DMA's Quarterly Business Review (QBR) for Quarter 1 Indicates Softness in Year-Over-Year Revenue

Direct Marketers Look to Resumed Growth in Q2

New York, NY, June 5, 2008 — The Direct Marketing Association (DMA) today released the Quarterly Business Review (QBR) for the first quarter of 2008. The report details how the greater direct marketing community — including direct marketers, agencies, and suppliers — collectively experienced a revenue dip following eighteen consecutive quarters of positive results.

“On the whole, the Q1 2008 results reflect the fact that many sectors of the economy are slowing,” said Anne B. Frankel, senior research manager. “For the first time since Q2 2003, the overall Revenue vs. same quarter last year (SQLY) metric has fallen into negative territory. However, direct marketers expect that some growth will resume for Q2, although at more conservative levels than in recent periods.”

An Overall Profitable Quarter, Despite Lower Revenue

In the QBR index, a score of 50 represents no change in the direct marketing business’ performance during the quarter versus the SQLY. Scores above 50 represent growth, and those below 50 represent a decline.

Revenue vs. SQLY was in negative territory, with an index of 48. This metric has declined in each quarter since Q4 2006.

However, Profitability remained robust at 63, with each of the three segments that QBR benchmarks (marketers, agencies, and suppliers) posting an index in the low 60s or better.

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QBR HIGHLIGHTS FOR 2008 QUARTER I

Direct Marketing Community: An Overview

Although Q1’s Revenue vs. SQLY is in negative territory, findings do indicate a growth in profitability as that metric continues to remain positive for all three segments.

With an overall index of 48, Revenue vs. SQLY reflects a seven-point drop from the previous quarter. Revenue vs. SQLY was flat at 50 for agencies, with marketers and suppliers registering indices below 50 (46 and 47) that pointed to lower revenue than in the first quarter in 2007.

Profitability remained solid at 63, although at a somewhat more moderate level than that for Q4, Q3, Q2, and Q1 2007 (65, 67, 68, and 69, respectively).

The agency segment posted higher than marketers or suppliers in both revenue and profitability indices.

Projected revenue for Q2 2008 also remains encouraging, with an overall index of 55. All three segments are expected to grow in Q2 2008, although at more conservative levels than in recent periods. However this metric is down from the 57 for Q1, eight points from the 63 for Q4 2007, and is a further decrease for the 65 projected for Q3 and the 66 forecast for Q2 2007. The fact that this metric has declined over each of the most recent quarters is a clear reflection of marketers’ deepening concerns about the economic situation.

Issues of Concern to Marketers

General Economic Conditions is again in first place overall in terms of factors likely to impact revenue for Q2 of 2008, with 56% citing it as a concern (as compared with 51% for Q1 2008 and 39% for Q4 2007).

“QBR initially asked marketers if they expected a recession in the Q3 survey, and found that just over one-third (36%) of marketers thought that a recession was at least somewhat likely in 2008,” continued Frankel. “Six months later, marketers seem more certain of a recession, with 41% saying it is somewhat likely and 37% stating it is very likely. Further, the percentage saying that a recession is very likely doubled from Q4 (37% vs. 19% in Q4). With these economic concerns, it is not surprising that marketers also voiced more modest revenue expectations going into 2008.”

In the event of a recession, marketers are most likely to keep their marketing budget the same but reapportion expenses.

In more encouraging news, marketers intend to boost their spending in a number of areas in the event of a recession, particularly in the online and analytics arena.

QBR Highlights Relating to Direct Marketers

Key QBR findings affecting direct marketers include:

· Q1’s Revenue vs. SQLY index of 46 pointed to a decline in revenue for Marketers.

· Profitability stayed healthy, but decreased by seven points to 61 from Q4’s 68.

· The weighted average revenue change (the measure that is more reflective of the direct marketing community in aggregate) was -3.6 percent. This represented a substantial drop from Q4’s 2.8% and Q3’s 4.9%. Consistent with the negative Revenue vs. SQLY index, marketers in most revenue tiers reported negative revenue changes.

· Marketers’ revenue projections for Q2 2008 fell by one point from Q1 to 54, marking the second consecutive quarter, and the second time, in 12 straight quarters that this measure has fallen below the 60s point.

· In terms of Q2 spending, marketers project slight decreases in their budgets for total advertising, while they expect to increase their DM Budget marginally. Expenditures on external direct marketing services and vendors are forecasted to slightly decline; marketers expect to spend somewhat more on new customer acquisition and new product development.

QBR Highlights Regarding Direct Marketing Agencies

· Revenue vs. SQLY was flat at 50, and represented a seven-point decrease from Q4’s 57.

· Profitability, with an index of 68, was six points higher than in Q4 2007.

· Agencies remain optimistic for Q2, but a forecast of 58 signaled more modest growth than that predicted for the five prior quarters.

· For the 12th consecutive quarter, agencies planned to spend the most in the next quarter on new customer acquisition.

QBR Highlights Regarding Direct Marketing Suppliers

· Revenue vs. SQLY registered a decline in Q1, dropping seven points to 47 from Q4’s 54.

· Profitability remained positive at 61, although at softer levels than in 2007.

· Revenue is expected to grow in Q2 2008, with a Projected Revenue index of 53 that reflects a more modest expectation than in recent quarters (59 for Q1 2008, 64 for Q4 and Q3 2007, and 62 for Q2).

Direct Marketing Breakout: B-to-B Segment

· The Revenue vs. SQLY index fell into negative territory at 44, below the levels for Q4 2007 (56) and Q3 (58).

· Profitability figures reflected growth in Q1, staying strong at 65.

· In Q1, the weighted average revenue change for B-to-B Marketers was -5.6%.

· B-to-B Marketers look to some growth in Q2 2008 with projected revenue index of 56, although expectations are more conservative than they were just two quarters earlier when the metric was 61. The Q2 forecast was more consistent with the expectation voiced for Q1 2008, which was 54.

Direct Marketing Breakout: B-to-C Segment

· Consumer Marketers posted a Revenue vs. SQLY index that was in negative territory (46), well below the levels for Q4 2007 (53) and Q3 (57).

· Profitability remained strong at 59, although down from one quarter earlier (68).

· In Q1, the weighted average revenue change was -4.6% for the B-to-C segment.

· B-to-C Marketers showed conservative expectations for revenue growth in Q2 2008, with a projected revenue index of 52. This figure is four points below the Q1 2008 forecast of 56.

About DMA’s Quarterly Business Review

DMA’s Quarterly Business Review (QBR) for the first quarter of 2008 is based on three online surveys of marketer, agency, and supplier companies. The surveys were conducted by DMA’s Research and Market Intelligence department from April 8, 2008 through April 24, 2008. Altogether DMA received 372 survey responses.

DMA members can download the report, for free, and non-members can purchase a copy from DMA’s Bookstore by clicking here.

About Direct Marketing Association (DMA)

The Direct Marketing Association (www.the-dma.org) is the leading global trade association of businesses and nonprofit organizations using and supporting multichannel direct marketing tools and techniques. DMA advocates standards for responsible marketing, promotes relevance as the key to reaching consumers with desirable offers, and provides cutting-edge research, education, and networking opportunities to improve results throughout the end-to-end direct marketing process. Founded in 1917, DMA today represents nearly 3,600 companies from dozens of vertical industries in the US and 50 other nations, including a majority of the Fortune 100 companies, as well as nonprofit organizations.

In 2007, marketers — commercial and nonprofit — spent $173.2 billion on direct marketing in the United States. Measured against total US sales, these advertising expenditures generated approximately $2.025 trillion in incremental sales. In 2007, direct marketing accounted for 10.2 percent of total US gross domestic product. Also in 2007, there were 1.6 million direct marketing employees in the US. Their collective sales efforts directly supported nearly 9.0 million other jobs, accounting for a total of 10.6 million US jobs.

The Power of Direct: Relevance. Responsibility. Results.

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