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Those on the outside might assume the e-mail marketing industry is in a state of crisis as a result of the backlash against spam, but insiders say business is booming.

Issues with unsolicited e-mail have indeed made some companies wary of sending messages that might be misconstrued as spam, but despite these threats, e-mail service providers and their clients maintain that e-mail marketing continues to gain support from advertisers.

And they point out that in Canada, consumers seem more willing than ever to receive relevant commercial e-mail that promotes products and services.

The key word is relevant.

"Consumers are getting smarter about what's spam and what's not, and are more willing to develop relationships with companies through e-mail," says Chris Ferneyhough, vice-president of marketing research firm Ipsos-Reid Canada.

Ipsos-Reid reports that roughly eight in 10 Canadian Internet users have registered to receive e-mail from commercial websites. And those who are registering are doing so at an average of nine sites, up from about eight in 2004.

Part of the reason, market watchers say, is that privacy legislation, such as the Personal Information Protection and Electronic Documents Act (PIPEDA ), introduced in Canada last year, and anti-spam laws in the United States are helping to rebuild the image of e-mail advertising by reducing the amount of unwanted spam clogging in-boxes.

"It's educating people on the rules of e-mail engagement," says Wayne Carrigan, vice-president of client strategy at Toronto-based e-mail service provider ThinData Inc.

The result, he says, is that business for his company is better than ever. "We're seeing companies allocating more of their budgets to e-mail, and communicating in a way that people want."

That includes no longer "blasting" pitches randomly to the masses or using e-mail to distribute content consumers can get just as easily off-line.

In order to succeed, Mr. Carrigan says, marketers must "provide value in exchange for consumer permission."

That's just what Toronto-based Mirvish Productions, a theatre production company and ThinData client, has been doing -- with what it says are stellar results. The company distributes a monthly e-mail newsletter called Estage to 17,000 subscribers, and the message gets opened by an average of 65 per cent of recipients. For comparison, some studies estimate that less than a third of direct-mail marketing delivered by the postal service gets opened.

To entice customers, Mirvish's newsletter offers things such as exclusive content and access to advance ticket sales.

Since its launch in 2002, the electronic marketing initiative has raised the company's return on investment from $20 to $120 for every dollar spent, it says.

"E-mail marketing is an affordable means of reaching a wide audience," says Chris Dorscht, marketing manager at Mirvish. "Our marketing budget for each production doesn't always allow us to reach our potential audience. By investing in e-mail, we are able to reach people that we couldn't normally reach because of either financial or geographical restrictions."

"E-mail is a really great tool for maintaining and building relationships," adds Mark Organ, president and chief executive officer of Eloqua Corp., a Toronto-based interactive technology and marketing services company. Almost all of Eloqua's clients, which include real estate developers Canderel Stoneridge Equity Group and Tridel Corp., use e-mail in their campaigns, he says.

But technology that has helped weed out unwanted spam poses a serious challenge for e-mail campaigns. Spam filters, which Ipsos-Reid reports 77 per cent of Canadian Internet users now have, can impede delivery, as can Internet service providers (ISPs) that block e-mail their systems perceive as unsolicited. These filters can divert messages even when customers have registered to receive information from a company, so marketers need to figure out a strategy to ensure their messages will get through to the intended recipients.

In order to overcome such obstacles, both ThinData and Eloqua work with Pivotal Veracity LLC, a U.S. e-mail management company.

"Deliverability is the biggest problem in e-mail marketing today," says Pivotal's president and CEO, Deirdre Baird. She estimates that up to one-third of legitimate e-mail never reaches the designated inbox, because of technical glitches and spam filters, among others. "Just because an e-mail doesn't bounce, doesn't mean the message has gotten through."

To determine where businesses e-mails are actually ending up, Pivotal Veracity maintains e-mail accounts with major ISPs. Before launching a campaign, its clients deploy their messages to this "seed list" and observe the results. If a message is blocked by an ISP's filters, it can be redesigned using the company's suite of on-line tools. The system ensures clients won't waste time or money e-mailing a campaign that won't reach the intended readers, it says. As a result, Pivotal Veracity reports that almost 85 per cent of its clients' e-mails reach the intended inbox.

Pivotal Veracity has catered to the U.S. market since it was founded in 2004, and last week it expanded to Canada, becoming the first company to offer a Canadian seed list. That list includes the six most popular Canadian ISPs, which on-line resource ISP-Planet says reach an estimated 54 per cent of Canadian households.

"A year and a half ago people thought e-mail was useless. Now it's recovering," Eloqua's Mr. Organ says. "But you need to figure out how to use it in a way that gets you the most bang for your buck."

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