May 9, 2016 (RARC-WP-16-010)
- The future of advertising mail—currently a critical product for the Postal Service’s bottom line—is uncertain.
- Key external factors impacting future advertising mail volumes are: the national economy, the growth of Internet advertising, and the degree to which Internet advertising displaces advertising mail.
- Despite the importance of external factors on advertising mail, the future of advertising mail is not predetermined.
Our white paper, Advertising Mail: Future Prospects in Five Scenarios, looks at the upcoming period from 2016 to 2025 and projects five plausible scenarios using three different external assumptions. Projected potential outcomes for Standard Mail volumes run the gamut, from 119 billion pieces to 53 billion pieces in 2025. This wide range is an indicator of both the great opportunity and the great risk to the Postal Service that is associated with advertising mail.
This analysis, based on work from RCF Economics and Financial Consultants, starts with 2015 data for the total advertising market, which is estimated at $190 billion by Pivotal Data. Of this, Standard Mail (most advertising mail is Standard Mail) had a 9 percent share, representing 80 billion pieces.
The scenarios project Standard Mail volumes and revenues from 2016 to 2025. In brief, they are:
Growth and Complementarity
We assume that advertising spending reverses its recent trends and grows faster than the overall economy.
Return to Pre-Great Recession Trends
In this scenario, advertising spending grows at the same pace as the economy.
Recent Trends Continue
Advertising spending grows more slowly than the economy has in recent years.
As in the scenario above, we assume that advertising spending grows more slowly than the economy, but Internet advertising grows aggressively.
Constant Traditional Share
As bad as the previous scenario was, Standard Mail fared better than other traditional forms of advertising. In other words, the growth in the Internet hurt other media more than advertising mail. In this last scenario, we assume instead that Standard Mail maintains its share of traditional advertising as Internet advertising booms.
These scenarios are meant to be illustrative and are not mutually exclusive. The 10-year future path of Standard Mail may end up being a hybrid of more than one of the scenarios presented.
The future of advertising mail has not been predetermined, but advertising mail must be positioned as complementary to Internet advertising. The USPS and the mailing community have started down this path with creative initiatives, but more needs to be done. Otherwise, like most other forms of traditional advertising, mail will be crowded out of the advertising market.