Making Money On-line: Why Hardly Any Brands Ever Build Homegrown Email Platforms Anymore

Build or buy? When it comes to email marketing platforms, it’s a question that brands rarely bother to ask themselves anymore because nearly everyone buys. And when brands do seriously ask themselves this question, it’s exceedingly rare for them to actually choose to go down the build road.

According to Litmus’s State of Email Survey of thousands of marketers worldwide, the percentage of brands using custom, homegrown email platforms to send marketing emails fell to just 6.1% in 2018, down from 10.9% in 2016.

Most of these homegrown email platforms are only used to send transactional emails, with traditional email service providers used to send the promotional emails that make up the vast, vast majority of their email volume. Only 34% of brands rely exclusively on a homegrown email platform to send all of their marketing emails, according to Litmus. That means that just 2% of brands use in-house email platforms to support all their email needs.

As you might expect, many of the companies that do choose to go this route are tech giants like Amazon and Uber. In fact, it’s become a not-so-funny joke that if you hire an email marketer from Amazon that they’ll want to build their own email platform. Since most companies don’t have Amazon’s scale, resources, and culture, this is a recipe for plenty of pain and suffering, if not disaster.

Let’s better understand why homegrown email platforms are dwindling and becoming the exclusive pet projects of unicorn companies by looking at the major dangers associated with homegrown email platforms:

Doing It Because You Can

Just because your company has the ability and capacity to create its own email platform doesn’t mean it should. The question is: Why do you want to build your own email platform?

In the rare cases where building is a possible option, the two big reasons that brands tend to give for wanting to do so are:

We want functionality that ESPs don’t provide.
We want to build our own to save money on what an ESP would charge.

Regarding that first reason, it’s not uncommon for brands to customize—sometimes heavily customize—around the edges of an ESP so they’re getting exactly what they need. Brands should just be mindful that ESPs update their code regularly, which can cause customizations to break.

“The impact could be severe if a customization provides important functionality for your business and is suddenly offline until the integration is rebuilt, putting your revenue at risk,” says Tony Castiglioni, VP of Product Management, Responsys Development, at Oracle. “Customization should be done thoughtfully, and brands should work with ESPs like Oracle Responsys and Eloqua that have both formal API platforms and an extensibility strategy.”

Regarding the second reason, brands tend to over-estimate savings, under-estimate long-term costs, and not even bother to estimate opportunity costs.

Focusing Too Much on Short-Term Savings

No business likes to spend money unnecessarily but having a cost-mindset boxes your business in and drives you to make poor decisions for the long term. Having an investment-mindset—where you’re focused on returns and building a competitive advantage—is a surer path to success.

Brands should care a lot less about what something costs—the cost per thousand emails sent (CPM) of an ESP for instance—and a lot more about the returns and customer experiences they’ll be able to generate with it. Email marketing isn’t a cost, after all. It’s an investment—and one that returns roughly $40 for every $1 invested in it, according to research from several sources. It’s an investment in your customer relationships and customer experiences.

If you’re a huge, tech-savvy company with lots of developers, the build-approach to email platforms can seem like a way to cut costs and save some money. But no one ever cut their way to a great email marketing program. Plus, the savings often don’t materialize. A big part of that is that brands that build their own homegrown email platforms generally do...

Not Fully Recognizing Long-Term Costs

Creating an email platform may be a one-time cost, but there are serious ongoing costs associated with running one.

Maintenance

This one isn’t likely to sneak up on you. This is a widely known cost. And if you outsource the infrastructure for your homegrown email platform, this can be a fairly predictable cost.

Upgrades and Advancements

Most companies don’t have an appreciation for just how much email marketing has changed over the years, so they’re primed to seriously under-estimate the cost of keeping an email platform even in the ballpark of staying current. There have been and will continue to be massive Innovations in audience selection, personalization, automation, send time optimization, A/B testing, artificial intelligence… The list goes on and on.

“The cost consideration is ridiculous,” says Castiglioni. “When we build a feature, that cost is distributed over the number of customers we have. When a brand does the same, they bear the full expense. It really makes no financial sense for any brand to build their own platform.”

While your company will likely always be able to find money for the maintenance of your email platform, money for innovation will be among the first things to go if times get tight. It’s a harsh reality that has played out several times in the ESP space, with a company acquiring an ESP and then under-investing in it for years to maximize margins in the short term.

Eventually, you end up with a platform that’s not competitive, doesn’t generate strong returns, and, most importantly, doesn’t allow you to create the customer experiences that you need to keep up with your peers. And you can forget about pulling ahead of competitors.

Integration and Compatibility

Email platforms sit in the middle of a roiling sea of more than 7,000 marketing technology companies, according to ChiefMartec’s 2019 Martech Landscape. With cross-channel visibility and omnichannel orchestration becoming increasingly critical, integrations across CRM, analytics, AI, and other tools is key.

These integrations take time and money to coordinate, execute, and maintain. If your homegrown email platform has poor compatibility with third-party systems, then you could be cut off from sources of competitive advantage.

“Email is important, but it is just one channel,” says Castiglioni. “So how do these homegrown solutions help marketers in these omnichannel environments, where the customer’s expectation is for the brand to react to customer interactions in the moment, in context, and with relevance? Either by integrating with other platforms or, if you stick to your guns, building your own digital marketing platform instead of just an email platform.”

Compliance

This is one you probably aren’t thinking about at all, but it’s significant. Becoming compliant with the General Data Protection Regulation (GDPR) wasn’t easy. It also wasn’t cheap. The cost was large enough that many smaller email service providers essentially withdrew from the European marketplace so they wouldn’t have to become compliant.

The California Consumer Privacy Act (CCPA)—or whatever national law it prompts to supercede it—will bring GDPR-like regulations to the US within a few years. Those compliance costs are looming for marketing cloud providers like Oracle and anyone who operates a homegrown email platform.

Getting Trapped by Your Sunk Costs

When maintenance isn’t kept up and when upgrades and advancements slow or stop, homegrown email platforms start costing brands huge sums in terms of opportunities lost. That’s why these platforms have fallen so out of favor with brands.

We’ll likely continue to see them decline in the years ahead as more of these brands embrace the marketing clouds that offer the functionality they need so they can focus on serving their customers instead of managing their in-house software.

However, some will likely take many years to transition off their underperforming homegrown email platforms simply because of not wanting to abandon all of the money they’ve invested in their platforms. Unlike marketing cloud users, these brands are trapped by the sunk costs of their legacy systems. Think long and hard before joining them.

“When you build your own, you inevitably will focus on process efficiency and consistency,” says Castiglioni. “This creates friction for change. So, marketers might be using a platform that is seamlessly tied into back office processes, but it isn’t helping marketers create better outcomes.”

Becoming Isolated from Help

When becoming a customer of one of your own technology, you also get trapped alone on your own island. Being outside all ESP communities means you don’t benefit from the communal experiences of the conferences and events they host, the collective performance data they accrue, or the pool of expertise they have.

For example, here at Oracle Marketing Cloud Consulting, we have more than 500 experts available to help our customers achieve more—whether they’re looking for training or help with reporting and benchmarking, strategy, creative, omnichannel orchestration, or anything else related to marketing. We routinely leverage anonymous performance data from across our customer base to help our clients make better decisions and generate higher profits.

“One of the most forgotten aspects of working with an ESP is perspective,” says Kevin Senne, Senior Director Global Deliverability for Oracle Marketing Cloud. “ESPs have the benefit of data from potentially thousands of different senders. Understanding data trends, industry changes, and just recognizing problems is a large advantage for an ESP. The perspective necessary for marketers to make informed decisions often isn’t available to users of homegrown systems.”

ESPs aren’t so much vendors today as they are partners that deliver tools, a community, and expertise, whether it’s through reporting and benchmarking or through training and other consulting services. Choosing to go it alone on an email platform also means to an extent that you’re choosing to go it alone when it comes to strategy and execution.

Distraction from Building a Competitive Advantage

Even if your company has the ability and capacity to build its own homegrown email platform and your company can keep up with the pace of innovation while controlling long-term costs to the point that significant savings are produced and your company can compensate for not having access to an ESP community, it may still not be worthwhile.

The bigger question here is: What could your business have been doing with those resources instead of building a homegrown email platform? What competitive advantage did you not pursue because you built an email platform instead?

During my more than 13 years in the email marketing industry, the only brands that I’ve met that were happy with their homegrown email platforms were hyper-innovators. They simply wanted to do things that the ESPs of the day couldn’t offer, and they didn’t want to wait. They saw an opportunity for a technological competitive advantage and went for it. I can count those brands on my fingers.

All the other brands I’ve met with homegrown email platforms were motivated by cost-savings and were deeply unhappy. They bemoaned how they couldn’t adopt this strategy or that strategy because their platform wasn’t up to the task. They also bemoaned that their situation wasn’t likely to change because they were “stuck” with their in-house email platform.

A successful email marketing program is more or less half technology and half strategy. If you have a poor technological foundation, it’s difficult to impossible to execute a successful strategy. But it’s equally hard to be successful with a weak strategy, even if you have state-of-the-art technology.

For the 99% of brands that aren’t tech giants, ESPs offer all the functionality they’ll ever need. So, instead of building a homegrown email platform that more than likely will disappoint, focus on building a stellar email marketing strategy that won’t.

Invest in hiring great marketers and keeping those marketers trained up. Invest in finding agencies, consultancies, and other partners that fill your skill and knowledge gaps and that allow you to get to market more quickly. And invest in all the ESP-adjacent systems that make your marketing cloud more powerful, like QA, testing, personalization, Ai, and analytics tools. You’ll never regret those investments.

Need help taking your email marketing program to the next level? Oracle Marketing Cloud Consulting has more than 500 of the leading marketing minds ready to help you to achieve more with the leading marketing cloud, including strategists, designers, copywriters, trainers, deliverability experts, and more.

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