Borrell: direct mail decline is local media's opportunity

A new report out today from Borrell Associates offers new online revenue hope for local media companies struggling with the model of banner advertising. Over the next five years, according to the report, direct mail advertising will fall 39 percent, from $49.7 billion in annual ad spending in 2008 to $29.8 billion by the end of 2013. If that occurs, direct mail will fall from the No. 1 placeholder for ad revenue to No. 4, behind the Internet, broadcast TV and newspapers.

Direct Mail ad category falls dramatically over the next five years

There are five key factors contributing to what the report calls a “perfect storm” buffeting this ad category:

  1. Fewer catalogues being delivered
  2. Tightened credit
  3. Shifting trends in coupons
  4. Financial woes for the U.S. Postal Service
  5. Momentum for do-not-mail legislation

Where will all that money go? Borrell projects the winner will be email.

Most of the growth in e-mail marketing will be local. we’re expecting local e-mail advertising to grow from $848 million in 2008, to $2 billion in 2013, as more small businesses abandon direct mail couponing and promotional offers and turn to a more measurable and less costly medium, e-mail.

This is a significant opportunity for local media, although the report warns that it won’t produce big revenues overnight. Companies such as Constant Contact that provide email marketing solutions for local media report an upswing in business, and it’s a smart ad category to help enable commerce in the communities we serve. But there’s another, perhaps even bigger reason for local media to get into this business.

Looking five years ahead, the need for local media managers to do things differently gets more urgent. A dramatic plunge is in store for display or banner advertising, which today comprises 51 percent of all local online advertising and is the mainstay of most local media companies’ Internet ventures. By 2013, we anticipate that banners will account for just 17 percent of all local online advertising, or about $2.6 billion.

So if your company has bet the ranch on banner advertising for its online future, it’s going to be a rough five years.

One of the constant themes coming from both AR&D and Borrell is the need for local media companies to diversify our portfolios, because the model of expensive, ad-supported content is slipping away. Advertising is content in the Media 2.0 world, and if we wish a seat at tomorrow’s table, we have to get into businesses that exploit the opportunities this new “content” offers. Email marketing is one of the most natural fits for local media, for our reach and reputation is ideal for creating mailing lists that we can mine on behalf of clients.

(Originally published in this week’s AR&D Media 2.0 Intel newsletter)

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