October 30, 2002
Seems like everyone is trying to make an extra buck these days by renting out their email list. Worldata's Jay Schwedelson says, \"We've seen exponential growth of the number of list on the market.18 months ago there were 3,000-4,000. Now it's literally close to 20,000.\"
Lots of those lists are \"garbage\" and many are selling for bottom-of-the-barrel pricing. Here is useful advice on how to put your list on the market the \"right\" way, so anti-spam advocates will not hate you, and so you actually make a decent profit.
A SherpaReader emailed us the other day with a question, "I want to start selling my list on the rental market, but the list manager wants an exclusive deal and he says he can't promise any specific revenue figures. Is this fair?"
While we do know enough about list rentals to ask smart questions, we do not always know how to answer them, so we called up Jay Schwedelson Corp. VP at Worldata/WebConnect whose firm manages list rentals for some fairly reputable lists, including Ziff Davis, Forbes, Bloomberg and CBS Sportsline.
Can you "sell" your email list?
First let us get terminology straight. When you 'sell' a list you do not actually sell it. "You're allowing a marketer to promote to your user base - you'll send out their information from your server. You're not selling the name," explains Jay.
You cannot sell a list to multiple people (how could two different people both publish Dental News Daily?) and you can not just hand over a name for a new owner to do as they like with it. Why? Because none of your readers gave you permission to do that.
How to grow your "rentable" list
Instead, you should add a separate, non-pre-checked box to your opt-in form that people can use to request to be added to your rental file.
Jay says, "The ideal thing is 'Check here for special offers from selected advertisers' and then on the page after that allow people to check off categories."
By separating the request to be added to your rental file you reduce two big risks:
1. The risk that your new members or opt-ins will worry that you are a spammer or enabling spam. If they see that you clearly distinguish permissions for your own materials versus third party offers they will be inclined to trust you more from the start.
2. The risk that you will decimate your own housefile over time. Every time a mailer rents your list, a small percent of people will opt-out. Over time that small percent can add up to a huge chunk. If your house file and rental file are the same list, then people will be opting out to your own mailings as well.
Still some list owners resist making the check box separate and/or obvious because they fear lots of people will not check it, and then the owner will make less money from rentals.
The answer is, sure, fewer people will check it. Sure you will have a smaller list to sell. According to Jay there are so many awful lists flooding the market right now that your public check-box may be a critical factor in helping you get more sales.
Jay explains, "We've seen exponential growth of the number of list on the market. 18 months ago there were 3,000-4,000. Now it's literally close to 20,000. A lot of them have no merit. They're absolutely garbage. Brokers call them 'opt-in' even if they are opt-out. It causes confusion."
Because of all the garbage flooding the marketplace, and the number of list owners or brokers who are misrepresenting permission, prices have plummeted.
"This is not five years ago when everyone was making $10 a name a year. Especially for consumer lists. The pricing has dropped through the floor. It's not difficult to rent lists for $1 a thousand."
Your public, very obviously permission-based, not-pre-checked box to join the rental file can be a critical factor in your favor in the marketplace. Your list rental manager will be able to trumpet it in their sales materials. Go look, we have a real site, we can prove we have permission, we can prove we are better than the garbage out there.
It is enormously reassuring to brokers, ad agencies and clients alike.
Your list may be smaller, but it may get rented more often, or it may be able to be rented for a premium price compared to other lists in its category.
How much money can you make selling your list?
Here is the bad news: Because thousands of lists are now available on the rental market, most are selling for far less than they did in the early days when list owners could confidently count on $5-$10 per name per year.
Pricing is the worst in the consumer list marketplace, which is flooded with millions of names at pricing so cheap it barely pays to sell them.
However, that does not mean you can not do well by using a combination of smart marketing and segmenting targeted names. Here are some tips:
1. Offer a desirable segment:
IT professional names are selling very well still, according to Jay who says, "It's still the #1 hottest list rental space. Other B2B holding up strong are sales and marketing professionals and healthcare professionals."
If your names are not in a hot segment, you can still help them rise above the common fray by being able to offer selections on recency (names that are new within the past 30-90 days), online buyers (people who have definitely purchased online), proven non-sweeps email responders (people who have clicked on a non-sweeps offer), and by zip code for marketers who want to geo-target their offer.
Just be sure that any segment you offer has at least 5,000 names in the file, because most list buys have a 5,000-name minimum.
#2. Label your list clearly
There are a lot of lists being sold under misleading or multiple names on the marketplace right now, and often smart list buyers are willing to pay a little more to avoid them.
If you are a known name-brand, or your list comes from a Web site, then put that name and URL in your list name. Make sure your list manager markets your list under it. The most powerful name is a real one.
#3. Hand out printed marketing collateral
Got a printed catalog, publication or glossy brochure for your company? List rentals are one area in marketing today that you can do better in if you send potential buyers printed material.
It does not have to be about your list specifically, just about who you are or what you sell. Again, the point is to give tangible proof that you are a "real" company with a real list as opposed to all the shady people.
Even if you are a fairly well known brand name, it is worth it to give your list manager a stack of printed materials for use when making sales calls or sending out recommendations.
#4. Rental income is not a multiple
Jay's biggest tip for list owners forecasting sales for 2003 is to remember that list rental income is not something that grows steadily as your list grows in size.
He explains, "Once you get beyond a critical size, say half a million, size does not dictate revenue. You may make less per name. If you have a B2B list of 100,000 you may make $3 per name now, but if it grows to 250,000 names you may only make $2 per name. Your net per name will shrink but your overall revenue should increase."
Why? Because in many cases mailers only want a certain sexy segment of your list (such as C-level execs or 30-day newbies or everyone in a NYC zip code), so they are not renting your whole list no matter how big it gets.
Also Jay points out that there are very few really big mailers in either B2B or B2C. It is a limited pool. The majority of your rentals will be to much smaller mailers who can only afford to purchase a small slice. Again, no matter how big you get, the average order will not get much bigger.
5. Do not accept CPA or CPC unless you have millions of names
"You'll never see a small file win on a CPA deal - the minimum you need is two-three million names. It's never worth it; it's not to your advantage otherwise," says Jay who flatly refuses to accept CPA or CPC offers for any of the lists his company manages.
"The most horrible thing from a list owner perspective is you have to rely on the tracking of the mailer," he adds.
MarketingSherpa's own advice is if you have seen the mailer's creative, and their landing page (or other related conversion process), and the reports they can provide to you for tracking, and they are a reputable company, it is sometimes worth spreadsheeting to see if any deal can turn in your favor.
If profiting is remotely iffy, then you can insist that the mailer either run a test campaign with you AT THEIR EXPENSE to prove it is a good idea, or you can ask them for a guaranteed minimum payable no matter how the campaign does.
You should also be prepared to work harder on CPA or CPC deals, really examine their creative, consider placement, track every metric, treat the campaign as though it were one of your own marketing efforts. Which in effect it is.
6. The cash is not quick.
You may have to wait and wait and then wait some more for list rental income to come in even if you have pretty good sales. That is because there may be a lot of middlemen between you and the accounting department on the buyer side. Each middleman has to process their bills, cut checks and generally shilly shally about before handing over the cash.
Example: a mailer schedules a campaign for Dec 1st. The day the campaign actually runs, your list manager sends off a bill to the broker. The broker sends a bill to the agency. The agency sends a bill to the client. Then the money comes back through the same laborious process. You get paid maybe in March. Yes, it may be quicker. But do not count on it.
7. Expect to discount your rate card.
List rentals are like buying a car: Everything is negotiable. There is the dealer's official price, then his price since you are such a good customer, and then his price since you are walking out the door to see another dealer.
The good news is your competitors are selling off rate card too.
How to select and compensate a list rentals manager
Many list owners are confused by the difference between a manager and a broker, partially because many list pros perform both roles.
It is a lot like real estate, a list manager is like a listing agent for your house. They *always* require an exclusive arrangement and a contract. Their role is to manage your list sales from start to finish, including:
- Marketing your list to the universe of potential buyers
- Creating a data card and pricing for your list
- Getting you samples of all order requests for approval
- Coordinating with the fulfillment center to send rented messages out, clean the list, and update it
- Coordinating with mailers or mailers' reps (such as ad agencies, consultants, or list brokers) to get campaigns out
- Managing all billing and payments processing
- Sending you a monthly report on sales and billing progress
- Cutting you a monthly check for your accounts paid
Your list manager will invest money and time into marketing and managing your list. They do this on a strictly commission basis. Their commission is generally 10% of the sale, plus they give an additional 20% of the sale to the broker or agency who bought the list on behalf of their client. As list owner you wind up with 70% of each list rental minus any costs you may have internally for updating the list.
As opposed to a list manager, a list broker is never exclusive. They can sell any client anybody's list, just as a real estate broker can usually show you any house on the market no matter who the listing agent is.
The broker has not invested lots of money or time marketing your list. They do act as a sales rep, recommending to clients that they buy your list. Unlike your list manager, a broker has no vested interest in a client picking your list over anybody else's, except obviously they want their clients to pick winners so they buy and buy again.
More useful tips from MarketingSherpa editors on chosing the best list manager:
Tip #1. Do not trust them if they promise you will make lots of money guaranteed. You want someone who believes in their own abilities, but they also know the realities of the list world.
Aside from the uncertainties of the economy and the changing availability of competing lists in your sector, no list is a guaranteed money-maker until several frequent mailers in your niche have tested it and found that it worked well for them. Without continuations (easy-to-count-on repeat orders), your list is not worth much.
Tip #2. Do they have lots of personal connections in your marketplace? Lists are sold because people know people, and people trust people. It is an old fashioned sales business for the most part. Does this manager have long-standing relationships with lots of brokers, agencies and client-side buyers?
If they handle your direct competitors' lists it can be a good sign. A manager may invest more in marketing to a niche if they have several items to sell. Plus, they will add your list to the recommendations pile whenever someone enquires about your competitors.
Tip #3 Look at their marketing materials. Read their copy. Check out their booth at major trade shows. Would it convince you to buy one of their other lists? When you hire a manager, it is just like hiring a marketer.
How to make sure no one spams your list
You must look over the creative for every single order that comes in without fail. If you are going on vacation or even going to be out of the office for a day, make sure that you have trained someone in your place to scrutinize creative.
(Sometimes clients want to buy lists in a rush, and if you are not there to approve, you can lose the sale.)
In each instance consider: Is this creative, this mailer, this offer, the kind of thing that an average member of my list would expect when they signed up for it? Remember, even if the offer is not spam, it can appear to be spam if it is something people do not expect from you.
This also means, never ever send your list anything that you are not happy and proud to put your name on.
Yes, you are going to have to put your name on it.
According to Jay (and we agree), if recipients do not know where the mailer got their name, it is spam whether they opted-in to receive it or not.
That means you must put your brand name that recipients would recognize in the "from" line, or in a clear statement at the top of the message.
No, tiny type at the bottom of a message is not enough. No, your corporate name that few recipients would recognize is not enough. Frankly that is a slightly shady practice, and to many recipients it spells spam.
"You have to establish a relationship up front, 'You're receiving this message because...' You have to establish credibility," Jay explains. "Or else it's going to look like every other piece of spam they receive."
He adds, "The biggest problem in email list rental marketing is headers that are not really detailing the true source of names. If you look at most headers it says something like 'You're receiving this because you opted-in at one of our parent sites' or some other ambiguous thing."
We have to say we agree. If you have done a good job of getting the names to opt-in on the front end, and of selecting the right mailers to rent to, then you should be happy to openly present your list with offers that will please them.
After all, that is what they signed up for.