One year has passed since the inaugural Online Performance Marketing (OPM) Study was released, showcasing impressive figures for the industry during 2012 at £9 billion (later revised to £12.5bn) in sales and £800 million in expenditure. It is no surprise to us at PerformanceIN that the second report, revealed yesterday, eclipsed previous figures and pushed the value up by 15% on a like-for-like basis in 2013.
This year’s findings were based on a survey of 27 industry participants, up from 23 in the previous year alongside 26 in-depth interviews to aid the analysis and support estimates.
Key highlights vs 2012 OPM study figures
- 15% like-for-like growth in 2013
- 4,000 advertisers actively engaged in the OPM market
- ROI now sits at 14:1 - £14 generated for every £1 spent (up from 9:1 in 2012)
- Expected to spend £1bn across 12,000 publisher sites (up £200m and 2,000 publisher sites respectively)
- 4bn ‘clicks’ generated which converted into 200m transactions
- Up to 20% of OPM advertiser spend is now via mobile and tablet devices (up from 4-5% in 2012)
- New payment models have continued to increase
- 8-10% of UK digital marketing spend (up from 7-9% in 2012)
- 10% of UK retail e-commerce (up from 5-6% in 2012)
- 0.8% of UK GDP (up from 0.6% in 2012)
Finance, retail and travel reign supreme as largest sectors
In terms of advertiser spend, the top three sectors each had a key publisher demographic that drove significant proportions of revenue. 90% (£315m) of finance’s 35% spend (£350m) relates to price comparison sites and 60% (£102m) of travel and leisure’s 17% spend (£170m) relates to major travel aggregators.
Cashback publishers took the largest share of retail’s 21% spend (£210m) but the breakdown was not shared.
Comparison to last year's report:
Performance marketing continues to rise within the digital economy
One thing that is evident regarding this year’s study in comparison to the inaugural OPM study in 2012, is the tightening of definition regarding Online Performance Marketing and exactly whose data is needed to give a fairer reflection of the OPM market. Last year’s initial figure of £9 bn sales revenue was an under-represented figure, one that did not factor in agency commissions, some white label tracking solutions, longtail comparison websites, global travel aggregators and spend on third party technologies went unaccounted for.
This year’s OPM study has included large travel aggregators, plus an increase in white label tracking solutions which have enabled a more tightened set of figures to be attained. With the addition of the above, Online Performance Marketing has made gains across UK digital marketing spend, UK retail e-commerce and UK GDP.
Head of advertiser development at Commission Junction, Ellie Pickering, said: “The OPM sector has responded to the increasing sophistication of consumers through continuous innovation, and we expect to see this trend continue as the economy improves and brands see the enormous opportunities in integrating online sales performance strategies with wider marketing plans.”
Here at PerformanceIN, we put together our view of today’s performance marketing ecosystem:
Content publishers push vouchers into fourth position
It is interesting that content publishers have nudged ahead of voucher publishers, receiving £120m of advertiser spend against voucher's £111m. There were a number of strategic shifts in classifying the affiliate mix, and a combination of an increase in publisher numbers and new payment models is encouraging growth.
Strategy director at Affiliate Window, Kevin Edwards, said: "We see a healthy number of new affiliates generating sales on a daily basis and average about 250-300 who hit our payment threshold for the first time every month.
"I think there’s been a lot of nonsense talked about the longtail dying and a so-called golden age of content that existed 10 years ago. Yes Google makes it harder for affiliates with every year that passes, but this also means affiliate businesses become more robust and sustainable.
"It’s true the channel has to work harder to showcase sites other than the big players, but let’s remember they’re huge retail portals in their own right, carrying out major multichannel marketing campaigns."
Tenancy & content sponsorship deals on the rise
The move towards additional payment models has continued, growing at a rate of 60% year-on-year. Tenancy deals and content sponsorships are playing increasingly prominent roles and this was a big discussion point for many at yesterday's launch meeting.
Head of client services at Affiliate Future, John Vickers, said: "Our account managed merchants are increasingly utilising tenancy spots with key tier one publishers. If possible, it is best to test with a smaller budget during a quieter period and then, if it has been successful, buying larger tenancy placements for peak periods.
"Whilst they do not work for everyone, they can significantly increase the number of sales coming through an advertiser's programme."
Commercial director at Webgains, Ben Cole, is seeing the improvements made by publishers in regards to their forecasting reflected in increased tenancy and content deals.
“As a network, we're seeing both alternative and additional payment models becoming more and more important," Cole begins.
"The growth in tenancies has of course been led by publishers, particularly content publishers for whom being paid on the last click model alone may not always be financially viable. What has really fuelled this growth however, is publishers' improved forecasting which has enabled them to calculate their tenancy fees back to an effective CPA, and thus make the value apparent to advertisers.”
While the growth reported shows encouraging signs for new payment models, UK MD at affilinet, Helen Southgate, believes that data has aided this growth but testing must still continue.
"CPA is still the predominant model and I believe it will continue to be," Southgate said.
"The more data that we are able to access and shifts in marketing spend mean that we have been able to test more payment models and make them successful. Everything is worked back to a CPA and ROI still, but it’s about finding the right models to use in the right situations.
"This is not new, it has been happening for years but I think the better quality data we have is allowing us to test and learn with more payment models to see what works where."
You can pick up a copy of ‘The Value of UK Online Performance Marketing – January 2014’ report by visiting the IAB’s website.
Check out our PI's news story on the launch of the 2013 OPM report: Online Performance Marketing Generates £14 Billion in Sales, and for more on the first ever OPM study from 2012, see £9 Billion of Sales Generated by UK Affiliate & Lead Generation Industry.