Direct media owners to see rise in ad revenue next year: Magna report

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Magna, an agency in the Interpublic Group division Mediabrands, predicted this week that revenue for owners of direct media — a diverse group comprising search engines, the US Postal Service and phone directories, among others — will rise 3.3% next year. That rise occurs when national and local brand-based advertisers are included and revenue is evaluated as a whole.

According to the projections, released October 13, total revenue for media owners will drop 1.3% in 2010. For this year, the overall drop is 14.6%, but direct as a subset only drops 7.5%. National media revenue, such as TV and magazine revenue, will drop 11% this year, with local advertising falling 21.7%.

“While the top-line observations suggest that there's a shift from mass media to direct media, what's implicitly modeled is that there's a change in the universe of advertisers who may disproportionally benefit from the use of direct media — and that's driving the growth," said Brian Wieser, SVP and global director of forecasting at Magna. "The rise in sophistication of advertisers contributes to the use of direct media because of the integration of databases, customers, list rentals, etc., and that contributes to growth overall."

Direct online ad revenue is expected to grow 2.4% this year and 11.3% in 2010, according to the report. Paid search and online video are the fastest growing segments in this category. This is due to growing use of paid search among small and midsize marketers, Wieser said.

"It's really speaking to the expansion of the market for advertising by making it possible for small to midsize marketers to do what we call advertising,” he said.

The Magna forecast divides offline media into two parts: direct mail and directories, such as Yellow Pages. Both channels face precipitous 2009 drops: directories by 12.1% and direct mail by 11.3%. However, direct mail revenue is expected to rise 2.5% next year, while directories could fall again — by 5% — as their functions are duplicated by online channels.

"We would argue that paid search is primarily taking a page from the [directories'] business," Wieser said. "It caters toward a direct response model even if the measurement is not as precise as you might think."

Mail suffered this year due to the economy and the perception that campaigns using it waste paper, Wieser noted.

"But you do have a broad subset of advertisers who use the medium who are becoming more sophisticated in using it," he added. "Plus, keep in mind what that growth rate is relative to other media. We're forecasting next year that all media will be down 1.3%, so that 2% growth rate looks pretty good."

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