I answered a question on Linkedin some time back about what Google might be spending on its direct mail efforts to small businesses. This was a challenging one and I had to rack my brains to estimate the numbers. Thanks to Jevon Cole on Linkedin for steering me towards the right pricing for this.
According to the IAB, the US advertising spend was $300 billion in 2008 with 25% of that expenditure going into direct mail. Let me try to figure out Google’s spend:
Breakdown for costs of a single mailing (Note that these are approximate figures) :
$ 0.30 in postage
$ 0.10 in printing and paper (Assuming a monthly mailing average of 20000 pieces per month)
$ 0.05 for direct mail sorting, address verification services, staff time
$ 0.05 for additional expenses
Total cost of a single glossy postcard mailer = $0.50 (I did get a recommendation that $0.40 was par for the course as a baseline, but I’m still going to plug in a slightly higher estimate).
Now, according to the US Small Business Administration, In 2004, there were an estimated 23,974,500 businesses in the U.S. Of the 5,683,700 firms with employees, 5,666,600 were small firms.
Assuming that Google wants to focus on businesses with 5-9, 10-19 and 20-99 employees, then they would send mailer to 2.2 million businesses. If they just want to focus on the firms that employ 100-499 employees than, they be sending mailers to 90000 firms. Assuming Google will employ an 80-20 rule and market to 20% of the small business segment that will avail of Google’s services and give them 80% of the revenue from that segment, then they’d probably mail to firms employing 20-99 folks (525,000 firms) and those employing 100-499 folks (90000 firms). That would be a total of 615,000 firms.
With the above cost breakdown, we could guesstimate that Google spends about $308K approximately.
If they decide to go for something more snazzy and send in a full-fledged mailer (envelope, inserts, magnet etc), assume a cost of $2 per mailer, we’re looking at $1.2 million direct mail spend by Google on small businesses.
I bet very few folks actually know that Google does direct mail since the assumption is that they would just leverage their reach online. Hope the above helped…
