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Greg Papacosta

Email Advertising Stats Point to a Great Future
By Greg Papacosta

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On the surface, Yahoo!'s announcement yesterday did not bode well with those of us that rely on Internet advertising. But is it really that bad for those of us in the email sector of e-advertising and marketing in the long term?

It's very likely in the short term (3-6 months) we'll continue to see our sector announce poor revenues and earnings.

Just today, Digital Impact announced it's lowering its guidance for quarterly earnings ending March 31. CEO William Park believes the economy has caused lower expenditures from advertisers and that marketers and the stock market eroded its client base due to dot-com failures. Their sector continues to hope traditional advertising/marketing companies will make up for the dot-com shortfall -- but their entrance onto the Internet obviously isn't fast enough.

A week ago, DoubleClick CEO Kevin Ryan stated in an interview with ON24 that advertising expenditures on the Internet will be 10-15 percent less than last year. CEO Alan Meckler recently announced he expects revenue to jump anywhere from 35% to 50% from last year. But at the same time, lowered 1st quarter projections by around 15% because ad revenues continue to be soft.

This means e-advertising companies will be forced to continue aggressive practices in reducing rates to marketers in order to generate increased revenue. Along with this we can expect these companies to further reduce pay out per CPM to sites and publishers in order to make up for the loss of top line margin due to a reduction in pricing.

We all know things are tough for everyone involved in the Internet advertising and marketing industry. And we know right now supply is hugely outweighing demand. So how can there be any good news?

Consider these facts:

1. Statistics are clearly pointing toward a great future.

According to research companies consensus, advertising and marketing on the Internet will increase 40% each year for the next four years and email advertising will increase 50% each year. Obviously, we aren't currently at these growth rates, but, when interest rate cuts begin to take effect, the economy should return to a solid, more normal growth rate. Once this occurs, companies will begin spending at more traditional levels which will then trigger a growth spurt on the Internet.

2. There are clear advantages to email advertising.

No one can dispute the advantages of email advertising and marketing on the Internet - low cost, targeting, measurability, immediate feedback... While the economy may be hampering the "entrance" of more traditional marketing companies onto the Internet, so might a lack of knowledge of what advertising online can achieve. The problem is some traditional companies still don't understand the benefits of online advertising. And, in terms of "coming onto the Internet" it appears many businesses are only beginning to "crawl" and aren't anywhere near "walking." In the meantime, the rest of us have been "running" for the past year. It's going to take a little more time and good economic conditions to assist these companies into the "walking" stage.

3. Some online companies do understand the advantages of email advertising and are just beginning to realize the potential positive impact on revenues.

DoubleClick's failed acquisition of NetCreations and possible acquisition of FloNetwork is a perfect example. A leader in the online advertising/marketing world, DoubleClick clearly sees email as an excellent growth opportunity for them. In a recent conference call, CEO Alan Meckler stated that email newsletters will have an important impact on its revenue growth in 2001. Meckler called the email industry the "hot button" in the Internet space. He continues to see robust email ad sales not only in the United States, but around the world. He also stated that "email newsletters are here to stay and are going to be very powerful."

Today's article in the Investor Business Daily might be an indication traditional media is beginning to understand these benefits. Although it may not be email-related, it does show online marketing does and will work. The article uses and as two examples of significant "wins" for online advertising., which began in 1995, had about nine million users prior to its ad campaign which launched last October. After five months of running ads on the Internet they had an additional five million people sign up., which started up in October, 1999 increased its subscriber base from 600,000 to two million within three short months.

It will take a lot more of these "wins" to generate enough interest from traditional "brick and mortars" to advertise on the Internet but the trend has started and their is no stopping it.

The question is this: When will they embrace it and to what extent?

And will it be enough for us to forget about lost revenues that evaporated with the dwindling of the dot-coms?

My bet is yes -- especially in the email advertising sector.

Ezine-Tips for March 09, 2001

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