Spam with a silver lining

Like getting commercial E-mail? How about commercial E-mail with flashy graphics, animation and sound? What if somebody paid you to get this stuff, in the form of frequent-flyer miles, restaurant discount coupons, or credit at chains such as 1-800-FLOWERS?

If a small company called Intellipost has its way, computer users will be offered the opportunity to receive multimedia advertisements in their E-mail boxes -- along with airline miles and the rest -- whenever they sign up for their E-mail accounts.

( Intellipost CEO Steve Markowitz explains how Intellipost works and why he thinks consumers will flock to sign up.)

As strange as the idea might seem, San Francisco, Calif.-based Intellipost's "Bonus Mail" model combines two of the most powerful concepts on the Internet -- advertising and E-mail -- and some pundits think it could be a winner. In the first few months since its June launch, without any significant advertising, Intellipost has managed to sign up around 150,000 users, gaining about 50,000 customers every couple of months. It also has deals in the works with several major Internet service providers -- as yet unannounced -- that will mean front-door exposure to E-mail users from the first time they sign up for an account. Intellipost expects these deals to push its subscriber base over the 1 million mark by next March.

"The fact that they're mating an E-mail program with a rewards-based program, they're combining two of the most important consumer trends out there," said Matthew Kinsman, an editor with Cowles/Simba Information, who follows online trends.

The Bonus Mail plan requires a little explaining. Basically, users fill out a demographic profile -- marital status, age, and the rest -- and tell the company what kinds of ads, and how many, they'd be interested in receiving. In exchange for receiving, reading, and responding to E-mail ads -- which are sent to an existing account -- users rack up credits that they can later exchange for a variety of bonuses; they can also try to win prizes, such as a current contest for 1 million frequent-flyer miles. Intellipost is counting on consumers' interest in these perks -- which have changed the way people think about everything from credit-card purchases to air travel -- to lure them in.

Intellipost CEO Steve Markowitz says he aims to change E-mail in the same way bonus programs changed the credit card: "When consumers became conditioned to getting something for flying on the plane, the next step was that they wanted to get something for shopping in a store, for staying at a hotel. It's this whole concept of consumer loyalty, it's really crept into the psyche of the population."

From an advertiser's point of view, the advantages are potentially vast. Access to a detailed demographic database allows Bonus Mail advertisers -- who include Newsweek, Ziff-Davis (the publishers of ZDNN), GE Capital Assurance, and CBS SportsLine, among others -- to aim their messages at precisely the group of people they want to reach. As a result of these close match-ups, Intellipost says it has a much higher response rate to its advertisements than traditional direct marketing.

Forty to fifty percent of recipients open up their E-mail advertisements, according to Intellipost's tracking software; that compares to an estimated 25-percent readership for traditional direct mail. More importantly, Markowitz says the advertising's response rate -- getting people to actually buy things -- is three or four times higher than typical direct-marketing responses.

Other factors make E-mail an attractive medium for advertisers. For one thing, about 50 million Americans have E-mail accounts, far more than have access to the World Wide Web. E-mail also benefits from being the Internet's killer app.

"E-mail is incredibly popular," Kinsman said. "Everyone wants to use it, everyone wants to talk to their friends and relatives. Other usages of the Internet are done from the workplace, or they're more fleeting; people might find some neat site, but it's not something they're going to go back to on a regular basis. People are going to use E-mail every single day."

But the question remains: are consumer incentives -- which are, after all, readily available from plenty of other sources -- enough of a draw to persuade users to open up their mailboxes to advertising, no matter how targeted it is?

"I can tell you this is one service I'm not going to sign up for," said analyst Clay Ryder of Zona Research Inc. "It doesn't seem to me that there's a real draw in that. If I want frequent flyer miles, there are other ways of getting them that don't include getting advertising... It just doesn't seem too appealing to me."

Ryder suggested that the appeal of such advertising methods would be far more limited than that of other forms of direct marketing.

"Your demographics on the Internet are going to be limited," he noted. "You can only direct certain products to certain people... It doesn't exactly make me jump up and down and think, 'Here's a way I can make millions.'"

Cowles/Simba's Kinsman agreed that the future is far from certain for E-mail marketing. "E-mail is a strong advertising form. The question is whether people are going to want to interact with ads, day after day, around their personal messages."

But recalling the way people have grown accustomed to banner ads on Web sites -- which users initially rebelled against -- he suggested people could get used to the flashy, multimedia commercial as a regular presence in the in-box. "Maybe they will," he said.