Rumors of Direct Mail’s Death…

Study shows mail is holding its own as Internet spending grows NESTLED IN THE PAGES of Veronis Suhler’s most recent Communications Industry Forecast are the anticipated fortunes of two marketing channels. The first, direct mail, is one of slow growth, as befits a mature medium. The second, Internet advertising, is burgeoning.

At $41.6 billion in advertising expenditures, direct mail is 1999’s largest category in what the New York research firm calls the “specialty media market,” which also includes consumer and business-to-business promotions and sponsorships. As a whole, this category amounted to $119.2 billion in 1999. Of that, 55.4%, or just over $66 billion, went to consumer spending, with the rest going to B-to-B efforts. Direct mail expenditures were not broken out within each market.

This segment is forecast as growing 6.2% annually, to $161.4 billion, in 2004. At that time, consumer spending will bump up slightly, to 54.9%.

>From 1999 to 2004, the direct mail component will lag the sector’s >6.2% growth rate. Spending on the medium, which rose 7% annually >between 1994 (when it amounted to $29.6 billion) and 1999, is >expected to slow to 6.1% annually through 2004, when it will amount >to just under $56 billion. Even that would be a pickup from the most >recent year’s gain, when the category rose by 5%, from $39.6 billion.

In contrast to this, Internet advertising spending – which is still in its nascent stages (Veronis Suhler does not have data for this category before 1994) – totaled $4.6 billion in 1999, up 141% over 1998. Through 2004 it is seen as growing at a compound annual growth rate of 39.5%, with expenditures that year amounting to $24.4 billion.

Veronis Suhler does not link the slowdown in direct mail to the rise in Internet marketing. In fact, the report says that as marketers continue to explore one-to-one marketing, all channels will see increased use. More germane are anticipated postal rate hikes, which may account for part of the slowdown in direct mail ad spending.

But marketers will still rely on the broad reach of print mail. This is affirmed by the fact that most Internet advertising is placed on relatively few outlets. The top 10 Web sites garnered nearly 75% of every dollar spent on Internet advertising in 1999, a figure that jumped to 95% when the top 50 sites were considered.

Where online advertising will see its biggest increases is as a percentage of total advertising expenditures. In 1999, its $4.6 billion represented 2.8% of the year’s spending on advertising, which amounted to $165 billion. By 2004, when online advertising is seen as jumping to $24.4 billion, it will more than quadruple to 9.8% of the year’s $249.1 billion in expenditures.