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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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Has AOL Just Endorsed Paid Spam?

Comments (19)

I’ve been deeply involved in the email business for the past decade through investments in companies like Postini, Return Path, Critical Path, MessageMedia, and Email Publishing and have been involved in the challenges of separating spam from legitimate email for a long time.  On Monday, AOL announced a set of changes that I think are a gigantic step backward for users of email.  While their announcement – that they are phasing out their IP-based Enhanced Whitelist and implementing Goodmail’s CertifiedEmail program – seems simple enough, I believe it is ultimately validation and support for “paid spam.”

As an investor in Return Path, which has been deeply involved in the issue surrounding email reputation (e.g. is this piece of email spam; is emailer-X a spammer), I’ve always thought that the “pay for delivery” approach is absurd.  While intellectually it might seem interesting (e.g. a mailer needs to pay a small fee for each email he sends), it results in horrible unintended side effects.  At Return Path, we’ve spent an enormous amount of time over the past few years discussing and exploring this approach and continually come to the conclusion that it’s fundamentally flawed, bad for legitimate emailers, and terrible for email end-users who simply “want the good stuff but not the bad stuff.”

Fred Wilson – my co-investor in Return Path – has written an excellent explanation of why this is a problem.  Matt Blumberg – the CEO of Return Path – has weighed in with a thoughtful, direct, and pragmatic reaction.  Jason Calacanis – the CEO of Weblogsinc and now part of AOL – asks straightforward questions to try to better understand the issue (and generates a great comment thread on what’s going on as people dig in and understand this better.)

Last night at dinner I had a long conversation about this with the CEO of a major email security provider (not the CEO of our investment – Postini) who wants to remain unnamed because he’s uncomfortable with “rattling AOL’s cage” about the issue, even though he thinks it’s an absurd approach.  Given AOL’s market power here, his reaction is typical – AOL obviously has the right to behave as aggressively as they want (e.g. “if you don’t agree with our approach, we aren’t going to let your mail through”).  Of course, any rational AOL end-user who cares about what shows up in his inbox also has the right to simply say “screw it – I’m already paying AOL to deliver my email and block spam (anyone seen an AOL commercial lately?) – they aren’t doing it, I’m switching to Yahoo / MSN / Gmail.)  Market power can be a dangerous thing – both directions – and I don’t think AOL has considered this carefully yet.

Following are two examples of the problem here.  Assume AOL does in fact phase out their IP-based Enhanced Whitelist as they state they are going to. 

eBay Example: eBay sends out an enormous number of transactional emails each day.  I’m an active eBay buyer and I rely on these emails when I’m bidding on something (each time someone outbids me, I get an email, which is what I respond to.)  In the “new AOL email model”, eBay is going to have to pay to get every one of those emails delivered.  I have no idea what the numbers are, but they are big ($10m / year, $100m / year?)  Either AOL is going to have to make an exception for eBay (which effectively guts the program) or they are going to have to get eBay to pay.  Given that eBay is already paying AOL a bunch of money to advertise on AOL, eBay is already paying the cost of sending the emails, why are they going to be willing to pay anything to AOL for the AOL users to receive the emails?  This isn’t going to happen and either (a) AOL is going to end up making an exception for eBay or (b) eBay is going to stop sending email to AOL users.  Hmmm – wonder what happens at that point?

Feld / FeedBlitz Example: I have a growing list of subscribers to my Feld Thoughts blog via email.  I’ve outsourced this to a service called FeedBlitz which is tightly integrated with my blog and my FeedBurner feed.  100% of my subscribers are opt-in – they have explicitly asked to get my content.  This is true across all of FeedBlitz’s users.  We (either FeedBlitz or Feld Thoughts) are now going to have to pay to have email delivered or AOL users aren’t going to get it.  I have no interest in playing this game – I’ll simply tell my AOL subscribers that they have lots of other free email services available to them that accept my email.

I don’t really care whether or not AOL implements Goodmail’s solution.  The fundamental problem is that AOL is phasing out their IP-based Enhanced Whitelist and forcing all mailers to either pay Goodmail (and correspondingly AOL since they get a big cut of the revenue) or no longer be considered legit email.  The simple solution is to continue supporting the IP-based Enhanced Whitelist (and other logical solutions that enhance the quality of the email they let through.)  Hopefully the service providers and end-users in this ecosystem that understand the issues will be brave enough to speak out clearly to AOL and AOL will be brave enough to look out for their end-users.  If not, AOL is effectively telling the spammers of the world “if you are willing to pay AOL, we’ll deliver your mail to our end-users.”  If I was an AOL end-user and I understood this, I wouldn’t be an AOL end-user for very much longer.

  • http://www.calacanis.com Jason

    Brad,

    That headline is dishonest, you know for a fact we are not endorsing spam. GoodMail lets you pay them (and AOL) to get *optin* mail through.

    Your porfolio company lets folks pay *you* (and you alone) to be “approved” for sending in email.

    Are you endorsing spam?

    Really.

    http://www.calacanis.com/2006/02/01/brad-come-on-try-and-be-fair-and-objective-more-on-return-pat/

    Jason

  • http://www.feld.com Brad Feld

    Jason – I appreciate your constructive commentary and you getting engaged in the discussion. I think this is potentially a huge issue that has not been carefully thought through yet.

    Re: the provocative headline, the “?” clearly signals that I’m asking a question. I’ve seen loads of sensationalist headlines in the blogosphere over the years – I’m just encouraging people to think hard about the issue. My opinion is – as I state in the post – is that this path ultimately leads to “validation and support for ‘paid spam’”. That’s me making an informed assertion based on what I know today. I am NOT asserting that AOL wants spam, supports spam, or embraces spam – I don’t believe this is AOL’s philosophy, desire, or intent.

    Re: AOL continuing their whitelist. I’ve heard from a number of people at this point that AOL has stated that they are phasing out the enhanced whitelist. If this isn’t true, that’s GREAT. If they aren’t forcing mailers to use Goodmail stamps to achieve the highest level of the email / user experience, that’s GREAT. But – that’s not what I’m hearing – both directly and indirectly – from many people in the industry.

    Re: AOL only letting “optin” email through. That’s the core of the issue. Defining “optin” from a receiver and a mailer perspective is complex, which is the whole reason I think this is a terrible approach. When a mailer is willing to pay for stamps and starts getting a negative “reputation” (by whatever measure you want to use), what do you do? How do you insure that the mailer is sending only to opt-in addresses in the first place? How do you know the opt-in’s are still valid? I’ll never begin the address the complexity here – having been arguing about this (from all sides) for a decade I strongly believe that reputation and accredidation are a lot more than someone saying “they are opt-in”.

    Re: Return Path. As I said in my post, I don’t really care if AOL works with Goodmail instead of Return Path (although – of course – it doesn’t have to a mutually exclusive phenomenon.) Bonded Sender – which is the Return Path product you are referring to – is a tiny part of Return Path’s business and the program is not simply a “people pay Return Path to be approved” – the Bonded dynamics are much more significant than that (http://www.returnpath.biz/delivery/bondedsender/). The bulk of Return Path’s business in this area is around improving mailers’ permission practices and reputations, which both improves the mailers’ response rates and deliverability organically. This actually lowers the burdens on ISPs while improving the end customer experience.

    What I do care A LOT about is that if a major ISP takes what I think is a user and mailer unfriendly approach to spam (which I think ONLY using Goodmail would be), the world should know. If AOL continues the enhanced whitelist, enabling mailers with great reputations to continue to get mail through at the highest level to AOL users, that’s great. However, that’s not my understanding of the plans and that’s what I’m reacting to.

  • http://worcester.typepad.com/pc4media/2006/02/aols_new_email_.html pc4media

    AOL’s New Email Marketing Tax

    If you want to follow this conversation, start here, here, here and here. If you want to follow where Jason Calacanis starts to speak BIGCO talk, read here. Here’s my response that I posted as a comment at Jason’s last

  • http://www.red5studios.com Taewon Yun

    This is interesting. Similar thing has been tried a few years ago in Korea. Daum, the biggest free e-mail provider “Hanmail”, adopted same technology and policy for their inboxes.

    What have resulted is that, as you predicted, it didn’t stop spams but blocked tons of legit e-mails. While they maintained the whitelist, a bulk of Korean web companies just service providers stopped sending e-mails to Hanmail inboxes and asked their customers to provide other e-mail addresses.

    Personally, I was pissed off personally and professionally. I had my own e-mail account. I still receive tons of spams and less legit e-mails. Professionally, I was about to launch World of Warcraft at Blizzard Korea and have zero intention to pay “tax” to Hanmail for our e-mail.

    It was said that pretty much every Korean owned Hanmail account a few years back. Now I see less and less Hanmail account owners even after Hanmail dropped the policy after a couple years trial.

    What is more interesting to me is, Hanmail was free and AOL is not.

  • http://postmaster.aol.com Charles Stiles, AOL Postmaster

    Sour Grapes?

    I, too, have been on the front lines of AOL’s spam fighting operations for three years, and I know I speak for the company when I say the last thing AOL would do is endorse a “paid spam” program. Given the overall lack of reliable information and the propaganda being slung around on this issue, I want to take this opportunity to set the record straight.

    First, AOL will continue to offer IP-based white list and enhanced white list privileges to mailers that do not wish to take advantage of the CertifiedEmail program. As long as there is market demand and operational need for these services, AOL will continue to operate them.

    Second, providing the opportunity to present qualified email with enhanced functionality is a step forward for the industry, not a step backward — as some Goodmail competitors suggest. This was the original intent of the enhanced white list, and we are further delivering on this promise with our Goodmail initiative. The CertifiedEmail program was developed for highly qualified mailers sending permission-based messages to existing customers – this is an optional premium service we are offering above and beyond our existing whitelist services. And, we’re confident the market will understand the value of this program when they take the time to evaluate it

  • Stubby

    “GoodMail lets you pay them (and AOL) to get *optin* mail through. ”

    B..b..but, didn’t AOL users already pay AOL to get mail? And didn’t the user already *optin* to get that mail? Why exactly are the senders having to pay as well?

    This sounds suspiciously like the head of AT&T grumbling about Google and Yahoo: “Why shouldn’t they pay to use our pipes?” I’d say the answer is the same here. Their customers already paid. No double dipping, please!

  • http://andrewbfife.blogspot.com Andrew Fife

    Charles:
    I think that you make a good point of clarification, that the goodmail technology is in addition to the whitelist. What still isn’t clear is when and why legitimate mass-mailers like ebay will pay. You mention that they can still use the old system or pay for new systems value-added features. I guess I don’t see the value-add. I admit that I don’t know how much pain the whitelist based system is causing ebay. However, I imagine that it can be measured by taking the difference between the number of AOL email accounts in their marketing db and the number of messages that are succesfully delivered into AOL user’s inboxes. Is the gulf really that big?

    Also, I’m happy to admit this isn’t my industry so I may be missing something but doesn’t this really solve the marketer’s problem and not the consumers?

    If you want to help consumers try creating/enforcing standards around optout policies… speaking of ebay, I’ve hit the unsubscribe link the email they send me many times and I’ve still yet to figure out exactly how I can change my account preference to stop recieving their promotional emails. On the other hand some companies let me optout very easily.

    I wish you’d create filters on based on these types of policies.

    -Andrew

  • http://www.feld.com Brad Feld

    Charles – thanks for the detailed comment. I’m very pleased that you are planning to continue the IP-based white list and enhanced white list indefinitely. As I mentioned in my original post, this is my major issue.

    I’d heard that AOL explictly planned to phase out the whitelist approach by mid 2006 from a number of people that I have no business relationship with (both directly and indirectly). In addition, this has been reported very directly in the media, including the following articles (I specifically linked to the ClickZ article in my original post as it appeared to directly source this information.)

    DMNews Article

    ClickZ Article

    I don’t believe in the Goodmail solution as an exclusive approach. Goodmail plus the IP-based white list and other accreditation approaches that don’t cost the mailer a tax for sending legitimate opt-in email is perfectly reasonable – if a mailer chooses to pay for stamps AND has appropriate accreditation, that’s their choice. If a mailer does NOT choose to pay for stamps YET has appropriate accreditation, then their mail should still be handled the same way.

    I very much appreciate your clarification on the IP-based white list. I’ll be presumptuous and suggest that you reach out to the media that has reported on this and clarify this position as it’s been clearly misunderstood.

    Re: Your suggestion that this is “sour grapes” – I’ve been open and direct that I’m an investor in Return Path. While Return Path has a competitive approach to Goodmail via their (Bonded Sender product, this is a small part of their business. The vast majority of Return Path’s business in this area centers around helping mailers improve their permission practices and reputation. While it’d be great if AOL supported Bonded Sender also, I’m much more concerned about what I viewed as a deeply problematic approach – forcing mailers to pay for reputation. I’m happy that you are NOT planning to do this.

  • http://worcester.typepad.com/pc4media Peter Caputa

    I am glad to see that AOL has reversed their plan to phase out the whitelist. Or if we give them the benefit of the doubt, they’ve corrected the misconception.

    However, they are still creating a caste system between email marketers that can afford to pay to deliver messages and email marketers that can’t pay. The ones that can’t pay will not be stamped with “AOL certified”, their images will not be shown and they will not get “much needed consistency and uniformity”.

    The last time I checked with most certification programs, they weren’t supposed to be bought and paid for. This is an obvious conflict of interest where a marketer is paying for AOL to endorse the message to the consumer.

    What I would suggest is that AOL adopt Goodmail, Habeous and Bonded Sender Program.

    It is obvious to me that AOL has chosen the certification program that puts cash in AOL’s pocket instead of a) choosing the best option for fair and ubiased certification or b) letting the buy side of the market (eg email marketers and their ASPs) have a say in the decision.

    Right now, AOL is exploiting their unique market position to choose the program that benefits them.

    I would much rather see AOL (and all the other ISPs) adopt multiple certification programs. Then, let email marketers and email marketing ISPs decide which solutions to adopt. Then, have ISPs correlate consumer spam complaints to effectiveness of each program and adapt delivery accordingly.

    That would show real leadership.

    Is that a possibility, Charles?

  • http://www.plum.com Hans Peter Br�ndmo

    Long time Brad. I�m glad to see that you and Fred Wilson are standing by and defending your investment in Return Path. I nevertheless think you are crying wolf for reasons that have much more to do with getting a return on that investment than solving the spam and email fraud problem.

    That said yours was a thoughtful considered response and therefore not as fun to debunk as Wilson�s �excellent explanation� that you referenced in your post. So permit me to respond to both of you here.

    First i can�t let this one go in Wilson�s post: �Bribing your way into inboxes�. Come on. That sounds like a politician with a sound byte.

    Is paying the USPS postage equivalent to bribing the postman to carry my mail? Or is paying my ISP every month equivalent to bribing SBC to give me access to the Internet?

    The examples used are misguided. Banks cannot reliably send you your statement by email today because they don�t know where it will end up. The alternative: send them by snail mail while killing trees and paying printers and the USPS a lot more than a fraction of a penny in the process. The good news is that if you do pay the postal service you can be pretty confident your mail will be delivered. The bad news is that if you don�t pay them they won�t pick it up ;-)

    A little economic friction applied to commercial senders of bulk email will not be a bad thing. In fact I am convinced it will achieve a number of good goals, one important one being to increase the quality of the commercial email I receive.

    As far as your concern about your Feld Thoughts email goes, I agree that this is something we must watch out for. In fact I wrote about this a couple of years ago in this ClickZ article. There are certainly issues we need to stay on top of when putting an infrastructure in place that enables transactions in mail, but you seem to be making an assertion that the good mail won�t get through with the Goodmail solution, and that�s a wrong assertion.

    The problem with spam is at its core a problem of accountability. There is a bug in email at the infrastructure level that makes it very difficult to hold senders accountable for bad behavior. Goodmail has developed a very elegant solution for dealing with this problem and AOL should be congratulated for partnering with them and taking a leadership position to bring trust and accountability back to the medium. Keep in mind (as I mention in the article above) that you can make all kinds of trusted assertions with a Goodmail token. This is ultimately not about �stamps in email�, it is about bringing trust and accountability back to the medium.

    In the spirit of full disclosure, I am a tiny (angel) investor in ReturnPath and an advisor to Goodmail. So I have a very small amount of stock/stake in both companies. To top it off I started one of the earliest email marketing companies, Post Communications (now YesMail) in 1996 so I have been thinking about this problem for a while too.

  • http://www.feld.com Brad Feld

    Hans Peter – I’ll keep this one short since I don’t feel like repeating what I’ve said in a few of the other comments to the comments.

    My issue is not that AOL is using Goodmail. My issue is that AOL announced they are using Goodmail exclusively and phasing out the IP Whitelist, which effectively means that all mailers – for all types of mail (transactional or otherwise) must use Goodmail. This is a really really bad idea (for all the reasons I’ve said above.)

    While I’d certainly like it if AOL used Return Path’s Bonded Sender, I care A LOT MORE that AOL continues the IP Whitelist approach and gives mailers a choice based on reputation – if I have high reputation, I should get the same delivery level as if I pay for delivery.

    Charles Stiles, a representative of AOL, commented on this post that “AOL will continue to offer IP-based white list and enhanced white list privileges to mailers that do not wish to take advantage of the CertifiedEmail program.” This is good and – while it contradicts what I initially heard and what the press initially reported – moderates my concern considerably. I’ve continued to hear things that appear to contradict this position so I’m hopeful that AOL will clarify this to their customers, partners, mailers, and the industry in general.

  • http://worcester.typepad.com/pc4media Peter Caputa

    I have no conflict of interest with any of these companies, and I would like to see multiple certification systems implemented at all ISPs, especially Return Path’s BSP.

    Anything else is equivalent to big boys playing big games. Implement multiple solutions, and let the market and the effectivness of each approach effectiveness decide which is best.

  • http://blog.tomevslin.com/2006/02/its_my_mailbox_.html Fractals of Change

    It’s My Mailbox; Pay Me

    AOL and Yahoo are preparing to charge large mailers for “priority” delivery to user mailboxes. You can read all about it here in the NY Times or almost anywhere else online. Allegedly this is an anti-spam effort rather than a revenue-raising exerci…

  • http://csertoglu.typepad.com/sortipreneur/2006/02/yahoo_and_aol_s.html SortiPreneur

    Yahoo! and AOL Sneakily Selling Our Attention

    (Let me start this with a disclosure: I do not like AOL. I don't like their walls, which they finally took down recently, and nickel-and-dime attitudes.) NY Times reported Sunday that Yahoo and AOL are planning to roll out a

  • http://csertoglu.typepad.com/sortipreneur/2006/02/yahoo_and_aol_s.html SortiPreneur

    Yahoo! and AOL Sneakily Selling Our Attention

    (Let me start this with a disclosure: I do not like AOL. I don’t like their walls, which they finally took down recently, and nickel-and-dime attitudes.) NY Times reported Sunday that Yahoo and AOL are planning to roll out a

  • http://csertoglu.typepad.com/sortipreneur/2006/02/aols_email_misu.html SortiPreneur

    AOL’s Email Misunderstanding (and the Rights of Spammers)

    I (and many others) wrote about AOL and Yahoo’s announcement regarding the enhanced emailer whitelist and the use of Goodmail last week, and now it seems like there has been a misunderstanding, and that the enhanced whitelist will remain in

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