Budget cuts hurting affiliate campaign returns

The Affiliate Marketing Survey Report 2008, conducted by online research publisher E-consultancy and affiliate marketing agency R.O.EYE, found that 46% of merchants responding to the survey said they find the channel very cost-effective for driving customer acquisition, up from 44% last year.

However, comparisons with last year’s survey show that merchants’ budgets have dropped from 18% to 14%.

Restricted budget has jumped from fifth place to second place in the hierarchy of barriers to successful marketing. Despite the inherently low risk nature of performance-based affiliate marketing programmes, less money is being invested in this area.

This research highlights the importance of a well-managed affiliate marketing campaign, ensuring the channel is driving incremental sales.

Almost 60% of merchants surveyed acknowledged that affiliate relationships and sector experience are crucial to a successful programme, reflecting the need to prioritise investment in resource or outsourcing.

Other findings show that sales generated by SEO and content sites have eclipsed those of paid search and loyalty/cashback sites.

The Affiliate Marketing Survey Report 2008 is based on the findings of a survey of 259 merchants and 150 agencies in July.

Linus Gregoriadis, E-consultancy’s Head of Research, said: “"Whilst the research represents something of a wake-up call for the industry, the good news for affiliate marketing is that merchants continue to regard it as a cost effective channel for driving customer acquisition. There has been a slight decrease in investment in affiliate activity which can be attributed to several factors. Whilst reduced budgets due to the economic downturn may be partly responsible, merchants are also getting better at getting traffic directly to their sites and they are also refining their approach so that they are not paying out for sales unnecessarily."

Key Research Findings:

·         The biggest driver of volume remains PPC, which has decreased from 52.5% in 2007 to 44% this year.

·         A third of merchants (34%) say that five or fewer affiliates are driving 80% of their affiliate sales of sign-ups. A further 23% say that between six and ten affiliates account for 80% of sales.

·         A quarter of merchants say they are not de-duping sales across different digital marketing channels.

·         More than a quarter of merchants (28%) say their organisations are poor at managing networks and monitoring affiliate activity.

·         For attributing the credit for sales, 41% of merchants are using the last click method. A quarter of respondents say that they are using a combination of methods while 10% are now sophisticated enough to split the CPA across different channels.

·         The three biggest barriers to successful affiliate marketing, from the perspective of merchants, are lack of internal resource (47%), restricted budget (29%) and difficulty in attracting affiliates (28%).

Lack of internal resource and difficulty attracting affiliates emerged as the biggest problems in last year’s merchant survey but restricted budget has jumped from fifth place to second place in the hierarchy of barriers.

Mark Kuhillow, Managing Director of R.O.EYE commented: “The 2008 report has clearly sent out some key messages for the industry. With budgets being reduced as a result of the economic situation, this has had a direct effect on the traffic and sales merchants and agencies have received through the channel. While more merchants than in 2007 view affiliate marketing as a very effective channel, almost 70% are spending less than two hours per week communicating with their affiliates and policing them. It is more important than ever before to forge strong relationships between merchants and their affiliates to protect volume and the channel’s efficiency. This report highlights the changes the industry has experienced since 2007 and exposes the end of ‘easy pickings’ for affiliates.”

The most significant affiliate marketing trends identified as being among the key issues affecting the sector are the rise of super-affiliates, brand-bidding and growth of cashback sites. 45% of respondents highlighted brand-bidding as the most significant trend.

The full E-consultancy/ R.O.EYE Affiliate Marketing Survey Report 2008 is available for download at: www.e-consultancy.com/publications/affiliate-marketing-survey-report-2008