E-mail marketing spending will grow from $1.2 billion in 2009 to $2 billion by 2014, according to a forecast released this week by Forrester Research.
Retention e-mail will account for three quarters of the spending, according to the report authored by Forrester analyst David Daniels.
Last year when Daniels was with JupiterResearch—acquired by Forrester last July for $23 million—he forecast e-mail spending would hit $2.1 billion by 2012. However, he said, market pressure on CPMs led him to make his forecast more conservative.
“The CPM price compression is continuing. The magic number for this forecast is figuring out what the erosion’s going to be,” he said.
The reason for the continued drop in CPMs is the dramatic growth of ESPs’ clients’ e-mail lists, said Daniels. “Whereas in a previous report, a b-to-c marketer had 2.8 million people on their list, now they had like 10.1 million. List sizes have grown dramatically, which means they’re [list owners are] putting pressure on the vendors.”
Daniels’ most recent forecast is also significantly more conservative than projections Forrester has put out in the past. However, Daniels said, whereas Forrester used to count projected e-mail service provider and agency revenue, Forrester now counts just ESP revenue in its e-mail spending forecast.
Still, even this conservative forecast represents a healthy trajectory.
Why is Daniels so bullish on e-mail’s future? For one thing, e-mail remains a low-cost way to communicate.
“Consumers have told us that even in a down economy their home Internet connections will remain on,” his report said.
Moreover, secondary e-mail box usage remains strong, according to Forrester. Also, according to Forrester, the growth of social media will bolster e-mail because people need e-mail accounts to register for these sites.
Also, the number of active e-mail individuals—defined as people who log into one or more e-mail accounts at least monthly—will grow from 145 million in 2009 to 153 million in 2014, Forrester projects.
The biggest growth area for e-mail spending between now and 2014 will be in transactional messaging, according to Forrester. The firm projects transactional messaging to grow at a compound annual rate of 9.2%.
“Fourteen percent of email marketing executives that we surveyed told us that they plan to begin placing offers in their transactional messages,” the report said. “This illustrates that marketers will begin to harness a previously untapped message stream for promotional purposes. Additionally, the rise of consumers using the social inbox will drive email alert messages that inform subscribers of ‘pokes,’ wall posts, and status updates — contributing to an increase in service-oriented transactional messages.”
However, marketers will continue to waste money on e-mail messages that never make it into the inbox to the tune of $144 million in 2014, the report contends.
“Why? Because of inadequate list hygiene and mailing practices, as well as overzealous ISPs that lump good messages in with bad ones,” the report said. “Marketers can slow the cash burn by adopting sender- and message-level authentication as well as reputation services to thwart the imperfect spam-protection heuristics that drive false positives.”