New research: The contribution from Online Performance Marketing

Performance marketing valued at £14bn in the UK showing the continued contribution of affiliate marketing

The IAB recently released their annual survey into the size of the Online Performance Marketing Channel. The industry, which includes Affiliate Marketing and Lead Generation, saw £1bn spent by advertisers in 2013 (an increase of 15% compared to 2012).

Some of the interesting top level numbers  I picked from the report include:

• UK consumers made 150 million purchases via affiliate websites (this works out at almost 3 for every British adult),
• Advertisers saw a return of £14 for every £1 spent,
• 39% of the UK population visited a comparison site
• 35% visited a voucher site
• 21% visited a cashback site,
• Online Performance Marketing can now claim to account for 10% of UK e-commerce retail sales,
• Up to 20% of OPM advertiser spend comes via mobile and tablet devices.

The return of investment from Affiliate Marketing is impressive, with £14 returned for every £1 spent based on the latest figures. It is one reason that over 4000 brands now use Affiliate Marketing within their digital marketing mix.

One of the key selling points of Affiliate Marketing is that you can define what you are going to pay for sales before they happen. So, whether you want to pay £5 for every sale made, or a percentage of the basket value, you can work out your margins beforehand. There is less risk than with other digital activities as the payment is made following an action. If it works, you pay what you pre-defined. If it doesn’t you don’t pay anything.

The thing I take from this report is there are big opportunities for advertisers to make more from Affiliate Marketing. There are some, like Sky, that are fully invested in the affiliate channel and see Affiliate Marketing account for 14% of their online sales.

But I still see some brands that do not fully commit resources or budget to the channel. It might be that the affiliate budget is capped (why you would want to stop cost-effective sales baffles me) or limited in comparison to other areas. As such a cost-effective method of acquiring customers, it seems that more budget (or at least a bigger percentage) should be put behind this area.

From a people perspective, sometimes it might feel like there is not enough resource internally to run an affiliate programme effectively. Like everything worthwhile, you get more out of your affiliates if you commit time and resource to it. However, with affiliate networks offering account management as part of their service, resource should be less of an issue. Perhaps you pay a larger override (the fee brands pay to affiliate networks for tracking and managing programmes) for more of their time or alternatively you start by putting in a few hours a week so you can gauge the opportunity.

Either way, as you look forward to 2014, Affiliate Marketing could be an area that you give more time, resource or budget as you look to hit your targets. You can get a full copy of the report via the IAB website: The Value of UK Online Performance Marketing