Direct Mail Spending to Plummet, E-mail to Soar: Borrell

Direct mail spending will drop 39% during the next five years from $49.7 billion in 2008 to $29.8 billion in 2013, according to a study released yesterday by media research and consulting firm Borrell Associates.

“Direct mail has begun spiraling into what we believe is a precipitous decline from which it will never fully recover,” the study said.

Not surprisingly, the study predicts e-mail will pick up some of the slack.

According to Borrell, marketers last year spent $12.1 billion on e-mail, more than they spent on either display/banner advertising or search.

“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,” the study said.

Most of the growth in e-mail marketing will be local as businesses begin to abandon direct-mail couponing and promotional offers in favor of more cost effective e-mail, the study said.

Borrell predicts local e-mail marketing spending to grow from $848 million in 2008 to $2 billion in 2013.

Among direct mail’s biggest threats, according to Borrell, is merchants mailing fewer catalogs and relying more heavily on e-commerce sites, tightening consumer credit leading to fewer financial services mailings, the increasing usage of coupons delivered by e-mail and inside stores, momentum for do-not-mail legislation, and, of course, the U.S. Postal Service’s well-documented financial troubles.

“[Postal] service cutbacks—including a curtailed delivery schedule that might eliminate Saturday service—could be devastating to the direct mail industry,” the study said. “Subsequently, postage increases would drive more marketers to the cheaper alternative, e-mail.”

The report concludes that e-mail is local businesses’ biggest overlooked opportunity.

“Nearly two-thirds of Internet users check their e-mail 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 create inventory to sell more and more advertising adjacencies,” the study said. “While that model works and shouldn’t by any means be abandoned, selling banner ads on Web sites has almost certainly become a mature business with little opportunity for growth.”

The study continued: “All signs point to the demise of direct mail. And when a local business owner looks for other ways to spend that $5,000 to $20,000 per year that doesn’t seem to work in direct mail, targeted e-mail with online promotions and couponing seem the perfect fit at the right price point.”