Download - Winterberry outlook 2012
Outlook 2012: What to Expect in Direct & Digital Marketing
Bruce Biegel Managing Director
October 1, 2012 Boston, MA
• Market Intelligence
• Strategic Consulting
• Transaction/ Diligence Support
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Winterberry Group & Petsky Prunier LLC: Maximizing Shareholder Value of Companies in the Marketing Sector
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Corporate Divestitures
Capital Raising & Private Placements
Buy side M&A Advisory
Fairness Opinions
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•
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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 Consider for 2012
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%
Then
As Goes the Economy, So Goes Marketing Spending
Sources: Trading Economics; Bureau of Economic Analysis; Company websites
U.S. GDP growth slowing to an average 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. government standoff and Middle Eastern unrest giving rise to greater global uncertainty
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 (August/September, 2011)
Now Source: Company Websites
The Recession Began An Acceleration of Spend Shift from Traditional to Digital Marketing Channels, A Trend That Continues in 2011
-12.0%
-4.1%
5.7% 6.7%12.3%
21.1%
-5.6%
-25%-20%-15%-10%-5%0%5%
10%15%20%25%
Print Direct Mail Broadcast Display Search Out-of-Home
U.S. Marketing Spend Growth, By Channel (CAGR, 2008-2011)
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
Television: $55.4BB
Newspapers: $22.4BB
Magazines: $14.3BB
Radio: $13.4BB
Outdoor: $6.4BB Cinema:
$0.6BB -0.2%
-2.2%
-4.2%
5.0%
-1.7%
2.0%
1.7%
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
Direct Mail: $46.4BB
Teleservices: $40.1BB
DR Broadcast: $25.4BB
Digital: $32.6BB
DR Print: $15.3BB
Other: $2.8BB
14.0%
Statement Inserts: $0.9BB 9.1%
7.6%
1.6%
10.9%
5.6%
2.0%
3.5%
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
Search: $16.6BB
Mobile: $1.2BB
Display: $12.5BB
Email: $1.6BB
Social Apps & Widgets, Listening
Platforms: $0.4BB
27.0%
41.2%
27.0%
14.0%
18.1% Lead Gen &
Affiliate Services: $0.2BB 6.6%
10.5%
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
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
Higher emphasis placed on reporting and analytics using advanced data tools and
platforms to determine ROI
As recovery slows, spending shifting back to retention, signaling lack of confidence
Marketing technology adoption—focuses on cross channel integration—beginning with
digital channels
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)
M&A activity picking up: 1H 2011 M&A in the 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 Consider for 2012
Global Ad Spend, Led by Asian Region and Digital Channels, Expected to Attain 6.8% CAGR Over the Next Five Years
11.4%9.5%
7.7% 7.2% 7.2%
4.2%2.1%
0.3%
18.1% 16.9%15.7%
12.3%
Online Video
Mobile
Digital O
OH
Paid Search
Pay TV
Cinema
Other OOH
Other Intern
et
Broad
cast
Television
Radio
Newspapers
Mag
azines
2011-2016 Global CAGR By Channel ($BB)
Source: MAGNAGLOBAL
EMEA24%
APAC37%
Latin America
12%
North America
27%
Contribution to Global Ad Spend Growth, by Region
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 • 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
2012: A Challenging Economic Outlook
Sources: [1] “World Economic Outlook” IMF [2] Goldman Sachs [3] Business Cycle Dating Committee of the National Bureau of Economic Research
“ “ ”
First Class Mail
Falling through the floor due to email and other digital media substitution
Direct Mail: A Tale of Two Classes
First Class Mail volume down 25% since 2006, and predicted to decline an additional 48% by 2020
Standard Mail
Second year of solid growth; 1H 2011 Standard Mail volume up nearly 4% from SQLY
Since Standard Mail generates one-third the profit of First Class Mail, it cannot shore up the bottom line alone
Our situation is extremely serious. If Congress doesn’t act, we will default.
— Patrick R. Donahoe, U.S. Postmaster General
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 have to shut down entirely this winter unless Congress takes emergency
action to stabilize its finances. –The New York Times ”
While standard mail improves, shrinking first class mail pushes USPS over the edge
Sources: Post and Parcel; Postal Regulatory Commission
Direct Mail’s Place in the Marketing Mix Has Changed
The purpose of direct mail has shifted… …from direct order….
Direct mail moving from a direct-response-only approach to key player in the multichannel world
…to driving sales online or in-store “ ”
The catalog is great driver for sales online and in stores. We’re not publishing with the idea of creating an [independent] direct marketing
business. It’s the idea of driving traffic into stores and giving the sense of a brand.
-Ellen Smolyar, 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
$47.5$48.0
$43.8
$44.9
$47.4$48.0
2009 2010 2011E 2012E 2013E 2014E
U.S. Direct Mail Marketing Spend ($BB)
Source: Winterberry Group, June 2011
Digital Channels Continue to Mature, Capturing New Spend and Taking Share From All Other Media
$0
$50
$100
$150
$200
$250
$300
$350
$400
2008 2009 2010 2011E 2012E
DigitalBTLATL
U.S. Advertising and Marketing Spending, by Share of Approach
2007-2011E (US$BB)
6% 7% 8% 9% 10%
Source: Winterberry Group analysis of various sources, 2011
55% 55% 57% 55% 56%
40% 38% 35% 36% 34%
Channel integration and optimization a major marketer priority
Digital spend growth continues to be driven by search and display
30-35% of media now consumed via digital channels, with social continuing to absorb time and impressions
Standardization of digital metrics fueling broader adoption
Faster mobile/social spending shifts delayed by talent / knowledge gaps
Source: eMarketer
Social, Mobile and Search Have Experienced Biggest Spend Gains, But 2012 May Tell a Different Story
2.9
3
3.1
3.1
3.3
3.4
3.5
3.6
3.8
3.9
4.1
1 2 3 4 5
Direct Mail: Catalog
Print: Newspaper & Magazine
Broadcast: TV & Radio
Direct Mail: Non-catalog
Out-of-Home / Outdoor
Other
E–Mail
Online Display Advertising
Mobile Marketing
Search
SocialSocial Search
Mobile Marketing Online Display Advertising
Email Other
Place-based Media/DOOH Broadcast: TV & Radio
Direct Mail: Non-catalog Print: Newspapers & Mags
Direct Mail: Catalog
3.0+ = Increasing Popularity
N = 105 Source: “Quarterly Business Review” DMA & Winterberry Group, August 2011 and August 2010
WG Marketer Survey: To what extent has the spend allocated to the following channels changed
compared to SQLY?
Priorities in the marketing mix are constantly
changing:
Today, marketers have increased spend in social, search and mobile advertising
compared to last year.
One year ago, marketers said the biggest spend increases over the past 12 months had come in
email, social and display.
Search: 2012 Spending Expected to Reach $19.4BB, Up 10.2% YOY, With No Slowdown in Sight
46% 44% 43% 44% 44%
Demand-side platforms (DSPs) integrate search in an effort to improve multichannel marketing and attribution
Increase in focus on SEO to complement rising SEM spend
Local search accounts for 40% of all search, drawing SMB marketer spending
Search retargeting enables marketers to take the power of search and apply it to display, with the added benefits of real time optimization and attribution
Still the most dependable channel for ROI
$20.5$22.0
$19.4$16.6$15.6$14.6
2009 2010 2011E 2012E 2013E 2014E
U.S. Search Marketing Spend ($BB)
7% CAGR
Source: Winterberry Group, June 2011
Source: Google
Display: 2012 Spending to $12.8BB, Up 21.9% YOY, Driven by Audience Targeting and Video Adoption
Significant rise in automated exchange-based buying of static and video display using real time data driven bidding (RTB), accounts for ~10% of all display spend
Online video ad spend expected to grow to $3.0 billion in 2012, up from $1.9 billion in 2011. By 2015, it will account for 1/3 of all display spend
Marketers shift to audience targeting, seeking performance improvements through the use of primarily DSP analytics, digital data and display retargeting techniques
Sources: Cream; eMarketer; Vator News
Facebook accounts for one in three (31.2%) of all display ad impressions, although its share of revenue is significantly lower
Source: Winterberry Group, June 2011
$15.5
$18.0
$8.4$9.3
$12.5 $12.8
2009 2010 2011E 2012E 2013E 2014EIncludes social display
U.S. Display Marketing Spend ($BB)
14% CAGR
E-mail: Spending Up 12.5% to $1.8BB, Database Segmentation and Targeting Driving Email Spend
Improvements in segmentation and database-driven versioning are primary drivers of spend increases - not volume of emails as CPMs continue to shrink
Remains the most cost effective media for retention functions, volumes continue to surge
Unique click to conversion rates have increased steadily in 2010 and 2011(Q2 2011 up14.6% over Q1 2011 and up 6.2% over Q2 2010)
Spending negatively impacted by price compression
Utilization expansion tied to the proliferation of devices, smartphone and tablet adoption, along with e-commerce, location-based emails and daily deal sites
$2.0$2.2
$1.2$1.4
$1.6$1.8
2009 2010 2011E 2012E 2013E 2014E
11% CAGR
U.S. Email Marketing Spend ($BB)
Source: Winterberry Group, June 2011
Source: “Q2 2011 North America Email Trends and Benchmarks Results” Epsilon & DMA
Mobile: 2012 Spending at $1.7BB, Up 41.7% YOY —The ”Year of Mobile Rollout” Led By Device Proliferation and Marketer Experience
84% of in-store shoppers are doing some type of mobile activity while they shop, such as comparing prices (70%), accessing product reviews (67%)¹ and using retail apps
Location-based targeting technologies advancing, but data for segmentation and connection a challenge
Growth of m-commerce: Global m-commerce revenues forecasted to reach $10BB by 2012 and $119BB in 2015²
Sources: [1] WhiteHorse, [2] Forrester and BitWizards, [3] GetJar, [4] Nielsen
$491
$2,946
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2009 2010 2011E 2012E 2013E 2014E
Spen
d ($
MM
s)
U.S. Mobile Ad Revenues
Early adopters move from test to rollout; mainstream marketers build mobile-friendly sites (20% have mobile-optimized sites today)
Digital Couponing: Rise in Mobile Usage Driving Rapid Adoption of Digital Formats
47% of Americans on the Internet will claim at least one digital coupon in 2011, increasing to 49% by 2013
Unique visitors to daily deal sites Groupon and LivingSocial grew by triple-digit rates between mid-2010 and mid-2011, yet few barriers to entry exist
Digital coupons redeem at a much higher rate than FSI coupons — between 5% and 20%, compared with 0.9%
Sources: eMarketer; MediaPost; ABI Research; Compete, Yipit
Rise of location-based and instant digital coupons track increases in in-store mobile usage, including apps and digital signage
-132
300
In the first eight months of 2011, 300 new daily deals site
launched, while 132 such sites went out of business
Social Media: 2012 U.S. Ad Revenues Up 27.7% YOY to $3.9BB, Growth Slows But Brand Dollars Accelerate
Social adoption and time spent slows: social media fatigue sets in among some early adopters, leading to fewer unique visitors and less time spent on social network sites High valuations are likely to come down as advertisers decide where to place their social dollars. Facebook and LinkedIn may catch up to their revenue promise
Marketers increasing investment focus in social media analytics to address concerns over ROI and measurability
Social media revenue ramps (31.6% forecast CAGR through 2015) from multiple streams: subscription, social currency and advertising
Sources: BIA/Kelsey; eMarketer; Nielsen Wire; Bizo
Coming Soon?
65% of Marketers Say Social is The Channel They Will Focus On Most in the Next 12 Months: Are They Asking the Right Questions?
As social media matures and becomes part of the fabric of everyday life, marketers must ask themselves fundamental questions…. •Why am I using social media? •How do I increase engagement? •How do I increase modernization? •How do I measure social media? •Should I focus on branding or direct response?
Social Media for Marketing Purposes
is About…
Source: Bizo
Addressable TV: Offers Marketers Enhanced Tracking and Targeting to a Larger Audience
Many networks are aggressively pursuing addressable TV to offset diminishing affiliate fees from cable providers
Most major cable providers have enabled addressable TV through their set-top boxes on at least a pilot basis
In a recent test by Starcom MediaVest, addressable TV
resulted in:
Sources: Comcast Spotlight and Starcom MediaVest Group
Universal media-buying standards still do not exist (as many set-top boxes are obsolete), inhibiting media buying at scale
Once addressable TV extends to all U.S. households, as soon as 2015, it could bring in $10 billion in incremental ad revenue to television
65% 32%
65% increase in efficiency (how much money advertisers can
save by delivering ads to those homes in which they
are interested)
32% increase in effectiveness (viewers less likely to turn away from an addressable ad than a non-addressable
ad)
Agenda
Outlook 2012
What happened in 2011?
2012 Channel Check: The evolution of direct and digital
Changing Data Landscape
9for12: What You Should Consider for 2012
Offline Providers
Publishers
Offline Compilers
Social Sites / Online
Providers
Portals / Online
Compilers
2012: Year of Digital Data and Analytics Taking Off
What’s at stake: The ability to pull together data from online and offline sources in order to optimize conversations with the audience via the right device at the right time
“
”
Imagine being able to 1) create a single view of a user
and 2) use all those data assets to make smarter
decisions about how to talk to each user you encounter through your digital media initiatives, your site-side
messaging, etc. That’s what I think makes the DMP powerful – bringing data intelligence to
every digital interaction a marketer has with users.
-Joanna O'Connell, Forrester Analyst
Geo-Demographic compiled from
publishers, databases and
other third parties
Online Data Types: • Registrations • Cookies (Flash) /
browsing activities • Social networks • Online purchase
data • In-market purchase
intent
Psychographic and behavioral compiled from
surveys, analytical models
Social compiled from
social sites, blogs, sharing
sites,
Transactional added from purchase records, cooperative databases
?
DSP
Site Interaction
Engine
Lead Scoring
SSP
Channel Interaction
Engine
Yield Mgmt.
Marketers Are Seeking to Align Their Internal Marketing Processes, Platforms and People, Decisioning Engine Development is Key
Marketing Data & Content Asset Layer
Real-Time Decisioning Engines
Mar
keti
ng E
xecu
tion
Pla
tfor
ms
Dat
a M
anag
emen
t P
latf
orm
(s)
Integrated Data Management
Marketing Execution & Response
Web Site Data
Web Site Data
Intent Data
Intent Data
GeographicGeographic
DemographicDemographic
ChannelPreferenceChannel
Preference
SocialSocial
TransactionalTransactional
These Changes Are Shifting The Balance of Influence in the Data Industry—and Offsetting Most Mail-Related Spending Declines
2008 2010 2012E(1) Online display-related data spending includes retargeting services, intent data / inferred data, offline data used for online marketing (2) E-mail-related data spending includes e-mail lists, database management / hygiene and analytics services (3) Direct mail-related data spending includes mailing lists, database management / hygiene and analytics services
U.S. Spending, Marketing Data & Related Services (2008-2012E)
$10.8BB $9.9BB
Online Display-Related Data Spending1
E-mail-Related Data Spending2
Direct Mail-Related Data Spending3
$11.9BB
Source: Winterberry Group analysis of various sources
Spending on Digital Data
$310MM 2.9%
$830MM 7.0% $510MM
6.2%
”
Marketers Face Data Governance Challenges, Such as Consumer Privacy, Data Security and Data Rights Management
“ Consumers have the right to know that their information is being collected and used by companies in a safe and
legitimate way in order to ensure that individuals are protected in the event of a data security breach.
Common sense commercial privacy laws are needed to impose accountability and security requirements on the
companies involved. -Sen. John Kerry,
Chairman of the US Senate’s Subcommittee on Communications, Technology & the Internet
Consumer Privacy
Data Security
Data Rights Management
Data Governance
Agenda
Outlook 2012
What happened in 2011?
2012 Channel Check: The evolution of direct and digital
Changing Data Landscape
9for12: What You Should Consider for 2012
9for12
It is the (another) Year of Data: Marketers will begin to approach the growing Big Data problem, developing plans on how to manage and activate data across channels. Early adopters begin to implement solutions including integrating online DMPs with offline prospect and CRM data sets to manage the conversation with disparate audiences across devices
Content is the new black: Content, recognized as the primary driver of engagement (along with the data that informs it), marketers and their agencies begin to wrap their arms around content marketing, including the continual creation, curation (finding, organizing, sharing), editing and active management – in order to organize content across channels and devices – and content is just another “unstructured” form of big data to deal with
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2
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Mobile: recognizing that mobile is about devices (tablets, smartphones, computers), location and intent, marketers accelerate the transformation of web sites from PC design (currently 80% of sites are PC only) to device specific sites – tablet sites, smartphone sites and PC sites.
Cross digital media buying search, display and email), driven by first, second and third party data experiences significant performance improvements as attribution solutions mature and are better able to identify the impact (engagement relationships) across channels…driving more digital spend
3
4
9for12
Improved marketing technology stacks, assembled via acquisition in 2010-2011 by large tech players (IBM, Adobe, Google) release the first sets of integrated products, primarily for enterprise marketers, that can automate the marketing process from campaign planning through execution and attribution.
USPS postal crisis is put to rest as the administration and congress accept a portion of the recommendations put forth by the postmaster general including a reduction in post offices and SCFs, though the 6 day week is more likely to remain in place. Force reductions will complemented by an agreement on a partial pension reform
5
6
9for12
The pace of M&A accelerates in the ad tech (digital display) sector along with continued agency consolidation of those with mobile/social specialties. Emerging attribution providers and data companies see renewed interest to complement the push towards digital cross-channel integration. Smaller ad tech firms that have not gained traction experience reduced funding forcing asset sales and closures. Privacy regulation, mostly quiet in 2011, moves back into the Washington conversation as legislators continue to examine the impact of EU privacy laws enacted this year. Probable outcomes include data (breach) security legislation and some form of baseline privacy rules around sensitive information – though not a Do Not Track (DNT) bill.
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And finally – the economy. If the US goes into a recesssion it will negatively impact all measured media channels along with direct mail spend while slowing (not stopping) the rate of growth in the digital sector. Marketers will stick to longer test periods as spend tilts back towards retention marketing again.
A neutral of low level of growth should result in the forecast envisioned in this presentation. Any higher growth rate will benefit TV, direct mail (in addition to the bump they get with the election) and the digital media channels – while stabilizing magazine and newspaper ad spend..
9
Questions? Copy of the Deck?
Bruce Biegel Managing Director
[email protected] (212) 842-6030
60 Broad Street, 38th Floor New York, NY 10004
www.winterberrygroup.com