Outlook 2012: Outlook 2012: What to Expect in Direct & Digital Marketing Direct & Digital Marketing Bruce Biegel October 1, 2012 Managing Director Boston, MA
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Agenda Outlook 2012 What happened in 2011? 2012 Channel Check: The evolution of direct and digital Changing Data Landscape 9for12: What You Should 9for12: What You Should Consider for 2012
As Goes the Economy, So Goes Marketing Spending Months of slow economic growth have given way to heightened uncertainty, long- term GDP downgrades and a reduced ad spend outlook Cuts in 2011 Global Ad Spend Growth Forecasts C t i 2011 Gl b l Ad S d G th F t U S GDP U.S. GDP growth slowing to an average th l i t (August/September, 2011) of 1.5% in 2011, down from higher growth levels over the previous six quarters Consumer spending in 1H 2011 at lowest growth rate since Q2 2009 U.S. unemployment rate continues to exceed 9.0% European debt/currency crisis, U.S. E d bt/ i i U S government standoff and Middle Eastern unrest giving rise to greater global uncertainty uncertainty 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Now Then Sources: Trading Economics; Bureau of Economic Analysis; Company websites Source: Company Websites
The Recession Began An Acceleration of Spend Shift from Traditional to Digital Marketing Channels, A Trend That Continues in 2011 U.S. Marketing Spend Growth, By Channel (CAGR, 2008 ‐ 2011) 25% 21.1% 20% 12.3% 15% 10% 6.7% 5.7% 5% 0% -5% 5% -5.6% -4.1% -10% -15% -12.0% -20% 20% -25% Print Direct Mail Broadcast Display Search Out-of- Email Home Home Source: Winterberry Group analysis
2011: Secular Spending Declines Has Continued to Affect Most Traditional Media 2011E U.S. “Above ‐ the ‐ Line” Advertising Spending $112.6BB Outdoor: Outdoor: 5 0% 5.0% Cinema: Ci $6.4BB $0.6BB 2.0% Radio: -0.2% $13.4BB Television: Magazines: Magazines: 1 7% 1.7% $55 4BB $55.4BB -2.2% -1.7% $14.3BB Newspapers: -4.2% $22.4BB Source: Winterberry Group analysis Source: Winterberry Group analysis Note: Arrows reflect expected percentage change in spend, by channel, from 2010 levels
2011: Digital Channel Growth Has Once Again Paced the Market of “Below ‐ the ‐ Line” Media in 2011 2011E U.S. “Direct & Digital” Advertising Spending $163.9BB Statement Inserts: Statement Inserts: O Other: 9.1% $0.9BB 10.9% $2.8BB DR Print: 2.0% 2.0% $15.3BB $15 3BB Direct Mail: 3.5% DR Broadcast: $46.4BB 7 6% 7.6% $25 4BB $25.4BB 5.6% Digital: Digital: 14.0% $32.6BB Teleservices : 1.6% $40 1BB $40.1BB Source: Winterberry Group analysis Source: Winterberry Group analysis Note: Arrows reflect expected percentage change in spend, by channel, from 2010 levels
2011: Digital Growth Driven by Rapid Mobile Adoption, Plus Reawakening of Interest in Display Advertising 2011E U.S. “Digital” Advertising Spending $32.6BB Social Apps & Mobile: Mobile: 41 2% 41.2% Widgets, Listening Wid t Li t i $1.2BB 10.5% Platforms: Email: $0.4BB 18 1% 18.1% $1 6BB $1.6BB Lead Gen & Affiliate Services: $0.2BB $0.2BB 6.6% 6 6% 14.0% Display: 27.0% $12.5BB Search: 27.0% $16.6BB Source: Winterberry Group analysis Source: Winterberry Group analysis Note: Arrows reflect expected percentage change in spend, by channel, from 2010 levels
For Marketers, Taking a Conservative Approach to Channel Investment Is The Rule, Leading to Extended Testing Cycles As recovery slows, spending shifting back to retention , signaling lack of confidence Higher emphasis placed on reporting and analytics using advanced data tools and l ti i d d d t t l d platforms to determine ROI Marketing technology adoption—focuses on cross channel integration —beginning with digital channels Marketers invest in mobile and social , yet concerns about ROI and the mix of brand and direct marketing hinder the move from test to rollout Source: “Quarterly Business Review” DMA & Winterberry Group, August 2011
For Suppliers, First Half Performance Is Driving Increased Investment in Staffing, Capabilities, M&A—So Far The majority of suppliers expect higher revenues and profitability as 2011 continues With increasing economic uncertainty, staffing and new capital investment may shift into neutral Nearly 2/3 of suppliers say sales cycle is either stable or decreasing , largely due to shifts in buying behavior A shift in marketer demand is driving investment in new capabilities (organic and via M&A) new capabilities (organic and via M&A) M&A activity picking up: 1H 2011 M&A in the marketing information and digital media/ commerce marketing, information and digital media/ commerce sectors up triple digits (value and volume) from 1H 2010 Sources: “Quarterly Business Review” DMA & Winterberry Group, August 2011; CMA Sales Forecast and Pipeline Survey; Petsky Prunier
Agenda Outlook 2012 What happened in 2011? 2012 Channel Check: The evolution of direct and digital Changing Data Landscape 9for12: What You Should 9for12: What You Should Consider for 2012
Global Ad Spend, Led by Asian Region and Digital Channels, Expected to Attain 6.8% CAGR Over the Next Five Years Contribution to Global Ad Spend Growth, by Region APAC 37% 37% Latin America 2011-2016 Global CAGR By Channel ($BB) 12% 18 1% 18.1% 16.9% 15.7% 12.3% 11.4% North EMEA 9.5% America America 24% 24% 7.7% 7.2% 7.2% 27% 4.2% 2.1% 0.3% Other Internet Mobile Paid Search Pay TV Cinema Other OOH Newspapers Magazines Online Video Digital OOH adcast Television Radio Broad Source: MAGNAGLOBAL
2012: A Challenging Economic Outlook Slow U.S. GDP growth continues: forecasts predict 2% for the year¹ • U.S. unemployment rate likely to stay above 9% • Gas prices, fiscal tightening, and European sovereign debt weigh down the 2012 outlook² sovereign debt weigh down the 2012 outlook • Odds of a renewed recession put at 1 in 2³ • Reduced confidence in U.S. economy as S&P downgrades U.S. credit rating and Moody’s lowers U.S. economic outlook through 2012 Sources: [1] “World Economic Outlook” IMF [2] Goldman Sachs [3] Business Cycle Dating Committee of the National Bureau of Economic Research
Direct Mail: A Tale of Two Classes While standard mail improves, shrinking first class mail pushes USPS over the edge First Class Mail Standard Mail First Class Mail volume down 25% Second year of solid growth; 1H since 2006, and predicted to decline since 2006, and predicted to decline 2011 Standard Mail volume up 2011 Standard Mail volume up an additional 48% by 2020 nearly 4% from SQLY Since Standard Mail generates one- Falling through the floor due to email g g third the profit of First Class Mail, it and other digital media substitution cannot shore up the bottom line alone The USPS is so low on cash that it will not be able to make a $5.5 billion payment due this [September] and may Our situation is extremely serious. If Congress have to shut down entirely this winter unless Congress takes emergency doesn’t act, we will default. — Patrick R. Donahoe, action to stabilize its finances. U.S. Postmaster General –The New York Times Sources: Post and Parcel; Postal Regulatory Commission
Direct Mail’s Place in the Marketing Mix Has Changed Direct mail moving from a direct-response-only approach to key player in the multichannel world Th The purpose of direct mail has shifted… f di t il h hift d …from direct order…. The catalog is great driver for sales online and in …to driving sales online or in-store stores. We’re not publishing with the idea of p g creating an [independent] direct marketing business. It’s the idea of driving traffic into stores and giving the sense of a brand. -Ellen Smolyar, y Senior Manager of Sales and Circulation at Crate & Barrel
Direct Mail 2012: No Real Catalyst for Continued Strong Growth Continued erosion (substitution) of first class advertising, statement and informational mailings will hold down retention mail growth while acquisition fights an uphill battle for marketers’ share of mind and wallet While 2010 and 2011 were bounce-back years for direct mail, 2012’s forecast predicts anemic 1-2% growth rate U.S. Direct Mail Marketing Spend ($BB) $48.0 $48.0 $47.5 $47.4 $44.9 $43.8 2009 2010 2011E 2012E 2013E 2014E Source: Winterberry Group, June 2011
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