AOL and Yahoo Hold Business E-Mail Hostage

AOL and Yahoo are trying to charge companies for prompt delivery of email to their customers.

Companies will soon have to buy the electronic equivalent of a postage stamp if they want to be certain that their e-mail will be delivered to many of their customers. America Online and Yahoo, two of the world’s largest providers of e-mail accounts, are about to start using a system that gives preferential treatment to messages from companies that pay from 1/4 of a cent to a penny each to have them delivered. The senders must promise to contact only people who have agreed to receive their messages, or risk being blocked entirely.

The Internet companies say that this will help them identify legitimate mail and cut down on junk e-mail, identity-theft scams and other scourges that plague users of their services. They also stand to earn millions of dollars a year from the system if it is widely adopted.

AOL and Yahoo will still accept e-mail from senders who have not paid, but the paid messages will be given special treatment. On AOL, for example, they will go straight to users’ main mailboxes, and will not have to pass the gantlet of spam filters that could divert them to a junk-mail folder or strip them of images and Web links. As is the case now, mail arriving from addresses that users have added to their AOL address books will not be treated as spam.

Yahoo and AOL say the new system is a way to restore some order to e-mail, which, because of spam and worries about online scams, has become an increasingly unreliable way for companies to reach their customers, even as online transactions are becoming a crucial part of their businesses. “The last time I checked, the postal service has a very similar system to provide different options,” said Nicholas Graham, an AOL spokesman. He pointed to services like certified mail, “where you really do get assurance that if what you send is important to you, it will be delivered, and delivered in a way that is different from other mail.”

But critics of the plan say that the two companies risk alienating both their users and the companies that send e-mail. The system will apply not only to mass mailings but also to individual commercial messages like order confirmations from online stores and customized low-fare notices from airlines. “AOL users will become dissatisfied when they don’t receive the e-mail that they want, and when they complain to the senders, they’ll be told, ‘it’s AOL’s fault,’ ” said Richi Jennings, an analyst at Ferris Research, which specializes in e-mail. As for companies that send e-mail, “some will pay, but others will object to being held to ransom,” he said. “A big danger is that one of them will be big enough to encourage AOL users to use a different e-mail service.”

In a broader sense, the move to create what is essentially a preferred class of e-mail is a major change in the economics of the Internet. Until now, senders and recipients of e-mail — and, for that matter, Web pages and other information — each covered their own costs of using the network, with no money changing hands. That model is different from, say, the telephone system, in which the company whose customer places a call pays a fee to the company whose customer receives it.

Given the vast number of email options–including several free services–this is an incredibly dumb move on the part of AOL and Yahoo. Not only will it likely backfire in the way Jennings suggests but it essentially creates a method for spammers to pay a fee to bypass the filters at AOL and Yahoo.

Of course, people dumb enough to still be using AOL are unlikely to hear about this.

FILED UNDER: Economics and Business, General, Science & Technology,
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.