Winterberry outlook 2012


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Winterberry Group Direct & Digital Marketing 2012 Outlook

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Winterberry outlook 2012

  1. 1. Outlook 2012:What to Expect inDirect & Digital MarketingBruce Biegel October 1, 2012Managing Director Boston, MA
  2. 2. Winterberry Group & Petsky Prunier LLC: Maximizing Shareholder Value of Companies in the Marketing Sector• Market Intelligence Sell-Side • Representation• Strategic Consulting Corporate •• Transaction/ Divestitures Diligence Support Capital Raising & •• Market/Competitive Private Placements Landscape Analysis• Industry Insight: Buy side M&A • Publishing and Advisory • Tactical Execution Fairness Opinions
  3. 3. AgendaOutlook 2012What happened in 2011?2012 Channel Check: Theevolution of direct and digitalChanging Data Landscape9for12: What You ShouldConsider for 2012
  4. 4. 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 U.S. GDP growth slowing to an average Cuts in 2011 Global Ad Spend Growth Forecasts (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. government standoff and Middle Eastern unrest giving rise to greater global uncertainty 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%Sources: Trading Economics; Bureau of Economic Analysis; Company websites Now Then Source: Company Websites
  5. 5. 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% 15% 12.3% 10% 5.7% 6.7% 5% 0% -5% -5.6% -4.1% -10% -15% -12.0% -20% -25% Print Direct Mail Broadcast Display Search Out-of- Email HomeSource: Winterberry Group analysis
  6. 6. 2011: Secular Spending Declines Has Continued to Affect Most Traditional Media 2011E U.S. “Above-the-Line” Advertising Spending $112.6BB 5.0% Outdoor: Cinema: $6.4BB $0.6BB 2.0% -0.2% Radio: $13.4BB Television: -2.2% Magazines: 1.7% $55.4BB -1.7% $14.3BB -4.2% Newspapers: $22.4BBSource: Winterberry Group analysisNote: Arrows reflect expected percentage change inspend, by channel, from 2010 levels
  7. 7. 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: 9.1% $0.9BB Other: $2.8BB 10.9% DR Print: 2.0% $15.3BB Direct Mail: DR Broadcast: $46.4BB 3.5% 7.6% $25.4BB 5.6% Digital: 14.0% $32.6BB Teleservices:Source: Winterberry Group analysis $40.1BB 1.6%Note: Arrows reflect expected percentage change inspend, by channel, from 2010 levels
  8. 8. 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 & 41.2% Mobile: Widgets, Listening $1.2BB Platforms: 10.5% Email: $0.4BB 18.1% $1.6BB Lead Gen & Affiliate Services: $0.2BB 6.6% Display: 14.0% 27.0% $12.5BB Search: 27.0% $16.6BBSource: Winterberry Group analysisNote: Arrows reflect expected percentage change inspend, by channel, from 2010 levels
  9. 9. For Marketers, Taking a Conservative Approach to Channel Investment Is The Rule, Leading to Extended Testing Cycles As recovery slows, spending shifting back to retention, signaling lack of confidence Higher emphasis placed on reporting and analytics using advanced data tools and platforms to determine ROI Marketing technology adoption—focuses on cross channel integration—beginning with digital channels Marketers invest in mobile and social, yet concerns about ROI and the mix of brand and direct marketing hinder the move from test to rolloutSource: “Quarterly Business Review” DMA & Winterberry Group, August 2011
  10. 10. For Suppliers, First Half Performance Is Driving Increased Investmentin Staffing, Capabilities, M&A—So Far The majority of suppliers expect higher revenues and profitability as 2011 continues With increasing economic uncertainty, staffing and new capital investment may shift into neutral Nearly 2/3 of suppliers say sales cycle is either stable or decreasing, largely due to shifts in buying behavior A shift in marketer demand is driving investment in new capabilities (organic and via M&A) M&A activity picking up: 1H 2011 M&A in the marketing, information and digital media/ commerce sectors up triple digits (value and volume) from 1H 2010 Sources: “Quarterly Business Review” DMA & Winterberry Group, August 2011; CMA Sales Forecast and Pipeline Survey; Petsky Prunier
  11. 11. AgendaOutlook 2012What happened in 2011?2012 Channel Check: Theevolution of direct and digitalChanging Data Landscape9for12: What You ShouldConsider for 2012
  12. 12. Global Ad Spend, Led by Asian Region and Digital Channels, Expectedto Attain 6.8% CAGR Over the Next Five Years Contribution to Global Ad Spend Growth, by Region APAC 37% Latin America 2011-2016 Global CAGR By Channel ($BB) 12% 18.1% 16.9% 15.7% 12.3% 11.4% North EMEA 9.5% America 24% 7.7% 7.2% 7.2% 27% 4.2% 2.1% 0.3% t rs eo ile H ch y TV a H ne on io es id ob l OO ar em OO ter isi ad pe zin eV M Se Pa Ci n er n ev R sp a a l in gita id th rI el w agOn Di Pa O he tT N e M Ot as dc oa BrSource: MAGNAGLOBAL
  13. 13. 2012: A Challenging Economic OutlookSlow U.S. GDP growth continues: forecastspredict 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 2012Sources: [1] “World Economic Outlook” IMF [2] Goldman Sachs [3] Business Cycle Dating Committee of the National Bureau of Economic Research
  14. 14. Direct Mail: A Tale of Two ClassesWhile 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 2011 Standard Mail volume up an additional 48% by 2020 nearly 4% from SQLY Falling through the floor due to email Since Standard Mail generates one- and other digital media substitution third the profit of First Class Mail, it cannot shore up the bottom line “ The USPS is so low on cash that it will not be able to make a $5.5 billion payment due this [September] and may have to shut down entirely this winter unless Congress takes emergency action to stabilize its finances. –The New York Times “ alone Our situation is extremely serious. If Congress doesn’t act, we will default. — Patrick R. Donahoe, U.S. Postmaster General Sources: Post and Parcel; Postal Regulatory Commission
  15. 15. Direct Mail’s Place in the Marketing Mix Has ChangedDirect mail moving from a direct-response-only approach to key player in themultichannel world The purpose of direct mail has shifted… …from direct order…. “The catalog is great driver for sales online and in stores. We’re not publishing with the idea of creating an [independent] direct marketing business. It’s the idea of driving traffic into stores and giving the sense of a brand. …to driving sales online or in-store -Ellen Smolyar, Senior Manager of Sales and Circulation at Crate & Barrel ”
  16. 16. Direct Mail 2012: No Real Catalyst for Continued Strong GrowthContinued erosion (substitution) of first class advertising, statement andinformational mailings will hold down retention mail growth while acquisition fightsan uphill battle for marketers’ share of mind and wallet While 2010 and 2011 were bounce-back years for direct mail, 2012’s forecast predicts anemic 1-2% growth rate U.S. Direct Mail Marketing Spend ($BB) $48.0 $48.0 $47.4 $47.5 $44.9 $43.8 2009 2010 2011E 2012E 2013E 2014E Source: Winterberry Group, June 2011
  17. 17. Digital Channels Continue to Mature, Capturing New Spend and Taking Share From All Other Media 30-35% of media now consumed via U.S. Advertising and Marketing digital channels, with social continuing Spending, by Share of Approach to absorb time and impressions 2007-2011E (US$BB) $400 Digital BTL Standardization of digital metrics ATL $350 6% fueling broader adoption $300 8% 9% 10% 7% Channel integration and optimization $250 55% 55% a major marketer priority $200 57% 55% 56% $150 Digital spend growth continues to be $100 driven by search and display 40% $50 38% 35% 36% 34% Faster mobile/social spending shifts $0 delayed by talent / knowledge gaps 2008 2009 2010 2011E 2012ESource: eMarketer Source: Winterberry Group analysis of various sources, 2011
  18. 18. Social, Mobile and Search Have Experienced Biggest Spend Gains, But 2012 May Tell a Different Story WG Marketer Survey: To what extent has the spend Priorities in the marketing allocated to the following channels changed compared to SQLY? mix are constantly changing: Social Social 4.1 Today, marketers have Search Search 3.9 increased spend in Mobile Marketing Mobile Marketing 3.8 social, search and Online Display Advertising Online Display Advertising 3.6 mobile advertising Email E–Mail 3.5 Other Other 3.4 compared to last year. Place-based Media/DOOH Out-of-Home / Outdoor 3.3 One year ago, marketers Broadcast: TV & Radio Direct Mail: Non-catalog 3.1 3.0+ = said the biggest spend Direct Mail: Non-catalog Increasing Popularity Broadcast: TV & Radio 3.1 increases over the past Print: Newspapers & Mags Print: Newspaper & Magazine 3 12 months had come in Direct Mail: Catalog Direct Mail: Catalog 2.9 email, social and 1 2 3 4 5 display.Source: “Quarterly Business Review” DMA & Winterberry Group, August 2011 and August 2010 N = 105
  19. 19. Search: 2012 Spending Expected to Reach $19.4BB, Up 10.2% YOY, With No Slowdown in Sight Still the most dependable channel for ROI Increase in focus on SEO to complement U.S. Search Marketing Spend ($BB) rising SEM spend $22.0 7% CAGR $20.5 $19.4 Local search accounts for 40% of all $16.6 $15.6 search, drawing SMB marketer spending $14.6 Search retargeting enables marketers to take the power of search and apply it to display, with the added benefits of real time 44% optimization and attribution 2009 2010 44% 46% 2012E 44% 2011E 43% 2013E 2014E Demand-side platforms (DSPs) integrate Source: Winterberry Group, June 2011 search in an effort to improve multichannel marketing and attributionSource: Google
  20. 20. Display: 2012 Spending to $12.8BB, Up 21.9% YOY, Driven by Audience Targeting and Video Adoption Marketers shift to audience targeting, seeking performance improvements through U.S. Display Marketing Spend ($BB) the use of primarily DSP analytics, digital $18.0 data and display retargeting techniques $15.5 14% CAGR Significant rise in automated exchange- $12.5 $12.8 based buying of static and video display using real time data driven bidding (RTB), $8.4 $9.3 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 2009 2010 2011E 2012E 2013E 2014E Includes social display Facebook accounts for one in three (31.2%) Source: Winterberry Group, June 2011 of all display ad impressions, although its share of revenue is significantly lowerSources: Cream; eMarketer; Vator News
  21. 21. E-mail: Spending Up 12.5% to $1.8BB, Database Segmentation andTargeting Driving Email SpendRemains the most cost effective media forretention functions, volumes continue to surgeUtilization expansion tied to the proliferation of U.S. Email Marketing Spend ($BB)devices, smartphone and tablet adoption, along with $2.2e-commerce, location-based emails and daily deal 11% CAGR $1.8 $2.0sites $1.6 $1.4 $1.2Improvements in segmentation and database-drivenversioning are primary drivers of spend increases -not volume of emails as CPMs continue to shrinkUnique click to conversion rates have increasedsteadily in 2010 and 2011(Q2 2011 up14.6% over 2009 2010 2011E 2012E 2013E 2014EQ1 2011 and up 6.2% over Q2 2010) Source: Winterberry Group, June 2011 Spending negatively impacted by price compression Source: “Q2 2011 North America Email Trends and Benchmarks Results” Epsilon & DMA
  22. 22. Mobile: 2012 Spending at $1.7BB, Up 41.7% YOY —The ”Year of MobileRollout” Led By Device Proliferation and Marketer ExperienceEarly adopters move from test to rollout;mainstream marketers build mobile- U.S. Mobile Ad Revenuesfriendly sites (20% have mobile-optimized $3,000 $2,946sites today)Location-based targeting technologies $2,500advancing, but data for segmentation andconnection a challenge $2,000 Spend ($MMs) $1,500Growth of m-commerce: Global m-commerce revenues forecasted to reach $1,000$10BB by 2012 and $119BB in 2015² $49184% of in-store shoppers are doing $500some type of mobile activity while theyshop, such as comparing prices (70%), $0 2009 2010 2011E 2012E 2013E 2014Eaccessing product reviews (67%)¹ andusing retail apps Sources: [1] WhiteHorse, [2] Forrester and BitWizards, [3] GetJar, [4] Nielsen
  23. 23. Digital Couponing: Rise in Mobile Usage Driving Rapid Adoption ofDigital Formats47% of Americans on the Internet willclaim at least one digital coupon in2011, increasing to 49% by 2013Digital coupons redeem at a muchhigher rate than FSI coupons — between5% and 20%, compared with 0.9% In the first eight months of 2011,Unique visitors to daily deal sites Groupon 300 new daily deals siteand LivingSocial grew by triple-digit launched, while 132 such sites went out of businessrates between mid-2010 and mid-2011,yet few barriers to entry exist 300Rise of location-based and instantdigital coupons track increases in in-storemobile usage, including apps and digital -132signage Sources: eMarketer; MediaPost; ABI Research; Compete, Yipit
  24. 24. Social Media: 2012 U.S. Ad Revenues Up 27.7% YOY to $3.9BB, GrowthSlows But Brand Dollars AccelerateSocial media revenue ramps (31.6% forecast Coming Soon?CAGR through 2015) from multiple streams:subscription, social currency and advertisingSocial adoption and time spent slows:social media fatigue sets in among some earlyadopters, leading to fewer unique visitors andless time spent on social network sitesHigh valuations are likely to come down asadvertisers decide where to place their socialdollars. Facebook and LinkedIn may catch upto their revenue promiseMarketers increasing investment focus insocial media analytics to address concernsover ROI and measurability Sources: BIA/Kelsey; eMarketer; Nielsen Wire; Bizo
  25. 25. 65% of Marketers Say Social is The Channel They Will Focus On Mostin the Next 12 Months: Are They Asking the Right Questions?As social media matures and becomespart of the fabric of everyday life,marketers must ask themselvesfundamental questions….•Why am I using social media?•How do I increase engagement?•How do I increase modernization? Social Media for•How do I measure social media? Marketing Purposes•Should I focus on branding or direct is About…response?Source: Bizo
  26. 26. Addressable TV: Offers Marketers Enhanced Tracking and Targeting toa Larger AudienceMost major cable providers have enabledaddressable TV through their set-top boxes on In a recent test by Starcomat least a pilot basis MediaVest, addressable TV resulted in:Universal media-buying standards still do notexist (as many set-top boxes are obsolete),inhibiting media buying at scale 65% 32%Many networks are aggressivelypursuing addressable TV to offsetdiminishing affiliate fees from cableproviders 65% increase in 32% increase in efficiency (how much effectiveness (viewersOnce addressable TV extends to all money advertisers can less likely to turn awayU.S. households, as soon as 2015, it save by delivering ads to from an addressable adcould bring in $10 billion in those homes in which they than a non-addressable are interested) ad)incremental ad revenue totelevision Sources: Comcast Spotlight and Starcom MediaVest Group
  27. 27. AgendaOutlook 2012What happened in 2011?2012 Channel Check: Theevolution of direct and digitalChanging Data Landscape9for12: What You ShouldConsider for 2012
  28. 28. 2012: Year of Digital Data and Analytics Taking OffWhat’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 Transactional added from purchase records, cooperative databases “ 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 Psychographic and behavioral compiled from surveys, analytical models Offline Providers Social compiled from social sites, blogs, sharing Social Sites sites, ? each user you encounter Offline / Online through your digital media Compilers Providers initiatives, your site-side messaging, etc. That’s what I think makes the DMP powerful Online Data Types: Geo- – bringing data intelligence to Demographic Portals / • Registrations • Cookies (Flash) / every digital interaction a compiled from Publishers Online ” browsing activities marketer has with users. publishers, Compilers • Social networks databases and -Joanna OConnell, Forrester other third parties • Online purchase data Analyst • In-market purchase intent
  29. 29. Marketers Are Seeking to Align Their Internal Marketing Processes,Platforms and People, Decisioning Engine Development is Key Marketing Data & Integrated Data Real-Time Marketing ExecutionContent Asset Layer Management Decisioning Engines & Response Geographic Geographic Marketing Execution Platforms Data Management Platform(s) DSP Demographic Demographic Channel Channel SSP Preference Preference Site Interaction Social Social Engine Channel Transactional Interaction Transactional Engine Intent Intent Lead Data Data Scoring Web Site Web Site Yield Data Data Mgmt.
  30. 30. These Changes Are Shifting The Balance of Influence in the DataIndustry—and Offsetting Most Mail-Related Spending Declines U.S. Spending, Marketing Data & Related Services (2008-2012E) Online Display-Related Data Spending1 E-mail-Related Data Spending2 Direct Mail-Related Data Spending3 $11.9BB $10.8BB Spending on $9.9BB $830MM Digital Data $510MM 7.0% $310MM 6.2% 2.9% 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 Source: Winterberry Group analysis of various sources
  31. 31. Marketers Face Data Governance Challenges, Such as ConsumerPrivacy, 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. Consumer -Sen. John Kerry, Chairman of the US Senate’s Subcommittee on Communications, Technology & the Internet ” Privacy Data Governance Data Rights Data Management Security
  32. 32. AgendaOutlook 2012What happened in 2011?2012 Channel Check: Theevolution of direct and digitalChanging Data Landscape9for12: What You ShouldConsider for 2012
  33. 33. 9for12 It is the (another) Year of Data: Marketers will begin to approach1 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 devices2 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
  34. 34. 9for123 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.4 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
  35. 35. 9for125 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.6 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
  36. 36. 9for127 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.8 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.
  37. 37. 9for129 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..
  38. 38. Questions? Copy of the Deck? 60 Broad Street, 38th Floor New York, NY 10004 Bruce Biegel Managing Director (212) 842-6030