I have been out pitching a new email oriented startup. As I’ve listened to smart people react to the idea, I’ve heard at least five different endings to the sentence “The future of email is _____”. The most frequent ones are:

1. Social Networks
2. SMS
3. IM
4. Mobile
5. Video chat

There are other less plausible ones too

Certainly the one I hear most is Social Networks and I’ve seen some support for this idea based on hitwise data. Here is a quick walk through their argument, which I think you will agree ends up being pretty weak.

It all starts with this picture, which is supposed to show that Social Networks are displacing email services for communication purposes.

Now it is impossible to dispute that social networks are growing and growing quickly. That is just a fact, and this picture would have looked pretty much the same if you compared social networks with ANYTHING. What is FAR less clear is whether or not they are displacing email.

Although there is communication taking place on social networks, I think its communication that wasn’t really happening in email before. Kara Swisher seems to think it was the sort of communication that happened in middle school lunchrooms, which she lays out here in “Facebook Apps are for Toddlers”. I think college fraternity parties and local singles bars is a little closer to the truth, but either way its safe to say that social networks foster a different sort of communication than email.

Whats more, is that email growth continues. Here is the data for Gmail vs. Facebook in the US over the last year. A very different story. Here both are growing nicely over the 12 month period, and facebook is actually flat over the last 6 months and DOWN month over month while gmail continues to grow.

Then Hitwise jumps the shark by suggesting that social networks are driving real commerce activity:

Perhaps more importantly, their statistics show that clicks to retail sites from social networking sites are now equivalent to the traffic generated from the web-based email sites. In other words, while many businesses view social networks as entertaining distractions, referrals via social networks are generating eCommerce activity.

That is crazy talk. I have a good amount of experience in eCommerce and I think it’s pretty widely known that social media is not driving meaningful commerce volume at the moment. I think the GigaOhm guys put it best in the You’re Better Off Working at Starbucks Than Running a Social Network post which details the reality of the $.03 to $.10 CPMs that you can earn on a social network precisely because they DONT drive any commerce.

Now none of this is to say that social networks don’t present some very interesting new communications tools and methods.

My simple bet is that the few small things that social networks have added to the communication will find their way into email and not the other way around.

The future of email is better email.

I was just reviewing Morgan Stanley’s last Internet Trends report and noticed a very interesting statistic deep down in the text of slide #23:

According to Morgan Stanley research estimates, spending on disply advertising online (those graphical banners, buttons, skyscrapers, etc) actually FELL over the period of 2001 to 2006.  In 2001, total spending on display advertising was $4.42 Billion and 62% of total ad spending.  In 2006, it was only $4.1 billion and 26% of total ad spending.

It’s very rare that you actually see online marketing spend decrease in absolute dollar terms.   Here is a picture of the story:

It’s even more amazing if you think that 2001 was just post-bust, and spending was lower than it had been in 1999, so this would have been an even steeper fall if we compared 1999 to 2006.

Right, so the big question is why?  Here’s my take:  3 reasons:

1. Search actually sells stuff online and a bunch of those 2001 advertisers were actually more interested in selling things than they were just spreading their brand around.  So when search hit the scene, it stole a ton of money from graphical.

2.  Graphical spent the better part of 5 years trying to figure out what metric it should sell to advertisers.  It moved from click through rate to CPA and CPM.   None of them really say much and compare poorly to other advertising media where the brand impact is much easier to understand (like television, for example).

3. The real explosion in online content is user generated (60% of the internet).  Most graphical advertisers don’t understand how reach that content, and the few who do don’t understand how to advertise on it effectively.

It spells opportunity to me…