in the past, and its pretty difficult not to be very excited about the
opportunities in this segment, this core segment of our business.
Now, let me shift to some highlights on our eCOST.com segment. As I mentioned at the beginning of
this call, revenues for the eCOST segment were down on a year-over-year basis. This decrease
primarily relates to the unforeseen challenges with our sales and marketing strategy around e-mail
campaigns that we began to experience last quarter, and as I discussed with you the last time we
As I mentioned on that call, the e-mail filtering algorithms that are constantly being evolved by
the various leading Internet service providers had recently begun to have the adverse impact on the
amount of customers that were able to reach via our e-mail marketing strategies. This has also
impacted several, sorry, has severely impacted the viral impact of our e-mail programs as well
simply because were reaching fewer individuals who then can pass along e-mail to fewer, fewer
individuals as well.
Because such a large portion of our target customer base is reliant on this method of e-mail
communication, weve simply not been able to reach them near as frequently as we were in the past,
which in turn reduces overall visitor activity to our site. Obviously, fewer visitors results in
lower revenue, less product purchases and so forth. So this has been quite an impact for us.
Weve undertaken a number of efforts to overcome the deliverability challenges and resume sales
growth. We spent a lot of time during the third quarter modifying our current e-mail practices, and
using a broader mix of marketing tools. These initiatives included first, working closely with each
of the major ISPs to educate them on our need to frequently communicate with our customers, given
the daily deal nature of our business and to educate them that customers that purchase in these
segments may only make one or two purchases every year, and that these characteristics may lead
automated filtering programs to conclude that the relevance of our e-mail is low when in fact its
simply the nature of the products being offered.
Secondly, we increased our offline marketing activities once again with an eye towards reaching
customers through this channel, which included the use of postcards, flyers and an additional
catalog that we had not done in a couple of years.
Third, we expanded our paid online advertising activities to help offset the impact that I just
described. However, many of these channels do not offer an attractive cost to acquire ratio for new
customers. So we have to continue to watch this portion of our advertising activity very carefully.
Fourth, weve worked more precisely segment our e-mail list in order to improve our deliverability
relevance in each of the major ASPs (sic) ISPs. Now, while these actions have improved our overall
e-mail deliverability, were currently sending less than half of the total e-mails we were sending
previously. Maintaining these reduced e-mailing levels or e-mail quantity levels are necessary in
order to keep our relevant scores above
acceptable levels at the major ISPs and ensure that our e-mail that we are sending is getting
While I believe personally that the actions of the ISPs are a restriction of trade and Im probably
not the only CEO out there who feels this way, we do have to recognize that a group of just a few
major ISPs control the e-mail playing field and we have to play by their rules or suffer the
consequences that little to none of our e-mail gets delivered. Its a challenging trend, but we
will continue to evaluate the landscape and take actions as we see appropriate.
As painful as it is, this e-mail deliverability issue is another example of how we gain intangible
benefits from having our own retail web commerce presence in that the significant experience that
weve now gained over the last few months about e-mail deliverability is allowing us to inturn in
our interactive marketing services area and our Services segment assist our services clients with
similar e-mail issues that they may well be experiencing as well related to this topic.