Is Gmail Feeding Your Customers to the Competition?

Jun 28, 2006 3:21 AM  By

An as-yet little-noticed aspect of Google’s free e-mail service is becoming increasingly troubling to marketers and will become more so as the service grows.

The problem: Gmail serves text ads based on words in the e-mail’s content. Also, the service blocks HTML by default, so graphics don’t appear in the e-mail unless the recipient clicks a link that says “display images below” or one that says “always display images from” the sender.

For example, a message from 1-800-Flowers.com pitching Father’s Day gifts earlier this month contained links to other merchants’ Father’s Day offers.

Even worse, if the marketer designs text e-mails to make up for the fact that the images may be blocked, the text makes it even easier for Google to serve contextual ads against that e-mail.

“They can do a much better job of selling those sponsored ads and make them more targeted if they don’t allow HTML imaging,” says Jay Schwedelson, corporate vice president for list services provider Worldata. “Every time you send to your customers who have Gmail accounts, you are opening them up to your biggest competitors to advertise to them. You could theoretically lose more customers by sending to Gmail than the business you would gain.”

Google positions the ads as a benefit in its welcome letter to new account holders. “As you’re using Gmail, you might notice that there aren’t any large, blinking, irrelevant ads,” the welcome letter says. “That’s because we only show small text ads that are matched by computers and designed to be relevant to the messages you’re viewing.”

The text ads are sold as part of Google’s content network, in which Google places contextual ads on publishers’ sites next to articles based on the content.

It is unclear how well the e-mail ads are working. “If you opt in to the content network, you get opted into [text ads served with] Gmail, but you also get opted in to all the other partners that Google has, such as ‘The New York Times,’” says Alan Boughen, a partner at NeoSearch@Ogilvy. “It’s not possible for me to identify if, by being placed in Gmail, an advertiser has had good results.”

Boughen says search marketers will typically bid lower for keywords that trigger contextual ads than they’ll bid for the same word used in searches, because contextual ads don’t necessarily reach people who are actively looking for the bidders’ products or services the way search keywords do.

Gmail addresses currently account for just 3%-5% of an e-mail file, but people are signing on to the service rapidly.

Also, unlike AOL addresses, which are generally popular only with consumers and are rapidly losing their luster with even them, Gmail addresses are gaining popularity with consumers and professionals alike. As a result, business-to-business e-mail marketing may be threatened by Gmail’s contextual ads as well.

“There’s more vanity with a Gmail address,” Schwedelson says. “If you’re thinking about hiring one of two consultants, and one has an AOL account and one has a Gmail account, you will instantly think the one with the Gmail account is more with it.”

Though Gmail has been serving contextual ads since its inception, only recently has it become an issue marketers need to start considering. “Now [Gmail is] really starting to grow,” Schwedelson says, “and I think Gmail is going to continue to be a bigger player.”