• by Tom Siebert , October 3, 2006

If the buzz rippling through the ranks of top media agency execs is right, the newspaper industry may be facing another big blow--not against its already battered national and local display ad business--but against another cash cow: freestanding inserts.

News of an impending shake-up in the so-called FSI category was broken by Carat CEO David Verklin during a panel of media agency chiefs at Media magazine's Forecast '07 conference in New York. Verklin, who heads up Carat's Americas and Asia units, dropped the bombshell that a major retailer has told agencies that future media plans would eliminate FSIs--the colorful supplements used to distribute coupons and promote retail sales--from its advertising plan by 2007.

Chased down after the panel, Verklin declined to elaborate. But it's worth noting that the Aegis-owned company is currently pitching retail giant Wal-Mart, in tandem with DraftFCB, the new brand-marketing agency. Carat is also the media agency for Radio Shack. A source familiar with the shop's strategy said it has been advising the electronics retailer to cut back on FSIs for several years.

With classified ads under siege from Craigslist, and help-wanted advertising losing its power to Web sites like Monster and HotJobs, freestanding inserts are among the last bastions of easy, old-fashioned profit for the newspaper industry.

One industry expert speculated that a big-box company like Best Buy would be ripe for a move away from inserts.

At an Advertising Research Foundation conference last Thursday, Patrick Keane, director of field marketing and sales strategy for Google, said that 40 percent of Best Buy's budget goes toward its Sunday advertising circular. He pointed out that it only represents 276 stock-keeping units. Online, however, a big-box store can provide access to over 250,000 units.

A spokesperson for Best Buy was unavailable for comment. But in a sign that something is happening within the company, chief marketing officer Mike Linton resigned last month.

"It doesn't really matter who it is," one marketing industry observer noted. "Once one of the big retailers does it, even in small doses, you could see a stampede away from the inserts."