Did Google Inc (GOOG) Just Kill Email Marketing?

Perhaps, the most concerning issue for Constant Contact is that 67% of its business is derived from small businesses with fewer than 10 employees.

Its customers are most likely to stop email campaigns from lower conversions — they don’t have the scale to leverage email marketing at lower ROIs. Email marketing has high fixed costs (setting up campaigns, managing the list) and almost no variable costs. Thus, smaller businesses operate on a thin margin of profitability.

salesforce.com, inc. (NYSE:CRM) is less levered to email marketing itself. The company provides analytics services to track response rates, but after its acquisition of ExactTarget, it has some skin in the game, so to speak. Luckily for Salesforce, its business is secure with or without aggressive email filters.

Because salesforce.com, inc. (NYSE:CRM) works primarily with large firms, a decline in email marketing ROIs won’t hurt its bottom line. Email marketing is a permanent fixture of its customers’ marketing plan, unlike Constant Contact, which focuses on much smaller businesses.

The Foolish bottom line

If Yahoo! and Outlook replicate Gmail’s newest feature, companies that rely on email marketing to boost sales will undoubtedly see a real drop in email effectiveness. That could spell disaster for the likes of Constant Contact, which has made a business of being the go-to B2B service provider for small businesses.

The article Did Google Just Kill Email Marketing? originally appeared on Fool.com and is written by Jordan Wathen.

Jordan Wathen has no position in any stocks mentioned. The Motley Fool recommends Google and Salesforce.com. The Motley Fool owns shares of Google. Jordan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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