What Are the Prospects for a Spending Revival for Out-of-Home and Direct Mail Advertising?

Among performance-marketing categories, both out-of-home and direct-mail advertising experienced devastating declines in 2020. As the effects of the pandemic slowly diminishes, both are expected to recover. But there's one question marketers in those categories face: What should they base 2021 spending on? After all, 2020 is practically synonymous with the much-overused word “unprecedented.” For Brian Wieser, global president, business intelligence of GroupM, you should look to 2019 and adjust according to how quickly parts of the economy recover. In Wieser's review of OOH and direct mail, the former category’s declines were expected. And while GroupM’s forecast for direct mail was consistently weak, he said that marketers may have missed a clear opportunity. After all, given that so many consumers were home, checking the mail was a much more likely activity than during “normal times.” Value remains high GroupM estimated that OOH, both traditional billboards and digital extensions, would decline by 31% in 2020, following 2019’s 10% rate of growth. The agency expects a “partial rebound” of 23% growth. During 2021, out-of-home advertising will account for 3% of all advertising tracked in our broadly defined estimates for the U.S. media economy. Within the OOH category, GroupM said cinema advertising is unlikely to see any meaningful rebound until traditional moviegoing returns. The studio business model was severely disrupted when major titles in theaters were sent to direct-to-consumer streaming platforms. Even once the virus has receded, it seems unlikely studios will release as many titles in theaters as they did in pre-pandemic years, meaning admissions are likely to remain below 2019 levels for some time. “OOH’s value remains high—but value and price and revenue are not necessarily related in a downturn,” Wieser said. “Spending by advertisers fell at an historic pace. It’s not an unreasonable outcome, given the degree to which people have prized staying at home throughout the year. And it continues to be true in many of the most valuable out of home markets.” Unless an advertiser has a long-term fixed commitment, it’s understandable why they wouldn’t start a new campaign there until things start to resemble normalcy—even at a deeply discounted price. There simply aren’t enough people walking around to be captured by a giant billboard. Still, Wieser did point to some small areas of resilience over the past 12 months. “I was fascinated by how the likes of [OOH media company] Lamar held up pretty well, even in the depths of the pandemic,” he said. “It speaks to their geographic skew, which tends to be placements across highways. But cinema advertising essentially evaporated. Then you have transit, where ridership has also experienced historic lows. In those types of environments, exposure is negligible.” As OOH buyers and sellers make their plans for 2021, there's likely to be some confusion of how to price these units. “Will marketers set the previous second quarter as a baseline or will they go back to 2019 for a baseline to model budgets against?” Wieser said. “We don’t know.” There was also a question of which products would be in high demand. No marketer wanted to be in a position of juicing demand for a product they couldn’t fulfill. And no one wanted to appear to be seen as exploiting a tragic situation. “The bottom line was that certain products were going to sell out no matter what,” Wieser said. “Advertising, in some cases, was largely unnecessary.” Direct mail: an under-appreciated category GroupM estimates that direct mail will generate around $13 billion in revenue during 2020—down 26%. If political advertising around national elections is factored in, that decline was 21%. The media intelligence unit is forecasting a partial rebound in 2021, with 17% growth before resuming single-digit declines. “I’m surprised more marketers didn’t capitalize on direct mail,” Wieser said. “People are stuck at home, so they’re going to see mail more than they might have otherwise. There's been a continued movement away from print. And there were issues with postal service delivery delays.” The big issue that direct mailers have is the secular weakness. Still, Wieser pointed to a potential for upside: the declines are single-digit. “Political advertising is going to hurt by comparison this year,” he said. “But it’s still strong on an underlying basis.”