The Electronic Nails in the Post Office’s Coffin

Startups such as Zumbox, Manilla, and Doxo add to the USPS’s woes
by digitizing bills and statements

By Tom McNichol
     Sept. 8 (Bloomberg BusinessWeek) -- As if the U.S. Postal
Service weren’t already in enough financial trouble, a growing
number of startups are about to make its future even more
uncertain. They’re trying to lure one of its main revenue
sources—the nearly 48 billion bills, statements, account notices,
and offers that companies send to households every year—into the
electronic realm. That could make the USPS’s $3.1 billion
third-quarter loss seem like small change. The companies aim to
do so with secure online services that, unlike e-mail, are
inaccessible to spammers and allow consumers to receive,
organize, and respond to important correspondence all in one
digital place. Matt Swain, associate director at research firm
InfoTrends, calls the technology “a potential game-changer.”
     Zumbox, a Los Angeles firm launched in December 2009, was
the first digital mail service out of the gate. With
$17.7 million in venture funding from private investors including
former Walt Disney Chief Executive Officer Michael D. Eisner, the
company is creating a digital mailbox for every street address in
the country. (Ironically, it’s using a freely available USPS
database to do so.) When customers sign up, Zumbox mails them a
PIN which they must use to register their account, a step that
verifies the link between the virtual Zumbox and the real-world
address. That assures mail senders that information is going to
the right household. Users can then access their Zumbox, free of
charge, to receive and store electronic mail, pay bills, and opt
out of paper mailings. “There’s sort of an inevitability about
the migration of the mail to digital,” says Zumbox CEO John
     The inevitable can’t come quickly enough for some companies.
In 2010, for the first time, households reported paying more
bills electronically than by mail, according to the most recent
USPS Household Diary Study. But only about 15 percent of consumer
bills and statements are delivered exclusively online. Businesses
spend about $30 billion each year printing, collating, and
mailing documents, and a typical bill costs a company anywhere
from 70¢ to a dollar to deliver. Zumbox charges senders as little
as 20¢. “Mailing is all about the cost of postage,” says Frank
Delfer, chief technology officer of DST Output, an El Dorado
Hills (Calif.) company that processes 2.3 billion paper bills,
statements, and financial documents annually for large companies.
DST started offering Zumbox to its customers in early August.
“Digital postal mail lets companies save money compared to the
way they’re doing it today.”
     Zumbox already has competition. In January, Pitney Bowes, a
maker of postage meters and machines, announced plans to offer a
service called Volly that, like Zumbox, will create a digital
mailbox tied to a customer’s mailing address. Manilla, a startup
owned by Hearst that launched in February, characterizes itself
as a free personal account management service. It can’t actually
receive mail as Zumbox does, but once users give Manilla the
credentials for their business accounts, the site provides an
organized view of all their bills, finances, travel rewards
programs, and subscriptions, along with payment reminders. Doxo,
begun in October 2010 and backed in part by Bezos Expeditions,
which manages founder Jeff Bezos’s personal
investments, operates similarly to Manilla but also allows users
to upload and store documents.
     All the services are free to consumers and make money by
charging mailers a per-document fee when customers agree to
paperless billing. They also promise to do away with junk mail,
since spammers won’t be able to infiltrate the gated electronic
system set up by the digital mail services. That doesn’t mean the
mailboxes will be entirely annoyance-free. Zumbox says it plans
to allow verified marketers to send mail—otherwise known as
spam—but that customers can filter those messages and opt out of
unwanted marketing. And while no online service is completely
impervious to being hacked, the digital mail providers have
invested in the same level of encryption and security that banks
     Right now, the various digital mailbox services are rushing
to form partnerships with companies that send out bills and
statements, while building up their user base. Manilla is taking
out two-page spreads in Hearst magazines such as Cosmopolitan and
Redbook , and Zumbox has launched a million-dollar sweepstakes to
get people to sign up and refer friends. Pitney Bowes has
promised to commit 5¢ to 10¢ per share, or about $20 million, for
market development of Volly.
     Swain, the InfoTrends analyst, expects more companies to
jump into the digital mailbox business. Digital postal mail has
already caught on in Finland and Denmark, he says, and New
Zealand’s postal service recently licensed Zumbox’s platform. The
country plans to roll out digital mail to 1.45 million households
as early as year’s end. If the trend holds in the U.S., then in a
few years’ time, the USPS may have nothing to deliver other than
the mail no one really needs.

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