As I’ve explained previously, email marketing is the single remaining form of outbound marketing that’s still effective for lead generation. Perhaps it’s the usefulness of the email marketing that convinces email marketing vendors to massively overprice their services.
For example, I recently ran across a price quote from a popular email marketing service (as you’ll see, it doesn’t matter which one, so I’ll keep them anonymous). Here’s the first part of the quote:
Our billing is based on the number of contacts being stored in the account. We have three base pricing plans for customers with up to 500 subscribers. These plans offer the same services but you will receive certain discounts for ordering the service for a longer period of time.
- Billed Monthly: $19.00 per month
- Billed Quarterly: $49.00 every 3 months
- Billed Annually: $193.80 per year
If you’re familiar with cloud-based marketing apps, $19 a month is a tad on the high side but not so high that’s it’s a deal-killer. And the yearly discount is reasonable enough… basically two months free.
However, that not-completely-unreasonable $19 monthly fee only allows you to use the app; if you have more than 500 subscribers you must pay what they call “storage fee costs” as follows:
As your list grows, there will be subscriber fees assessed on top of your service charges. Subscribers Additional Fee
- 501 – 2,500 +$10/month
- 2,501 – 5,000 +$30/month
- 5,001 – 10,000 +$50/month
- 10,001 – 25,000 +$130/month
- 25,001+ +$181.00/month plus each additional 1,000 is $8.00
Now, let’s say for the sake of argument that you have 34,000 subscribers, which means the email marketing vendor in questions intends to charge you $253 per month for “storage fee costs.”
Let’s do the math!
The average email address is about 25 bytes long but since it’s in a database, let’s give each address another 25 bytes of indexing data. At a total of 50 bytes per subscriber, your 34,000 subscriber base consists of roughly 1.8 megabytes of storage.
The vendor is charging you roughly $150 per megabyte, which comes to $150,000 per gigabyte or $150 million per terabyte. For contrast, a 1 terabyte hard drive costs around $60 on Amazon.
Those “storage fee costs” seemed so mathematically out-of-whack that I reality-checked pricing with multiple vendors. Based on their websites, here’s the per-monthly cost to use their apps to service 25,000 subscribers (application fee plus storage fee):
- ActiveCampaign – $135 per month
- Aweber – $149 per month
- Benchmark – $149 per month
- Campaign Monitor – $199 per month
- Campaigner – $149 per month
- GetResponse $145 per month
- GraphicMail – $150 per month
- MadMimi – $89 per month
- MailChimp – $150 per month
- Pinpoint – $150 per month
- ResponseWise – $150 per month
- StreamSend – $165 per month
- VerticalResponse – $160 per month
The average price is $149, which is within $1 of what most of them are charging. Gee, it’s almost as if email marketing vendors have agreed keep their prices all in the same ballpark. Not that I’m accusing them of anything.
Of course, one could argue that “storage fee costs” are just a pricing methodology and that these companies have other expenses, like sending the actual emails. That’s got to cost plenty, right?
Uh, no. A couple of years ago, Facebook employee John Kurlak ran the numbers on the cost per 400 word email on Quora. Here’s what he came up with:
400 words is about 2.4 KB. Email headers add on about 2.6 KB. So that’s about 5 KB of text. Amazon SES will let you send 350 TB of email per month at $0.05/GB. 350 TB is 358400 GB. At $0.05 GB, that’s a total of $17,920. 350 TB is 375809638400 KB. 375809638400 KB / 5 KB/email = 75161927680 emails. $17,920/75161927680 emails is about $0.00000023841 per e-mail, or 0.000023841 cents per e-mail. So … about two hundred thousandths of a cent.
In other words, sending 250,000 emails (ten emails a month to 25,000 subscribers) should cost roughly five cents. (Note: the Amazon SES email service currently offers 60,000 emails a month… for free.)
Since the cost to provide email marketing services is a microscopic fraction of what these companies charge, it’s only a matter of time before one of them break ranks and starts charging $20 a month for unlimited emails to unlimited subscribers.
When that happens, you can bet that most of the email marketing providers will fold up because they’ve become accustomed to a business model that charges outrageously for a fairly trivial set of capabilities.
So be forewarned. Make a local copy of your subscriber list every week or so because when the proverbial hits the fan, you don’t want your data to disappear along with your vendor.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.