• by Joe Mandese  @mp_joemandese, July 7, 2009

The Internet has already ravaged the newspaper classified business, and it's clearly challenging its display advertising model. Now a team at big Madison Avenue agency Y&R is developing an alternative to another newspaper advertising mainstay: the Sunday circular. In a deal developed for client Office Depot, Y&R is taking a portion of the hundreds of millions of dollars the retailer normally spends on circulars and is shifting it into a new online "circular" that adds video, viral, commerce and community-building components that newspapers cannot.

The effort, which is built around a new micro site, and weekly Internet show dubbed, "Specials with Matt and Matt," is being billed by Y&R executives as an alternative to the Sunday newspaper circulars.

The site, which is located at www.thesurvivalofthesmartest.com, features the weekly "Specials" show, named after its advice-giving co-hosts, and offers a variety of consumer promos including contests, sweepstakes, discounts, as well as direct commerce via a variety of online services aimed at small business owners and consumers.

Y&R execs would not disclose the cost of the site and the weekly series, but said it was being done at a "fraction" of the "hundreds of millions a year" that Office Depot currently spends on traditional Sunday circulars.

More importantly, they say the new online platform will generate a bigger bang for the buck by creating community interaction that extends the life of the offers.

The series, which is also available as a downloadable widget, will soon be launched on Hulu.com, and will be emailed directly to millions of Office Depot "rewards" members each week to promote viral activity.

The team says the concept is already generating interest from big manufacturers that supply Office Depot, including HP, Xerox and 3M, each of whom have approached the retailer about creating their own segments on the show.

"Specials With Matt and Matt" isn't the first assault on the Sunday circular, also known as FSIs, or free-standing inserts. A variety of online portals have emerged over the past couple of years to provide centralized online destinations for consumers seeking the latest discounts and promotional offers from retailers.

One of them, ShopLocal.com, recently said it experienced a 16% surge in consumers using the Internet to organize their holiday shopping, and that traffic to department stores and mass merchandiser sites was up 30%. Overall, traffic to circular sites peaked at about 9 a.m. on Wednesday, then again on Thursday at 9 p.m. as shoppers solidified their plans. The Thursday night peak set an all-time record, with just under 11 million page views in a single hour.

It's unclear how the online activity is so far impacting traditional printed circulars. According to TNS Media Intelligence's sixth annual Marx Promotion Intelligence 2008 Free Standing Insert (FSI) Distribution Trends Report, the total dollar value of consumer incentives distributed through FSI coupons increased 2.9% in 2008 $334 billion. Those FSIs generated 195 billion pages containing more than 251 billion offers, with an average "face value" of $1.33, up $0.06 from 2007.

But the trend may be more reflective of current economic conditions, than it is a testament to the underlying vitality of print media to distribute such offers.

"In an extremely challenging economic and retailing environment, marketers increased their reliance on FSIs as a cost-effective advertising medium to deliver consumer impressions that encourage consumer loyalty and drive retail trips," Mark Nesbitt, president of TNS Media Intelligence, said when the Marx findings were released earlier this year.

"Retailers are increasingly including FSI promotions in their marketing mix to engage with their shoppers when they are actively seeking product information, developing purchase intent and planning shopping trips," he added. "FSI coupons continue to be a source of news about product categories to the consumer and to be a driver of category trips for the retailer."