Lydia Lee

How do you make sure that online voting is free from fraud?

We had multiple outside firms that audited our processes, and more security than any other Internet event in the history of the world. Now, I can’t say that definitively, but we put so many resources into it. And you can imagine, with the tens of thousands of people who voted, and with all the publicity there was on this election, any security glitch would have been known worldwide in a minute. Yes, people did try to hack into our systems, but none of them got through.

What kind of encryption do you use to make sure that votes can’t get hacked?

We have our own proprietary type of encryption, which we call cascading encryption; it has several layers of encryption and supercedes what’s in existing browsers. There’s no plug-in, but you have to be using a current browser for it to work.

How can you make it easier for people to vote?

Going forward, we need to do a better job of educating voters — we fielded a lot of questions about old browsers. And we also need to do a better job making it easier for users who have never used computers before. We had the president of the Navajo nation vote, it was his first time.

For those of us who have only punched paper ballots, can you walk us through the online voting process?

You go to our site, choose the election and then enter your credentials. In the case of the Arizona Democratic primary, they previously sent each voter a PIN number in the mail. So you had to enter that, as well as identify other info about yourself. And then you vote.

There doesn’t have to be a physical mailing as part of the process — you could use e-mail, or have to go to the county recorder to get your number. Every election is different. Say you have an uncontested election for a not-for-profit organization — the level of security would be different, and it could be cheaper to run. There are situations right now where elections aren’t held because it’s too expensive. For example, you have caucuses instead of primaries; in Iowa people get together and decide who they want by yelling at each other across the room, primarily to save money. But if you bring down the price, more people would hold elections.

How much more efficient is it to hold an online election?

Most private sector organizations spend 12 percent of their budget on expenses related to an election. We can save them half of that. And we do it better — we don’t have to cut down half a rain forest to mail out the ballots, we’re saving natural resources. This is a big plus for some of our customers. We’re handling the upcoming Sierra Club election.

But won’t online elections be skewed and tend to represent rich people who own computers and fewer poor people?

That’s a very significant issue, we’re doing studies right now on that. It turns out that there’s a big difference between owning a computer and having access to a computer. Many people voted from a friend’s house, borrowed their neighbor’s computer, went to a church or a Kinko’s.

Many people who are not voting now are poor people. They’re people who are working two jobs, they’re working mothers, they’re in the military, they’re in situations where it can be really difficult to get to a polling place. There’s a big voting divide today; we think online voting will help close it.

My last name means “laborer” in Gaelic — well, actually it means “he who has no skill whatsoever.” We can get the vote out to the organized labor voter. We can work with unions to put computers in union halls.

Almost any American can register to vote online, too, on our Web site. Instead of having 3,000 counties and 47 different types of instructions, [we have one place] where you can go to register. You can’t register for North Dakota because there is no voter registration there, and there are three states we haven’t gotten to yet, but we have 46 out of the 50 states.

What were the voting patterns of online users like?

Seventy-five percent of young people — the 18 to 24 demographic — voted online. But the overall voting was scattered across all age groups. And note that the only people who could vote online were people who had already registered beforehand, so a lot of people weren’t allowed to vote online even though they wanted to. There just wasn’t enough time before the election to allow them to register and vote online. It was very popular, we blew out the turnouts from other years.

Don’t expect the Parisian luxury purveyor to make a splash — at least not yet. Eluxury.com launched late last month, but LVMH won’t begin marketing it until the fall. Nevertheless, the site now hawks a wide range of designer items with eye-popping price tags. Why the soft launch? Perhaps amid the doom and gloom, LVMH understands that selling $17,000 Bulgari watches, $900 Louis Vuitton pooch carriers or $100 La Perla undies may be seen as a little tactless.

But market faux pas or not, this is no nouveau riche VC experiment. Through Eluxury.com, LVMH plans to aggressively showcase and sell the latest collections of its key brands, including Vuitton, Christian Dior and Givenchy, to name a few.

Parental clout does give Eluxury.com a bit of an edge. Online retailers have traditionally been stuck with last season’s leftovers, if only because designers fear that selling their wares on the Web is tacky. Although competitor LuxuryFinder.com now sells over 60 brands, including fine linens by Frette and Brioni menswear, Eluxury should have an advantage because LVMH boasts many of the world’s most prestigious brands.

That doesn’t mean Eluxury.com has a market. LVMH found out with its investment in the now-defunct Boo.com that selling high-end goods on the Internet takes more than a snazzy business plan. And Eluxury.com plans to sell everything at full retail price, so not only must customers do without a salesperson fawning over them in the dressing room, but they won’t even get a price break.

What they do get when they visit are virtual representations of products hidden behind elaborate graphics, along with custom editorial content designed to put them in an expensive frame of mind. Those who go to the travel section, for example, can read an article about renting a castle in Scotland, just in case they had that fancy.

For its part, the shopping experience is pretty mundane. Take this $235 La Perla bra and “Add to Shopping Bag.” Fill in quantity and size. Send. Click-click-click. What’s not cut and dried, however, is the cost. An experimental shopping excursion came out to $18,644.00 (including $1,419 in taxes and $25 in shipping). Yikes!

Jim Conte, Eluxury’s senior vice president of marketing and business development, says the site’s typical customer is a “current buyer of luxury goods and services, as well as the aspirational buyer.”

Nice customers … if you can get them.

Neither LuxuryFinder.com, which has been around for nearly a year, or the 2-year-old Ashford.com has earned a penny. And despite rising sales and predictions of profitability at the end of next year, the luxury sector is particularly sensitive to economic downturns.

Then there’s that nagging question: Who in the world would buy a $17,000 watch on the Web?

“The luxury market is not about the expense — it’s about feeling good,” insists James Finkelstein, the president of LuxuryFinder.com. “I don’t think it’s an either-or situation. People enjoy going to a shop. They also enjoy shopping on the Web. You can’t go to Bond Street or Madison Avenue or Beverly Hills every week anyway.”

Mossimo’s flames flickering out?

Three creditors that say they’re owed $650,000 have filed a petition to liquidate the sportswear company, reports the New York Post. The New York Stock Exchange halted trading in the trendy fashion house after the filing was disclosed and may delist it permanently. Shareholders already seem to have written off the company; it began the year at $8 a share but was at 88 cents until the trading halt. Mossimo plans to lay off 90 percent of its employees and close its Los Angeles store.

Why Dr.Koop.com can’t fight the financial flu

The health-related Web site doesn’t attract people until they’re sick, says Steve McKee, president of marketing company McKee Wallwork Henderson, in an audio interview with Internet broadcast network ON24. Plus, Web users don’t see Dr.Koop.com as the place to buy, say, prescription drugs–which makes it difficult for the ailing venture to function as a real e-business, instead of as a public service. But rumor has it that Drug Emporium may take over the site and provide some much-needed Rx.

Raging youths meet aging soaps

Teenagers may be young and restless, but can they really be sold on Mom’s favorite daytime fodder? ABC thinks so. The New York Times reports that the network is launching a $7 million television and print campaign to try to hook teens on old-fashioned soaps like “General Hospital” and “One Life to Live.” The goal: Turn Gen Y into lifelong daytime-TV slaves. The strategy: Bombard them with ads featuring hip young characters with names like “Hottie,” “Rebel” and “Virgin.” In one ad, a daytime diva, identified as “Trouble,” “slaps herself on the rump and declares: ‘Watch and learn, kids.’”

Pop star turns into investment guru Annoying ’80s pop crooner Eric (“Hungry Eyes”) Carmen doesn’t have much of a recording career anymore. So, like everyone else, he’s trading. “I had returns of about 140 percent a year over the last two years,” says the ersatz songwriter. “I started my portfolio with only about $300,000 and it’s over $3 million now.” Somebody call Jewel.

Who you calling Gordon Gekko? Reptilian “Wall Street” star Michael Douglas apparently doesn’t have the real-life Wall Street wherewithal to pass Investing 101. Half of his portfolio lost money last year. On one ill-fated choice, he blew $117,165 of $225,000–and this happened during a bull market! Don’t quit your day job, Michael.

According to a BBC report, a last-ditch effort to secure another $30 million failed, and while the site was growing, it wasn’t getting enough orders to make up the vast sums already spent starting the company. So, some 300 people were reportedly clearing out their desks Wednesday.

Still, it’s hard to imagine many users crying over the loss of the site itself. Boo.com had a troubled beginning. Its initial launch was delayed for six months, and when it finally opened its virtual doors, shoppers found themselves confused, even driven away by the cartoon salespeople and cumbersome design of the oh-so-hip online shop.

Online retailing doomsayers should note that Boo.com’s demise doesn’t make it an e-commerce casualty — it’s merely the death of style over substance.

It didn’t take long for an e-mail address to get hit on by a bulk e-mailer. After four days, an unsolicited commercial e-mail made its way to the address listed on the masthead. The message touted “the all new exclusive Y2K highly targeted e-mail address CD volume #7!” And to make doubly sure that Wallis didn’t miss his chance to buy one of the 27 remaining CDs, the spammer sent two copies of the same e-mail. We got spam!

But after four weeks, Wallis had received a mere 20 pieces of spam (along with 10 pitches from observant public relations representatives) at the address listed on the masthead. Surprisingly, none of the other addresses got even a nibble. It was a rare moment; we were a bit annoyed that spammers were ignoring us.

“Give it four months,” advises Alan Schwartz, co-author of “Stopping Spam.” “A spammer spends more time harvesting e-mail addresses than mailing to them. They’ll probably spend a month gathering addresses and then do one mailing at the end of the month. It doesn’t pay to be mailing every week.”

Besides, AOL, Hotmail and other companies have implemented filters to keep bulk e-mail out, says Jason Catlett, president of Junkbusters, a site that provides tips on how to avoid spam.

But we were doing the right thing — if we wanted spam — by putting our e-mail address on Web pages. “An e-mail appearing undisguised in a public Web space — a member directory, Geocities, Usenet — all of these are equally quick routes to being spammed,” adds Catlett. An address is even more inviting to spammers if it appears in a “mailto” link, which lets people click on a link and send e-mail directly from a Web page, says Catlett.

We may have unwittingly discouraged spammers by giving our straw man an unusual name. “A lot of it has to do with the exact address you pick, since the spammers attack all the major ISPs and go through the dictionary, asking the SMTP [mail] servers if they’ve got a “john1,” a “john2,” and so forth,” explained Catlett. But Wallis was also pretty safe because he laid low, only posting twice on Usenet within the month. “The more times you appear on Usenet and on Web pages, the more likely you’re going to get spammed,” said Catlett.

What else triggers spam? If you sign up in order to download software or use a Web service from a company of dubious standing, it may sell your e-mail address. “There are lots of individuals that offer Web services who aren’t that scrupulous about what they do with the addresses,” says Schwartz. He also pointed out that subscribing to mailing lists may put you in the path of spammers. Sometimes these automated lists aren’t properly secured and will give up their lists of subscribers to anyone who asks.

And Catlett was optimistic about Wallis increasing his spam intake: “A while back, someone did an analysis of the names on one of these bulk mailing lists. Many of the addresses on the list had been dead for years and years,” he says. “It may take a while to get on one of these lists, but it’s going to take a lot longer to get off of one.”

Prior to Post, Brxndmo focused on technology for video editing. In the ’80s, he worked on digital video at the MIT Media Lab. He started a video editing software company called DiVA, which he sold to another video company, Avid, before founding Post in 1996. Next on his career path? Authordom: His book, “Engaged: The New Rules of E-mail Marketing,” will be published in August by HarperCollins.

E-mail marketing doesn’t sound all that glamorous for an MIT Media Lab guy. How did you get into this business?

After I left Avid, I didn’t want to start something just because it was a really cool technology. I wanted to find a need in the industry, a pain in the market. And what companies were saying four years ago was, “We’re collecting more information about our customers; we have 3 million names in our database; we’re worried about privacy and spam; we want to have an effective dialogue.”

You’ve said companies misuse e-mail. What’s wrong with the way they use e-mail?

What a lot people are doing is saying, “Well, we have direct mail, so let’s do direct e-mail.” And direct e-mail works pretty well. It is better, faster, cheaper — it’s got a higher response rate, it’s cheaper to contact people, it’s got a faster turnaround time. But it’s just doing exactly what we’ve done in the past, instead of engaging customers in an ongoing dialogue.

What’s a good example of one of these dialogues?

There’s a great company called Wegmans, a grocery chain out on the East Coast. Wegmans is a very customer-oriented company — they help people with menus, they have a nutritional advisor on staff, they have very loyal customers. So we developed an e-mail marketing concept: Let’s not use the Web to sell customers, since you want them to come into the store. Let’s use e-mail to service your customers.

As a customer, you tell them the number of children, any dietary concerns — maybe Junior has diabetes — whatever the primary issues are for your family. And then, every Monday morning, Wegmans sends you an e-mail that says, “Here’s your suggested meal plan for the week.”

How targeted is targeted e-mail?

We put our clients’ customers into three main buckets. The first bucket is untargeted — yours might address you by your first name, mine might address me by my first name, but otherwise it’s pretty much the same newsletter. The second bucket is targeted: Given the gender difference, Victoria’s Secret would send me gift suggestions around the holidays, while they might suggest microfiber underwear to a woman. The third bucket is individualized communications: You and I would get very different communications completely based on who we are, where we live, how long we’ve had a relationship with the company and what actions we might be taking. For instance, if you make a purchase and I don’t, you would get a sequence of follow-up e-mails while I wouldn’t.

Untargeted communications gives you a 6 to 10 percent response rate; targeted doubles to 17 percent. And when you get to individualized, our average response rate is about 32 percent. If you’re doing a good job, if you miss a week or whenever your regular mailing is, your customers should be e-mailing you asking, “Where’s my e-mail?”

But are companies really thinking that way, or is it, “OK, we’ve got these customers, we’ve got their e-mails — now, let’s sell them more products!” What’s the general modus operandi? Most of the e-mails from companies I get are very product oriented.

I think the challenge is moving to relationship management, which is what I just described. If I look at our total customer base, I would say that less than 20 percent of them are doing what I would consider to be service-oriented relationship management. The rest are basically doing direct e-mail. And direct e-mail is the majority of what you receive today.

It still can be of value as long as you’re in control and unsubscribe if you don’t like it, and maybe specify your areas of interest. You sign up for a natural health store, and you say, “I’ve got spring allergies, and I’d like tips on yoga” — you specify a little bit of a profile, and they update you with information. But every time they give you information, they’re also going to try to sell you something. And then there are the ones that say, “Screw the information, we’re just going to try and sell them something.”

One of the challenges we have is that those programs, in spite of being annoying if they’re overused, work really well. We have clients whose e-mail programs drive more revenue than any other program. And so we come in and say, “But you’re sending too many messages to your customers,” or “You’re pissing them off,” and they say, “What do you mean? They work. We’re making millions of dollars.” So how can you argue with success?

How, indeed?

You have to be able to take a longer-term perspective with these people and show them. Give us 5 percent of your customers for three months, and we will show you that by being smarter about segmenting these customers, they will be more valuable. When I signed up for a program we developed for Music Boulevard/N2K, I could specify my favorite artists, and I’d get an e-mail every week telling me about new releases. In the first month of that program, I spent $350 on CDs. It was personalized enough so it was my only source of music acquisition for a while — it was great!

The age-old principle is, “Well, let’s just broadcast and get a 1 to 2 percent response rate — it’s so cheap to contact people we can afford to do it.” That’s problematic. It’s going to cause the industry response rates to go down. Customers are going to get sick and tired of it and unsubscribe or filter the messages out.

What if there was a price for sending e-mail, like a tax on each e-mail, so companies would strive for a better return? Would that help?

The problem you have with pricing is that it actually [gives people the wrong incentive]. Say you’re selling herbs online, and you have 100,000 customers and prospects. I charge you $1 for every e-mail, and you get a 5 percent response rate; you send out 100 e-mails, five people respond. So it’s costing you $20 to get someone to respond. What are you going to do? Every one of those e-mails needs to be promotional in nature. Are you going to send them a newsletter about growing herbs when it costs $100 to send out 100 e-mails that may get no response? What happens when you put that kind of mentality behind these programs is that they get even more promotional.

Maybe in a socialist country, you could levy a tax on any e-mail that was purely promotional in nature. That could be one way to use economic incentives. But I don’t think that will happen in this country.

What’s your position on opt-in/opt-out?

I do believe that the onus should be on the marketer to ensure that the customer understands the terms. There should be a “Check here if you agree to the terms” — so the customer actively says, “Yeah, I know what’s going on.” There’s a big difference between positive opt-in and negative opt-out. You could argue that negative opt-out, as some sites do today — where you have to uncheck a box to not receive stuff — isn’t really giving the consumer easy choice. You’d want something in place to make it harder for companies to do that.

And, by the way, I have the numbers to prove to companies that they’re better off if they use positive opt-in. They might have slightly fewer names in the database, but the total economic return of positive opt-in is way better.

So should positive opt-in be not only for e-mail but for other types of targeted promotions, like banner ads?

That one I’m less concerned about. I think the DoubleClick thing was, frankly, blown out of proportion. [DoubleClick was planning to merge users' names and purchasing history with their surfing profiles until privacy advocates blew the whistle.] What DoubleClick was saying that they would do is no different from what marketers have been doing for decades: collecting information from different sources and combining them into one profile.

Now, of course, you have even more information online. Say you went to a site to investigate a story on child pornography, and 17 years later you’re running for mayor of Chicago and someone digs up your profile — you get the drift. So clearly there are some implications. However, if you buy child pornography by mail, these companies will keep lists, and that information will get consolidated into other databases.

Now you could argue that all of that is wrong, but I think singling out what has happened online is a little alarmist. If I can go to DoubleClick, or any Web site, and click on a link that says “Check my profile” and see what they have on me — this kind of full disclosure will alleviate some of people’s concerns.

Post clients may be good marketing citizens, but there are all these other companies who aren’t and are flooding people with e-mail right now. What can the industry do to stop this?

I believe that there should be federally mandated privacy legislation. I don’t believe this industry self-regulation stuff is going to go anywhere. What’s happening is that because there’s no real federal regulation, every state is coming up with its own mishmash of laws. The marketers are doing themselves a disservice because it’s going to be so hard to navigate all 50 states’ and the European initiatives — you’re going to get to the point where you have to send different e-mails to every state with different disclaimers if you’re going to remain legal.

But would this stop spam?

When you get spam today and you respond by saying “unsubscribe,” you don’t know what is actually going to happen. They might be checking to see if your account is a valid address. But if you own your own data, then nobody can use it if you tell them not to; if you instruct the company not to do something, then they’re legally obligated to do that.

That could be tricky to enforce.

Somebody could set up “complaints@us.gov” and if you cc’ed them when you unsubscribed, they could keep a record. Then you could turn around and file a complaint. It would give anti-spam organizations legal recourse to pursue. It’s not that spam wouldn’t happen — the spammers could go offshore or something — but if you relegate spammers to doing something illegal it makes it more difficult for them.

Is there an industry group that could have a lot of impact if it came out with best practices — “Do not bombard your customers with more than X number of e-mails a month?”

I don’t believe there is. This is the problem I have with self-regulation. All it takes is one big guy to break the rules, and you’ve got a problem. If there are no penalties involved, then it isn’t going to be long-term effective. If someone sees a reason to break the rules, they will — even if it is shortsighted and the whole industry will suffer for it.