The rise of the Internet has taken its toll on a number of media and is about to claim its third analog victim: direct mail. The largest of the print media, printed direct mail will decline 39 percent over the next five years with annual spending dropping from $49.7 billion in 2008 to $29.8 billion by the end of 2013, according to a study from Borrell Associates to be released later today (Wednesday, May 20) at BIA's Winning Media Strategies conference in Washington, D.C.
If Borrell's prediction holds up, direct mail, once topping ad spending on Internet, broadcast TV and newspapers, will slip to No. 4.
One of the media expected to replace direct mail is e-mail. Last year, e-mail moved to the No. 1 online ad category spot, surpassing all other forms of interactive advertising. Last year alone advertisers spent $12.1 billion on e-mail marketing, more than was spent on display/banner advertising or search advertising. Over the next five years, e-mail advertising will grow to a $15.7 billion business, Borrell forecasted.
Most of the e-mail growth will occur on the local level. Local email advertising is expected to climb from $848 million in 2008 to $2 billion 2013, driven primarily by small businesses abandoning direct mail couponing and promotion offers.
Companies that could be challenged by the emerging trend in direct e-mail marketing are direct marketing giants such as Valpak and Valassis, which send out packages of coupons and offers to consumers' homes. In first quarter this year, Valassis' "shared mail" revenue declined 12.7 percent from a year ago.
While coupon usage is up, it is being delivered more frequently via e-mail and the Web, or directly in stores. Last year, 36 percent of adults picked up a coupon inside a store and used it, compared to 28 percent two years ago. About 8 percent of consumers are using coupons delivered in e-mail or on the Web.
Other companies are poised to benefit from the trend such as ConstantContact, Bronto, iContact, Silverpop, MailChimp and Yesmail. Constant Contact, one of the larger email service providers, reported a 52 percent increase in mailing last year. Revenue was up 73 percent to $87 million.
For local media, e-mail marketing represents an "overlooked opportunity," the Borrell report concludes.
"Nearly two-thirds of Internet users check their email at least once a month, while one-third go to the Web. Yet most local media companies toil exclusively on the Web following the mass-media model of packaging and delivering more and more content, which will generate more and more traffic, which will crate inventory to sell more and more advertising adjacencies. While that model works and shouldn't be any means be abandoned, selling banner ads on Web sites has almost certainly become a mature business with little opportunity for growth," the Borrell report concludes.
To take advantage of the trend, Borrell recommended that local media companies require site registration, run contests and promotions, and hire a database manager.