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The Growth of the Social Inbox
Forrester Research forecasts overall growth in domestic email marketing — to $2 billion by 2014 — but social platforms are replacing the traditional email inbox among the younger set.
Posted Jun 22, 2009
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The domestic email marketing field is withstanding the current economic turmoil, according to a new report from Forrester Research, and is slated to hit the $2 billion mark in 2014. Whereas consumers may be cutting back on mobile plans such as SMS text messaging, social media activity is contributing to the continued viability of email.

Forrester's U.S. Email Marketing Forecast from 2009 to 2014 is the firm's first report covering this segment released since acquiring JupiterResearch nearly a year ago. David Daniels, vice president and principal analyst at Forrester (and former research director at JupiterResearch), points out that, because this new study implemented the smaller firm's methodology, projections are approximately half the size of those previously released by Forrester. The current forecast excludes numbers from the digital industry agencies (e.g., Ogilvy and Razorfish) and focuses primarily on the email service providers (ESP). Even with the modification in methodology, the numbers around email marketing growth are significant, reinforcing the ongoing power of this low-cost channel.

The number of email users in the U.S. is predicted to grow from 145 million in 2009 to 153 million by 2014. In a June 2008 survey of online Americans by JupiterResearch, 90 percent of respondents reported sending and receiving email at least monthly. Given the steady increases in postal fees — First Class postage, for example, climbed to 44 cents this past May — consumers are turning more and more to email. Marketers, too, are turning to digital, with 66 percent of marketers responding to a July 2008 study conducted by ClickZ and JupiterResearch stating that email is the "most cost-effective marketing tool at their company." In fact, Daniels adds, 20 percent of marketers reported plans to replace most or all paper marketing with email in 2009.

Accordingly, Daniels says, email volumes have skyrocketed — a couple of years ago, when JupiterResearch last did this study, marketers sent roughly 3 million emails monthly. Now, that number has hit a record 10 million emails. Because of the efficiencies of scale, the cost of sending each email has decreased. (The downside, Daniels says, is that the same cost efficiencies have enticed spammers to make a comeback.) With more emails cluttering consumer inboxes, marketers have had to become increasingly sophisticated, looking for ways to get better at segmentation and targeting.

"For the first time in a couple of years, we're starting to see [marketers] who want to know [the identities of those] who clicked on their emails," Daniels says. It's a worthy effort, especially since Forrester predicts that, by 2014, $144 million will be wasted on messages that never even reach the inbox.

For most of this decade, Daniels says, only 25 percent to 33 percent of marketers were paying attention to their email clickthrough data. Last year, the number finally broke out of that stagnant period, increasing to 40 percent. Now, he says, it's grown to 50 percent — and whether you look at that milestone as a glass half-full or half-empty, there's still work to be done. In fact, Daniels says, growth won't increase dramatically in the next couple of years, due primarily to the fact that marketers are now facing a shift in incentives. "[Marketers] are incented by [their] list size and growth," Daniels says, "so it doesn't behoove [them] to cut people who are not answering or engaged off [the] list."

Despite the bigger-is-better mentality, acquisition emails will remain secondary to ones focused on retention, according to the report. In fact, by 2014 those retention emails will account for the largest share of email messages that reach the inbox, and, at nearly $1.5 billion, the bulk of email spending overall. Moreover, transactional emails will see a compound annual growth rate (CAGR) of 9.2 percent from 2009 to 2014, the fastest growth of all email. This rapid expansion is expected to rely in part on the increased adoption of social media platforms as users receive more email alerts in the form of "service-oriented transactional messages."

But that will mark a reversal of the short-term impact from social media. Nearly 45 million individuals — approximately 30 percent of all email users — are now relying on social networks such as Facebook or MySpace as a primary inbox, according to the report, and email volume actually declined among the 18-to-34-year-old demographic in 2008 due to this shift. (Fifty-three percent of 18-to-24-year-olds, and 42 percent of 25-to-34-year-olds use social networks for messaging as opposed to their personal email, which leads to far less email overall, because they receive fewer commercial and spam messages in these environments.)

Forrester expects the expansion of the social inbox to flatten out over time, as social media sites start to "resemble traditional email inboxes in features and messages received." Until that happens, the important thing for marketers now is to bridge the communication within the email channel to the social space, in part by relying on mobile marketing. By enabling social sharing tools, Daniels says, marketers will not only expand distribution but also enhance engagement. 

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