I’ve often wondered if and when the Internet would become a major distribution medium for cents-off coupons issued by CPG manufacturers. Sure, I realize that there are concerns about the possibility of fraud if hackers figured out some way to print millions of coupons and some unscrupulous retailer tried to submit them for redemption. But, since the gang-clipping of coupons from newspapers appears to have been stymied, I figured that it was just a matter of time before manufacturers got to the point where they felt comfortable using the Internet. Today, I’m wondering if we’ve reached that point.

To begin, here are some interesting – even remarkable -- statistics about coupons. PROMO magazine reported that CPG manufacturers distributed 302 billion coupons in 2007, up 6% and representing a whopping 16 billion more coupons relative to 2006. The face value of the coupons was $387 Billion, a big increase of 16% over the $337 Billion in 2006 and representing a 9% increase in face value. Free-standing inserts in newspapers continued to lead the ways in which marketers distribute coupons (88%), followed by handouts (5%), direct mail (2%), magazines (2%), newspapers (1%), in/on-pack (1%) and the Internet (0.4%), according to NCH Marketing.

According to CMS, a promotions logistics company, the boost in value and sheer number of coupons available helped improve redemption in 2007. Consumers turned in $2.8 billion of the total $387 billion in available coupon value. That added up to 2.6 billion coupons redeemed in 2007, the first time since 1992 that redemption volume did not decline.

Economic pressures and consumer-friendly tactics combined to guarantee continued consumer and manufacturer engagement with cents-off offers in 2007. In fact, comparing coupon response to key economic indicators over time has shown a strong link between the economy and coupon redemption. Most notably, as unemployment and prices rise, coupon redemption increases. So, with today’s challenging economic conditions, I don’t think we should be surprised if coupon redemption increases again this year and next.

So, what’s been happening to the use of coupons online? Well, it certainly appears that surfing for coupons is growing in popularity. comScore’s data show that 27 million people visited coupon sites in October, up 33% from a year earlier (that’s 18% of the 148 million Americans who use any coupons in a year). The number of searches conducted using coupon terms also increased by 100% from January to September of this year. On a global basis, we saw a 42% increase in the number of pages viewed at coupon sites, so it’s certainly not just a U.S. trend.

It’s also very interesting to look at the income segments where the growth is occurring:

Coupon Sites: Average Monthly Unique Visitor Growth Q3 2008 Vs. Yr Ago

At first blush, it might seem counter-intuitive to see the strongest growth occurring in the mid-to-upper income households. But, this might reflect the reality that offline coupon redeemers tend to be better educated and have higher household income than non-redeemers. Several reasons have been put forward to explain this phenomenon, including the fact that the distribution vehicles used by coupon marketers tend to reach higher rather than lower income households and more expensive brands tend to run more coupon promotions. Whatever the real reason, I think it’s encouraging for marketers to see such high online growth rates in the mid-to-upper income households where substantial purchasing power resides.

So, what does the future hold? I believe we’re likely to see an explosion in the use of electronic coupons by CPG manufacturers. There are a number of reasons why I think this will happen. First, I believe that the rapid growth in consumers’ willingness to use the Internet to obtain coupons, coupled with a continued decline in print newspaper readership, will force manufacturers and retailers to reconsider their distribution strategies that today are so dependent on the use of newspaper FSIs. By distributing coupons online, retailers can reach a large audience and realize large savings relative to the cost of newspaper distribution. Second, retailers are increasingly looking at the opportunity to link online coupons to the use of their loyalty cards in a seamless and efficient manner. To get these electronic discounts, shoppers simply have to type in their loyalty-card ID numbers on a store Web site (or other site) and click to load the coupons to their card account. The discounts are subtracted at the retail store after those items are scanned at checkout and the consumers have shown their loyalty card.

Now, that’s a simple and cost effective solution that provides benefits to the manufacturer, the retailer and the consumer.

Once upon a time, accessing content on the Web required the digital consumer to be tethered to their desktop computer, which was in turn attached to a phone line that enabled access to the Internet at blazing 56K speeds. The web-accessing Neanderthal soon became more upright with the widespread availability of broadband access. Later, mobility was generally available – we could access the Internet from different access points (home, work, coffee shop, library, airport) without the burden of wires connected to our computers (a luxury I enjoy while writing this post on my laptop, connected to the Internet through a wireless router). And of course, now the digital consumer can access the Internet from nearly anywhere through their iPhone, Blackberry, or other web-enabled mobile device.

Just as the digital consumer has become increasingly mobile, so too has the content we consume. A web landscape that once required people to go to specific web destinations for content has evolved to one in which content is pushed to consumers, where and how they want to consume it. Starting with RSS feeds and customizable home pages, web content has grown legs and is finding its way around the web.

This dynamic was pioneered by, and is commonplace among, Web 2.0 leaders such as MySpace, YouTube, and Facebook. YouTube, for example, gives users access to easy-to-use tools to embed a video in their customizable home page or Facebook or MySpace profile page. Additionally, the introduction and rapid mainstream usage of widgets, gadgets and other social media applications, all of which allow consumers to get access to a publisher’s content away from that publisher’s site, has exploded over the last 24 months. Facebook has built an entire ecosystem around the idea of their site being a platform for other publishers and application developers to make content available to their users. Publishers face the reality that there can be more consumers of their content off their site than on their site.

As this complex ecosystem rapidly evolved, we at comScore have had to move quickly to provide the critical 3rd-party services that measure consumer engagement with publishers’ content wherever it occurs. It is essential that the many emerging media formats are able to prove their value to advertisers in reaching their desired consumers. For example, since our initial release of the comScore Video Metrix service in 2006, we’ve had to measure the viral nature of video as it is distributed and viewed across the web. Most importantly for video monetization, one needs to properly attribute credit to the publisher that serves the video. So, in the case of a consumer watching an embedded YouTube video on MySpace, it’s important to give proper credit to YouTube for the view. Similarly, a video that is watched on a portal through the Hulu player is attributed to Hulu. (Jason Kilar, CEO of Hulu, recently commented that Hulu content is embedded into over 60,000 Web sites, including MySpace.)

Additionally, as comScore’s video measurement evolves with the use of server-side tagging for enhanced measurement and classification, we will be able to introduce reporting views that account for the distributor, as well as the content creator and the partner site where it was watched.

The more recent forms of portable content - widgets and social media applications - have exploded in their reach over the last 18 months. Our data show that more than 75 percent of U.S. Internet users have viewed a widget or social media application. Social networking sites are prime places for distribution of content in easy, bite sized pieces, through such applications. A new wave of media companies, such as Slide, RockYou, iLike and WaterCooler, have stormed onto the scene as a result of Facebook and other social media sites opening their platform to distributed content. With the initial launch of comScore’s Widget Metrix service in mid-2007 – which subsequently evolved into our Extended Web reporting just last month, we have been able to provide media buyers with a view into the consumer uptake for these new media formats and media publishers with new ways to demonstrate their incremental reach with these vehicles.

We enter 2009 with little doubt that distributed content will continue to grow as consumers get more sophisticated in their media consumption habits and demand content in more portable formats. At comScore, we look forward to measuring what we expect to be an increasing mobile consumer interaction with increasingly portable content. We would be interested to hear how your organization is enabling one or both of these market dynamics.