Q2 Revenue Falls Below Expectations, DMA Business Review Says

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Though the direct and interactive marketing industry continued its sustained growth, second-quarter revenue was below expectations, according to the Direct Marketing Association's Quarterly Business Review released yesterday.

The review is a benchmark for the industry's financial performance. It identifies trends affecting future performance, including changes in sales revenue, customer response rates, marketing expenditures and staffing levels.

According to the review, the index for revenue performance had a score of 61, down from 64 in the first quarter. The revenue performance index was 65 for the 2003 fourth quarter, 63 for the 2003 third quarter and 49 for the 2003 second quarter.

The QBR Index, which is a score out of 100, compares revenue this quarter to the year-ago quarter. A score of 50 means no change; above 50 indicates growth and below 50 signals a decline.

"After years of reporting an economic roller coaster, the QBR Index has now registered a solid fourth straight quarter of growth," said H. Robert Wientzen, DMA president/CEO. "What's more, there is reason to be cautiously optimistic for a fifth quarter, also."

But because revenue did not meet expectations, the report also indicates a potential slowing in the growth rate for the third quarter. While revenue index numbers remain broadly consistent for users and suppliers, agency revenues seem to be lagging.

Nonetheless, projections for next quarter continue to be strong, predicting an index of 67 for the three segments (users, agencies and suppliers) and overall.

The Quarterly Business Review also reports on specific DM segments.

· Business to business reported strong revenue index figures, with profit and revenue higher than the overall user segment numbers. Projected revenue for the third quarter is high with a reported index of 70.

· The catalog segment reported an index of 63. More than 65 percent reported an increase in sales with only 16 percent reporting a decrease.

· Agencies reported that the number of clients grew in the second quarter at a moderate rate, the same as quarter one, while clients' sales goals stayed very strong, especially relative to client expenditures.

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