Today saw the release of the first Online Performance Marketing (OPM) Study to hit the shores of the UK, as a number of industry stakeholders contributed financially and statistically so that the IAB could commission an industry study to PwC.
Whilst the IAB’s press release details Performance Marketing as the ‘hidden’ marketing channel that generates significant revenue for brands; those that have been involved in Affiliate & Performance Marketing for such a long time prior to these figures being generated will be pleased to finally see the channel gaining the recognition I feel it has rightly deserved for many years.
Here are some of the key highlights of the UK study, which shows some interesting statistics surrounding demographics, vertical revenue and an increased move away from pure CPA-based affiliate marketing to other CPX and tenancy models.
Here’s another brief overview of the key findings from the report:
• There are c. 3-4,000 advertisers and c. 10,000 publishers actively engaged in Online Performance Marketing (in this instance – Affiliate & Lead Generation)
• Advertisers have spent (through commissions, management fees, bonuses and other marketing spend) £814 million on Online Performance Marketing in 2012, generating c. £9 billion of sales for advertisers
• This spend was achieved through at least c.100 million transactions and an additional c. 70 million leads generated
• This is equivalent for c. 7-9% of UK digital marketing spend, and drives c. 5-6% of retail e-commerce in the UK
• The largest end-sectors include Finance, Retail, Telecoms & Media, Travel & Leisure
• Market growth of c. 14% p.a (2008-11) and c. 7% p.a in 2012 (expected)
• Cashback, voucher, loyalty and price comparison websites are the leading publisher types
• Sites designed specifically for mobile and tablet account for c. 4-5% of advertiser spend on Online Performance Marketing
Rebate & Coupon Websites Account for Close to 70% of Sales
Advertiser spend on affiliate demographics threw up some semi-predictable outcomes as far as the UK industry is concerned.
The large rebate websites Quidco & Top Cashback, alongside large Coupon websites VoucherCodes.co.uk (now owned by WhaleShark Media), Savoo.co.uk (owned by Savings.com), MyVoucherCodes.co.uk, DiscountVouchers.co.uk all contribute up to 70% of total advertiser spend in the UK market (c. $654.6m).
Peter Berry, a Senior Publisher Manager at EU Affiliate Network Affilinet, believes that a rebate monopoly should not cause concern for the industry:
“The numbers 31% Rebate and 17% Loyalty do not in themselves cause concern as long as advertisers are seeing the right return on that spend and as long as spend continues to grow across the board.
“This is indicative of the mindset of online consumers and just needs to be managed intelligently; advertisers need to analyse the value of these orders and the part that rebate and loyalty play amongst other marketing influences and across the customer journey.
It should be used as an excuse rather than a warning to challenge ourselves; other publishers to innovate and increase their share, networks to introduce and deliver alternatives, and advertisers to test and embrace them.”
CPA still Dominates, but Additional Payment Methods are on the Rise
As mentioned previously, even though the official press release for the launch of the OPM study mentions a ‘hidden’ industry, an increasing number of publisher websites are far more common to the eye of the consumer, placing themselves within the online mix as specialist comparison engines, shopping portals, loyalty and mainstream brands.
Here are a few examples of tenancy deals:
With publishers increasingly being an early point of call or final shopping destination for consumers, it is not surprising that advertisers and publishers have looked at other ways they can add value and brand awareness in order to increase sales revenue. Enter CPM [Cost Per Mille] and Tenancy deals.
We’re also led to believe that this figure for tenancy has increased by 129.6% over the past few years, although it is not reflected in the final report.
Whilst also not included in the final report, sources tell us that there has been a decrease in
2012 for management, access and set-up fees, down 14% from 2008-11.
Estimating a US Affiliate Market Size?
It’s hard to try and put this study into perspective for the US market, naturally due to the lack of figures for market size when compared to the UK. However, for this instance let’s say that the US Affiliate Market is around 5 times the size of the UK:
UK Market = £9bn Sales Revenue & £814m Advertiser Spend (0.6% UK GDP of £1.4tn)
(x5 plus exchange rate)
US Market = $71bn Sales Revenue & $6.4bn Advertiser Spend
US GDP according to Google – just over $15tn = US Affiliate Market = 0.473% of US GDP
That’s quite a chunk for a ‘hidden’ marketing model, and it’s a shame we can’t pin down any market figures for this. Do you think it’s more or less? Hopefully a study won’t be too far away.
You can read more about the UK OPM (Online Performance Marketing) Study and additional analysis here.