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Late Entrants Play Catch-up in E-Mail Marketing

What's the hottest marketing medium that the industry's biggest players are throwing money at? It's the Internet's original "killer app," the most widely-used, but, until now somewhat overlooked, technology -- e-mail.

In the past few weeks, the industry has seen the two leaders in the advertising business -- CMGI Inc. and DoubleClick -- make big moves to stake claims in direct e-mail marketing. CMGI (CMGI) recently acquired yesmail.com in a deal valued at around $500 million; and DoubleClick (DCLK) recently laid out plans for the launch of its direct e-mail products, acquiring Opt-in Email.com in hopes of accelerating its entry into the market.

Suddenly e-mail direct marketing is a "must-have" capability. Why now, when e-mail has been around since before the web?

"E-mail marketing is a relatively new medium," says Dave Tolmie, yesmail.com's president and chief executive officer, "and I think it's taken a relatively long time to gain traction because of concerns about spam."

Advertising in e-mail newsletters has been equally slow to catch on.

"Everybody I was talking to, of course, used e-mail, but they were so in love with the Web that they didn't recognize that e-mail could be an advertising medium" said Tom Watson, co-founder of @NewYork.com, an internet.com publication that began as a newsletter in 1995.

But now, it appears, both e-mail direct marketing and newsletter advertising is taking off. The concept of opt-in e-mail is growing more widely accepted, and advertisers are beginning to recognize the value of highly-targeted e-mail newsletters.

Tolmie refers to it as an "inflection point," where an interesting new approach becomes a "must have." The growth and consolidation is apparently a response to advertiser and marketer demand for one-stop shopping and coordinated campaigns. "As we build a relationship with the client," says Tolmie, "they ask 'can you do this other thing for me?'"

So the biggest players are rushing to add these capabilities to their arsenals, either acquiring other companies or building new products themselves. DoubleClick has taken this second approach, saying that building was more cost-effective than buying.

"We tried to build a system that anticipates the needs of the market two years out," said Eli Chalfin, DoubleClick's vice president and general manager of direct response. "We feel it's very compelling one-stop shopping."

Although Chalfin's company has announced its strategy indicating it wants to be a player in this game, it won't actually have products until next year. DART for Publishers, a solution that inserts ads and content into e-mail newsletters, will have its beta launch in early January, and will officially be offered at some point in the first quarter. The second offering, DART for Advertisers, a direct-marketing product, won't be ready until the second quarter. The acquisition of Opt-in E-mail.com was an attempt to jump-start the company's entry into this second market, since DoubleClick is trying to quickly serve clients of another of its acquisitions, Abacus Direct.

What DoubleClick hopes to create with all of these moves is a full-service shop for advertisers, where they can come to buy ads across its networks, as well as in e-mail newsletters. While they're there, perhaps advertisers will also pick up a targeted list of e-mail addresses, or do a campaign.

"What we felt was the compelling value proposition here," said



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