Direct Mail Fails, Email Soars

—Borrell Associates, 2009

Eight years ago we began issuing forecasts showing a steep, permanent falloff for newspaper advertising, starting with help-wanted, then automotive, then retail and then real estate. Despite the industry’s claims that any downturn would be cyclical, it wasn’t. Newspapers have seen a 30 percent decline in revenues since their peak eight years ago.

Last August, we predicted an accelerated decline for another print medium—Yellow Pages, forecasting a 38 percent drop in ad revenues over five years. The Yellow Pages industry and its consultants, which had been forecasting single-digit declines, scoffed. By the end of the year, the bottom seemed to have dropped out, hurtling the Idearc into bankruptcy and causing it to tell investors that a 40 percent drop in revenues over the next five years was likely.

Now, our latest prediction: The kudzu-like creep of the Internet is about to claim its third analog victim – the largest and least-read of all print media – direct mail. Direct mail has begun spiraling into what we believe is a precipitous decline from which it will never fully recover.

We’re predicting a 39 percent decline for this Goliath over the next five years, 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.

So where’s the upside? It would be too easy to say that its digital replacement will be e-mail. But e-mail advertising is indeed skyrocketing while its traditional counterpart plummets. In fact, last year e-mail advertising quietly moved to the No. 1 online ad category spot, surpassing all other forms of interactive advertising. Advertisers spent $12.1 billion last year on e-mail marketing, more than they spent on display/banner advertising or search advertising. We’re predicting that e-mail will continue to distance itself from other online advertising formats over the next five years, growing to $15.7 billion and remaining the preferred channel among many marketers.

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.

Those trying to latch onto this trend aren’t likely to strike instant gold. Managing large e-mail marketing campaigns require database marketing expertise, a savvy sales force, adequate e-mail management software, familiarity with the rules and regulations and a lot of patience.