Newspapers, Local Media Missing E-mail Revenue Stream

Every day stories surface about local media firms laying off staff or closing up shop all together, but many may be missing out on a large, untapped revenue stream: e-mail advertising. Among the oldest form of online advertising, e-mail has yet to be fully adopted by local media firms or local advertisers. However, according to a new report from Borrell Associates, it’s poised to grow significantly in the next few years.

Just a fraction of e-mail marketing revenue is local, says Borrell. While the e-mail market reaps $12.1 billion, only $848 million of that is local. However, the local media research outfit predicts big growth for local e-mail spending. By 2013, Borrell expects local e-mail revenues will exceed $2 billion, increasing 150 percent.

“Most local media companies are not leveraging e-mail advertising to the fullest degree,” said Borrell Associates VP Peter Conti. “They could have an upper hand as local e-mail gains prominence because they have massive marketing channels in their traditional media [properties].”

That upper hand comes in databases many media firms have amassed over the years. Most already send out regular e-mail newsletters to readers in the hopes of driving traffic to stories on their Web sites. But they could also be selling ads placed within those e-mails, or targeting messages to segmented audiences on behalf of advertisers. Still, most are not taking advantage of that revenue opportunity.

“This is where newspapers companies in particular can pick up the slack they’re losing in traditional [media],” Conti said.

In fact, of the 4,400 local media firms that provide Borrell with revenue information, only 190 — less than 5 percent — broke out e-mail as a separate revenue stream. On average, the firms that did break out e-mail reported it amounted to about 2.5 percent of their total gross revenue. None of the firms reported more than $900,000 in e-mail revenue, according to Conti. However, he added that of the firms reporting larger e-mail revenues, e-mail represented between 12 and 20 percent of their online revenue.

One reason cited by the firm for the impending e-mail surge: the expected decline in online display advertising. The firm believes display will account for 17 percent of local online ad spending in 2013, down from 51 percent currently. According to Borrell, local display advertising sales began to drop late last year. The researcher also points to a drop in direct print mail and catalog spending as reasons for the predicted e-mail uptick.

Local advertisers have indicated they would increase their budgets for e-mail marketing, but local media firms aren’t stepping up to the plate to serve those needs. “The amount of segmentation and targeting that can go into e-mail is not exhibited at the local level yet,” said Conti. He suggested local media outlets could be up against competition from pure play digital firms if they don’t introduce e-mail offerings.

“You’re losing a large potential source of revenue,” Conti said, adding that media firms should “look at adding a database manager or e-mail marketing manager.” Whether they will is another story. “It requires an investment in someone to manage the database, and [local media companies are] loath to step up and hire someone to do that,” he said.

Among the potentially successful approaches are enabling e-mail promotions and coupons for advertisers, said Conti. The report mentions newspaper firm Belo, which sends targeted e-mails on behalf of local advertisers. Radio stations have also sent e-mail messages promoting local nightclubs that may not be able to afford radio ads.

“If a local media company can package a bunch of [promotions] in a targeted e-mail, then it makes sense for a smaller businesses,” continued Conti.

“Media companies need to be investing in this to help their advertisers understand it. They need to have solutions for them,” he said.