E-mail professionals help get the word out

SAN FRANCISCO -- Janine Popick wants to make sure you get even more daily e-mails in your inbox.

Don't hate her. It's her business.

Her company, VerticalResponse, helps 40,000 small businesses send e-mail marketing campaigns to their customers.

The merchants — primarily restaurants, retailers and dot-coms — could do it themselves. But with VerticalResponse or competitors Constant Contact or iContact doing the heavy lifting, they get professional-looking e-mails with color, images and tracking tools to see who actually reads a message.

"We let them know who opened it and who unsubscribed," says Popick, 41, the company's founder and CEO. "We comply with all the anti-spam laws, and let them focus on running their business."

VerticalResponse is No. 2 to Constant Contact, which works with 250,000 businesses. But, as Popick likes to point out, her private firm is profitable — $500,000 on revenue of $13.1 million in 2008. Publicly traded Constant Contact ctct reported operating losses of $2.7 million in the first three quarters of 2008. (Constant Contact says it is cash-flow positive.)

Rates start at $10 a month to send up to 500 e-mails; most customers spend about $60 a month. The fourth quarter is traditionally the company's strongest period, when sales were up 40% over the prior holiday quarter, Popick says.

Business was a "little bit" down in January, and Popick says she's being less aggressive than usual in sales projections because of the uncertain economy. "It's too early to tell what's going to happen."

A career in direct marketing

Popick grew up on Long Island and began her career in direct marketing working at firms Claris (then owned by Apple) and NBC's then direct sales unit XOOM, which is now a money transfer service.

After she left NBC in 1999, she and husband John Hingley came up with the idea for VerticalResponse while on vacation in France.

"We saw a big gap in the market," she says. "A simple tool for the small-business market to communicate with their customers didn't exist."

They spent four days writing up a business plan, and came back home to raise money for a business aimed at a market that was technologically challenged — most small businesses didn't even have websites.

Popick wasn't swayed when banks and venture-capital firms declined to lend. "It made us scrappier, hungry and leaner," she says.

She used credit cards to pay her monthly bill from Google for ads that helped attract clients. She charged $50,000 on the cards, while friends and family eventually kicked in with $1.2 million.

"She pretty much figured it out from scratch," says Bob Ellis, an investor in VerticalResponse and colleague from her days at XOOM. "There was no off-the-shelf technology and certainly no playbook."

In December, VerticalResponse sent out a record 12 million daily e-mails. The company saw a seasonal dip in January, to 9 million a day.

Customer Albert DiPadova, who runs a website that sells clothing to expectant mothers, sends 150,000 e-mails a week at a cost of about $1,000 a month.

Some 10% of recipients click links in the e-mails to go to his Due Maternity website, far above the direct-marketing response average of 1%.

"I know exactly who opened the e-mail, and whether they bought anything," he says. "It's the most economical and efficient form of advertising there is."

Gina Pell, founder of the Splendora website, an ad-supported guide to female fashions, sends e-mails to 80,000 subscribers weekly.

"Some people might see these e-mails as spam, or hit delete, but most don't," she says. "In one recent e-mail, we generated 2,800 clicks. That's a lot of clicks."

What she likes about working with VerticalResponse is that its e-mails don't end up in junk mail folders — they get through to the consumer.

"If you're found to be a spammer, you will be blacklisted by Internet providers," Pell says. "I've been with VerticalResponse for 10 years, and it's very rare that I end up in junk mail."

How it works

New customers start their campaigns by signing up for the service and choosing one of many templates to design an e-mail. They can create time-intensive newsletters with lots of copy, or basic image-and-text ads. From there, they upload their e-mail list and set a date for the campaign to begin.

Popick says the secret to staying out of spam folders is to screen new clients; most start with under 500 on their lists. "If someone uploads a list with 1 million e-mails on it, we start asking questions," she says.

Richard Davis, an analyst at Needham and Co., says e-mail marketing companies like Constant Contact, VerticalResponse and iContact (No. 3) will do $400 million in business this year, growing to $500 million in 2010 and $650 million in 2011.

Davis thinks the e-mail marketing firms are set to profit from the recession, as advertisers cut budgets for more expensive alternatives. Still, Davis says only 4% of small businesses use e-mail marketing.

Time and fear are two big impediments.

"If you're a small-business (person), you're so busy," says Gail Goodman, CEO of Constant Contact. "You don't have the time to learn about new marketing methods."

And small businesses are sometimes scared of new technology, Popick says. "Our job is to convince them otherwise."

To get its message out, the much larger Constant Contact advertises heavily on radio, including NPR, ABC and the Westwood radio network. Goodman projects growth of 40% to 50% for 2009, even in a recession.

But Jeff Rau, an analyst at e-Marketer, says people are getting so bombarded with e-mail ads in their inbox that the effectiveness is slipping. "The returns are diminishing and will diminish further if marketers don't do a better job of targeting their customers with offers they actually want to receive."

Both Constant Contact and VerticalResponse send their clients frequent e-mails to enlighten them on more effective marketing methods, and offer video tutorials and webinars as well.

The message is the same: Send more targeted e-mails to customers to keep in touch, and make sales.

"I know we were really early at it, but there's still a lot of education that needs to be done," Popick says. "I figure I'm about 25% of the way there."