From MIT Blackjack to E-Mail Databases: We Catch Up with the Other Micky Rosa

4/2/08Follow @wroush

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a consumer service. “Austin came up with this idea of an email change-of-address company, providing the missing link between someone’s old address and their preferred address for people who have lost touch with an old associate or classmate,” says Kaplan. The company won a patent on the idea of creating a database of “change pairs”—matched electronic identifiers such as e-mail addresses—and created a consumer website where users could supply the company with such change pairs by entering their old and new addresses.

“But my concern was that you can’t make money off that,” Kaplan recounts. “Consumers weren’t willing to pay anything. Everybody thought that just bringing eyeballs to your website was so great—and a lot of those companies went under. But what’s more interesting is that companies who are losing touch with their customers should be willing to pay money to reconnect with them.”

So FreshAddress spent a couple of years rebuilding its technology as a corporate service, which it started selling in 2003. FreshAddress’s clients start by sending in lists of inactive or bouncing e-mail addresses from their customer databases. (The company only works with customers who can show they have a legitimate relationship with the people on these lists, and that the original addresses were volunteered or obtained through an opt-in process. In other words, no spammers.) Sometimes e-mail addresses are bouncing simply because they contain errors: somebody typed “joesmith@hotmila.com” into an online form instead of “joesmith@hotmail.com.” By applying automated “hygiene” algorithms, FreshAddress is able to correct half to two-thirds of those problems, Kaplan says.

If it’s not a hygiene problem, FreshAddress looks for matches in its database of change pairs. That database is drawn from the company’s own consumer-facing website and from databases that the company licenses from hundreds of other websites where consumers have opted to provide their e-mail addresses.

“Say you gave the address waderoush@aol.com to Dell at some point,” Kaplan explained to me. “Now it’s bouncing. I do a lookup and I see that now you’re at wroush@gmail.com, or whatever. We send out an e-mail on behalf of our client to confirm that e-mail is deliverable to the address we’ve matched, and we give people a chance to opt out if they don’t want to reconnect. We then deliver the updated e-mail addresses to our clients on a pay-for-performance model. We only charge for the guaranteed, delivering e-mail addresses.”

Lately, the company has added another service: finding e-mail addresses in cases where a client only has a customer’s postal address. “A general rule of thumb is that most companies have e-mail addresses for only about 25 percent of their postal database; about 75 percent are missing,” says Kaplan. “And on the e-mail side, about 30 percent of one’s file will start bouncing through attrition over the course of a year. Those are pretty big numbers, and it’s a huge cost to a company.”

Indeed, FreshAddress’s service is proving so popular that revenues at the self-funded, 20-employee company grew by 50 percent between 2006 and 2007, Kaplan says, although he declines to cite specific revenue figures. And the phenomenon that makes FreshAddress’s business possible isn’t going away anytime soon. “There are a few people who have permanent e-mail addresses”—for example through their college’s alumni organization—”but the fact is that people are switching schools, switching jobs, and switching e-mail providers al the time, looking for a better deal,” says Kaplan. “They’re switching from AOL to Gmail, or from Comcast to Verizon, or they have a Prodigy address which becomes SBC which becomes AT&T.”

To complicate matters further, most active Internet users have at least three separate e-mail addresses, which they give out for work purposes, for personal matters, and for newsletters and commercial offers. Somebody needs to sort it all out. And that’s the humble task that will keep FreshAddress occupied for a few years—or at least until someone figures out how to supply consumers with secure, universal, persistent identities on the Internet (and there are plenty of people working on that, including the OpenID Foundation).

Kaplan says FreshAddress had only one major competitor—a New York startup called Return Path that, he says, spent a lot of its venture funding “running full page ads in all of the direct-marketing magazines, which was honestly very helpful for us in terms of educating the market.” But after FreshAddress won its patent, Kaplan says, ReturnPath moved mainly into e-mail marketing consulting, and is now one of the companies that licenses its address data to FreshAddress.

“We just completely blew them out of the water,” Kaplan says, showing a bit of the competitive spirit that was undoubtedly helpful during his squash- and blackjack-playing days. Indeed, judging from his past, Kaplan no doubt thinks FreshAddress has better than house odds of eventually conquering the e-mail attrition problem.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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  • Steve

    FreshAddress is a terrible idea. There are reasons people have multiple addresses and only give out certain ones to certain people. Companies will just use this service to send people crap they don’t want. If I need something from a company I will e-mail them.

  • Lanny

    There is a patent on a database of (old address, new adderess)? How is that not obvious?

  • Yawn

    Yet another “we’ll help you spam” business. They should be illegal..

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  • VJ Agrawal

    Short and sweet, why bothering using all these complicated software claiming being the “silver bullet” to verify emails or online solutions that are not more than simple automated scripts, while there are real companies out there actually performing the verification of email lists/databases? I have tested most of them; some are good and others not so good. A while ago, I found http:www.GreenAppleMail.com and it was the final solution for me. Their business model is simple yet strong; I just have to upload my email list and they take care of the entire validation process. They keep me posted and when the “green light” is given I download the file back. What a concept! Hope this helps
    Cheers!
    VJ