes Unsubscribes are a particularly important part of both compliance and

delivery If it is not a simple or trusted mechanism for the consumer to unsubscribe,

then they are much more likely to report the message as spam, which will significantly impact reputation and future delivery

Further, if an unsubscribe request is not honored, it will impact blacklisting and potentially being blocked by the ISP

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Conclusion Email marketing is a huge opportunity with a great ROI It is a multifaceted and evolving market that requires understanding and dedication Success comes from delivering a message that is acted upon

No one would debate the relationship between delivery and engagement/relevance Compliance is a significant issue on its face, in terms of actions by regulators, lawyers,

and consumers It is also linked to delivery just as engagement is… non-compliant messages

will impact delivery In today’s market:

What makes it to the inbox and what a consumer wants are increasingly tightly connected

Consumers expect quality ads that are compliant, and ignore or report those that aren’t

Gaming this is increasingly futile A successful campaign has to “check all of the boxes” – engagement, reputation,

authentication, and compliance

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Conclusion

Thanks for your time and let me know if you have any questions.

Peter Wilson

Chief Executive Officer

Direct: 314.754.2286

Email: peter@lashback.com