The U.S. Postal Service's $200 million mistake

USPS should sell advertising on postage stamps. It's missing at least $200 million in the next two months by not doing so.

Here's the math: Advertisers are desperate to get into consumers' homes. This year, between just Thanksgiving and Christmas, USPS will deliver 20 billion cards, letters and packages. So if the USPS could charge just 1 penny per delivery to sell advertising on the outside of all those paper communications, it would net $200 million.

Ah, critics grumble, it's the government! It's a poorly run business! Why should we let USPS advertise on envelopes?

First, USPS is already doing this. Back in 2006 Congress repealed a law banning commercial images on stamps, and USPS launched custom stamp products ... which have basically gone nowhere. Trouble is, USPS ceded control of the program to four middlemen -- Stamps.com, Endicia, Zazzle and Pitney Bowes -- and each of these companies charge large mark-ups for the service. Kenneth McBride, Stamps.com's CEO, told NYT back in May that he charges a 15 to 25 percent premium for stamp customization.

Second, we say critics are wrong. The U.S. Postal Service is an amazingly efficient machine, employing more than 700,000 people with the largest retail network in the United States. We challenge YOU to start a business where you deliver a piece of paper from Connecticut to California for only 41 cents.

USPS is threatened, and the outlook is not pretty. Package delivery firms such as FedEx have cherry-picked profitable corporate business; banks and companies are pushing consumers to electronic bill payment; consumers are sending email instead of mail ... and at the same time, postal carriers have to walk farther. Every year the United States builds more homes and offices, adding delivery points equal in size to the city of Chicago. Imagine the bind McDonald's would be in if it had to add 1,000 store locations in the U.S. every year while people were eating fewer hamburgers and french fries.

So, if USPS provides a valuable service, why not encourage underwriting by advertisers? USPS should take full control of the program, print the ad stamps itself, market it aggressively, and sign up big boys like Coke or Victoria's Secret to fund millions of stamps at USPS retail outlets. Consumers wouldn't blink; after all, we allow advertisers to underwrite our TV, radio, magazines and newspapers, why not First-class mail, too? The economies of scale would allow USPS to drive down costs, and if advertisers could jump in for 1 or 2 cents per stamp, the program would scale.

USPS could then expand the program with higher-margin advertiser services, such as large-stamp formats, peel-off coupons, specific home targeting, and confirmation of in-home delivery dates (say, allowing a marketer to send you an email the same day the mail offer arrives in your home).

Heck, mail might get interesting. It's time for advertisers to go Postal.