Advertisers in the UK spent £1bn on online performance marketing (often referred to as affiliate marketing) in 2013; up 15% on 2012, with advertisers getting an average £14 return on every pound spent, according to new data.
The study, conducted by PwC for the Internet Advertising Bureau UK (IAB), found that affiliate marketing generated £14 billion in sales via price comparison, voucher, cashback, loyalty and product review websites – the most common forms of Online Performance Marketing (OPM). This represents a return of £14 for every £1 invested by advertisers.
The study also found that 4 in 10 Brits online visiting a price comparison site a month.
Across OPM sites – such as Comparethemarket, TripAdvisor, Vouchercodes, Nectar and Quidco – advertisers don’t pay publishers to show the ad, they only pay if the ad causes someone to complete a defined action, such as making a purchase (affiliate marketing) or submitting contact details (lead generation).
In 2013, UK consumers made 150 million purchases via affiliate websites – three for every British adult – totalling £13 billion. £1 billion in sales was generated from Britons submitting contact forms. This means OPM now drives about 10%¹ of all UK e-commerce retail sales.
Dan Bunyan, Manager at PwC, says: “OPM generated around four billion clicks in 2013, the equivalent of 10 million per day or 120 per second, about 5% of which resulted in a transaction. This high conversion rate and the high return on investment explains the significant increase in advertisers (to 4,000) and publishers (to 12,000) now using OPM.
“It isn’t just the big publishers, or ‘super-affiliates’, who generate revenue through OPM. It’s opened up a new and growing industry among the ‘long tail’ where Individuals and small publishers with specialist knowledge of a particular area can produce websites and then automatically generate advertising revenue.”
OPM ushering in a “new era of savvy and careful consumerism”
OPM taps into consumers’ desire to find the best deals. Over half (52%) of British adults online report having visited a price comparison website in the last six months². Nine in 10 say they cash-in vouchers or redeem points, half of whom do so every month. One in eight has redeemed a voucher or deal using an app on their mobile phone.
UKOM-approved comScore data³ shows that in November 2013 alone, 39% of the UK internet population (18.7 million people) visited a price comparison site; 35% (16.6 million) visited a voucher/coupon site while 21% (9.9 million) visited a loyalty or cashback site.
“Characterised by deals, incentives and product reviews, OPM has ushered in a new era of savvy and careful consumerism,” says Tim Elkington, Director of Research & Strategy at the Internet Advertising Bureau. “However, the industry is growing quickly because it’s an ‘everyone wins’ situation.”
He explains: “Consumers can save money in a variety of convenient ways and get access to content online free of charge. Advertisers get new customers – nearly 6 in 10 people become repeat customers of a company they only discovered through a deal or incentive site – and, at a return of 14:1, it’s extremely cost-effective. It also generates extra revenue for the publishers in the middle, large or small, via referral fees.”
Finance and retail advertisers account for over half of OPM spend
The finance sector, driven by insurance and credit card advertiser’s use of price comparison sites, is the biggest spender – accounting for 35% of OPM expenditure in 2013 – followed by retail (21%). The top five are completed by travel & leisure (17%), telecoms & media (9%) and gaming (7%).
Commenting on the success of OPM, Olivier Claude, Marketing Controller Affiliate & Email at BSkyB: “Between 2010 and 2012, affiliate channel sales volumes grew by 33% and customer quality has improved. At the same time, affiliate share of online volumes have grown steadily. Should Performance Marketing maintain positive volume growth and positive ROI, we should expect an increased investment in the channel.”
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Methodology:
PwC’s figures are based on detailed submissions from 27 companies. This was supplemented by a modelling methodology for companies not participating as well as a further 26 in-depth interviews with industry participants.
Definitions:
Online Performance Marketing: a form of online advertising that differs from traditional online display as it’s paid by outcomes (a user-initiated action such as purchase, submitting contact details).
Affiliate Marketing: users typically click on an ad and are re-directed to the advertiser’s site to complete the transaction, after which a fee is paid to the content owner once the transaction is completed.
Lead Generation: users typically enter their details (e.g. into a lead capture form) which are then passed to the advertiser, following which a fee is paid to the content owners (payment is on a per enquiry basis).