By Cary Sherburne, Senior WTT Editor Part 1 August 3, 2006 -- In the second part of this two-part interview, WhatTheyThink continues its conversation with David Atlas, vice president of marketing for Goodmail Systems, one of the firms leading the charge in bringing certified e-mail solutions to the marketplace, to find out what’s going on in the world of certified e-mail and to get his perspective on its ultimate impact on print. In other words, how long can we count on deliverability as a competitive advantage in the world of direct marketing—and continue to see direct mail as a growth opportunity and one of the bright spots in the printing industry? Atlas provides a perspective on the challenges facing certified e-mail as well as the potential impact of certified e-mail on print. WTT: I can see that ISPs and senders will understand the value proposition for certified e-mail pretty quickly. It seems to me that a major challenge will be the education of consumers. Over the next six months, we will have more large retailers, health care companies, and media companies coming on board. Those brands will help educate the market. You will see many major financial, retail, media, healthcare and other brands using certified e-mail. DA: That’s right. We really have three separate challenges we are attacking: The ISPs, the senders, and the recipients. Right now we have enough of the ISPs that we can be in business. Our main focus through the end of this year is adding senders. For example, the Red Cross is one of our senders. They had a huge problem with phishing in the wake of Katrina. People would get e-mails that appeared to be from the Red Cross asking for donations, and their donations ended up in some bank account in Eastern Europe. The Red Cross looked at certified e-mail as an option, sending certified messages to guarantee recipients they were actually getting an e-mail from the Red Cross. Other senders include KeyBank and PetCo, and over the next six months, we will have more large retailers, health care companies, and media companies coming on board. Those brands will help educate the market. In six months, you will see many major financial, retail, media, healthcare and other brands using certified e-mail. As we build up critical mass among senders, the other ISPs will respond and so will the receivers. The real education comes when you get your e-mail with the blue ribbon icon. With AOL, for example, when you get that icon, if you roll your mouse over it, it explains what it is. And starting in the last quarter of this year, you will see AOL do more consumer education. It is an unrealistic expectation that we will see a one-to-one print suppression ratio with electronic communications, even certified e-mail. There are enormous cost benefits to electronic use, but it will not result in one-to-one print suppression anytime soon. WTT: So if I were a KeyBank customer, or buying from PetCo, I might start seeing those icons show up in my Yahoo! mail after August? DA: Yes and no. Right now, Outlook is a limitation. You can see the certified e-mail icons using AOL’s mail client and Yahoo! Web mail but not in Outlook. The icon is separate from the e-mail. If it were included in the e-mail, it would be easier to spoof. We will have an add-on for Outlook towards the end of the year. Hopefully by this time next year, Outlook will ship with the add-on. WTT: In preparation for this discussion, I asked you to take a look at recent EDSF trends research that talks about trends for displacement of paper with electronic delivery alternatives. Can you give us your thoughts about that research and how certified e-mail is likely to affect direct mail and other paper-based communications? DA: I think it is an unrealistic expectation that we will see a one-to-one print suppression ratio with electronic communications, even certified e-mail, as the study points out. Having spent 20 years in the e-mail market, compound document architecture, etc., I know that it will be a while before we see any type of paperless office. There are enormous cost benefits to electronic use, but it will not result in the one-to-one ratio of print suppression anytime soon. As the EDSF study showed, in tracking through the stepdown of print to electronic communications when an insurance company tries to move to electronic communications with its customers, 30% enroll in the company portal, 15% of those users opt to use the portal for viewing, and only 7% of those who elect to view online select print suppression. Additionally, due to regulatory concerns, even if the viewer selected print suppression, there are documents that still must be printed. The conclusion reached in the research was that online access to electronic documents was only resulting in a one to one-and-a-half percent suppression of print, far from a one-to-one suppression ratio. WTT: So what we really are seeing is kind of a hybridized usage, then. DA: Right. And keep in mind that historically, when any type of new media hits the market, the first fear is replacement, with everything goes from this to that. Certain media do fall by the wayside with the emergence of the next generation, but more often you get a net growth in both and people using a combination of the two. For example, MP3 players didn’t eliminate CDs. Sure, people have MP3 players, but they also use CDs. Print has certain form factor benefits that electronic will never have. Paper is often the “last mile” of communication. There will continue to be variations in what gets printed and where in the information distribution chain it gets printed. Print has certain form factor benefits that electronic will never have. I just read the EDSF survey on the Stairmaster. I could not have done that online. It was created electronically, and I printed it from your electronic copy that you distributed to me electronically. Paper is often the “last mile” of communication. I think it is always going to be like that. What gets printed out and by whom and where is changing. In the case where I printed the report on my laser printer so I could read it on the Stairmaster, that represents a cost savings to EDSF but a potential loss of revenue to a print service provider. There will continue to be variations in what gets printed and where in the information distribution chain it gets printed. WTT: How do you think certified e-mail will play out with respect to displacement of opt-in direct mail? DA: The EDSF survey talked about what will facilitate movement from paper to electronic. A lot of those same factors exist for the movement from direct mail to e-mail—being able to trust the communication, security, legal standing, making sure companies can rely on deliverability for both transactional and marketing communications. With e-mail marketing, you get something you don’t get with paper, and that is closed loop communications. When you send messages by certified e-mail, you know who got them, who opened them, who clicked through to the Web site. Certified e-mail will assist in that migration from paper to electronic. But the big issue is larger, more systemic, and is about what you get with e-mail that you don’t get with paper-based direct mail. When you talk about a paper bill going to electronic form, it is relatively comparable. But when you talk about migrating paper-based direct mail to e-mail marketing, you are enabling a much larger capability. With e-mail marketing, you get something you don’t get with paper, and that is closed loop communications. When you send messages by certified e-mail, you know who got them, who opened them, who clicked through to the Web site. Certified e-mail will assist in that migration from paper to electronic. WTT: In the United States, we take the reliability of our postal system for granted, and that one percent that doesn’t get delivered can be shocking. That is clearly not true in developing countries, where paper mail systems are not only unreliable, but may not even exist. Do you plan to extend these services to those environments? DA: Right now, we are exclusively in North America, but we are beginning some outreach to Europe and Asia. For us, outreach beyond that is a next year thing. WTT: What is the pricing model for certified e-mail? DA: It is approximately a quarter of a cent per message in volume. We charge the sender for each token. WTT: Can you comment on volumes going through the system now? DA: No, I can’t really say. It’s too early. WTT: David, thank you for talking to us today. How can people find out more? DA: They can visit us at www.GoodmailSystems.com. WTT: Is there anything else you would like to add before we close? DA: Making certified e-mail happen is a major change. The upside is that we are genuinely doing something innovative. But it is a challenge. It is not just “flip the switch.” It won’t be overnight. It is definitely an evolution.