I have been hearing the term “performance marketing” more and more often from people outside what we would call the traditional affiliate space. When I recently read about a company with no prior connection to anything remotely performance oriented, describing their services as performance marketing, it finally hit me: “Performance marketing” is a great buzzword. It’s a compelling, sexy term, prompting images of successful athletes and notions of effectiveness and achievement. Who wouldn’t want to be doing performance marketing?
The proliferation of the term has brought some overdue attention to our industry, which for the most part still remains the unsung hero of marketing. However, it has also created a great deal of confusion around the term and which marketing activities can actually be classified as “performance”.
It goes without saying that in order to have any meaningful, let alone strategic, conversation about the industry we first need to agree on the basics. The discussions about performance marketing are wide and varied, depending on one’s background, business agenda and country.
Originally used by the affiliate industry to clear its name and make a fresh start, the term signaled a broader change and we were all keen to declare that performance marketing encompasses so much more. Today it’s often used to describe any metrics driven digital marketing activity, such as search marketing or even social media marketing. But how does that differentiate performance campaigns from any other digital campaign, where results are tangible and measurable by design?
In contrast to that wide open definition of performance, IAB’s own and extremely insightful Online Performance Marketing study (OPM) clearly limits the scope of the research to affiliate and lead generation. At the same time, IAB’s Affiliate Marketing Council sticks to the term “affiliate” and there seems to be little or no mention of the word performance on their website at all.
More recently, programmatic buying and real-time bidding (RTB) have also claimed ownership of the term, with IAB’s (programmatic-oriented) Performance Marketing Committee putting together what they call a “new definition of performance marketing”, built around -what else- real-time optimization of campaigns. Interestingly, although the report broadly describes what we know as affiliate marketing as a sub-set of performance marketing, it never once mentions the actual term “affiliate”. Meanwhile, in the US, performance marketing is still used interchangeably with affiliate marketing and for most of the industry means exactly the same thing.
Two (plus one) types of performance marketing
In an attempt to determine what constitutes performance marketing today, taking into account recent technological developments in the industry, I have put together a list of what I believe are two different types of performance marketing, plus one that is not.
#1 Performance based payment
This is what I would call pure performance marketing, aka pay-for-performance, paid on results or what we all already know as affiliate marketing. This is the original performance marketing model, where activity is post-paid based on outcomes typically resulting from the affiliates’ own marketing efforts. Those efforts can include any combination of digital marketing activities (even new methods such as programmatic buying, as explained in the excellent Affiliate Marketing Handbook by IAB). In this sense, affiliate marketing is a model, but not a channel per se, since it utilizes all digital channels to achieve the desired result.
The key differentiating factor here is the advertiser’s ability to pay based on a specific action being completed. The closer that action is to a financial transaction (e.g. CPS, CPL), the more performance oriented and ROI driven the promotion is. A large part of this type of activity is carried out through affiliate networks, but this is neither absolute nor a pre-requisite.
Alternative mobile driven technologies, such as card-linked and in-store offers are playing an increasingly crucial role in this area and are set to push the industry forward in the coming years, but still belong to this category regardless of their technical differences.
#2 Performance based optimization
This is where technology and real-time bidding platforms come in, allowing advertisers to optimize their campaigns in near real-time, based on that campaign’s performance and effectiveness in driving the desired outcome. RTB has been a part of search engine marketing for years, but has recently gained more popularity through the inclusion of display ads in this buying process. The ability to optimize the campaign buy programmatically, i.e. in an automated way, does not really add anything to the performance quality of this type of activity, despite the fact that the two terms (RTB and programmatic) are often and mistakenly used interchangeably.
Although the payment model here is not performance based (most display ads are bought on a CPM basis), using RTB to optimize the campaign in real time based on results, is what gives this method its performance value.
#3 Performance oriented activities (but NOT performance marketing)
This is where I think there is a vast grey area of marketing activities, which are often generically (and in my opinion mistakenly) characterized as performance marketing. Many agencies are adopting the term to highlight the fact that their efforts are focused on results, as opposed to only considering campaign creativity or content.
This is of course commendable and it’s great to see the industry finally embracing the full potential of the measurable and accountable web. However there is a danger of rendering the term “performance marketing” meaningless, diminishing it to just another buzzword. Running a social media marketing campaign, monitoring that campaign’s performance and adjusting accordingly in time, does not make that a performance marketing campaign. It merely means that someone is doing their job right.
It may sound pedantic and overly concerned with definitions, but an industry-wide agreement must be reached. Restricting the scope of performance marketing to the first two types of activities, i.e. pay-for-performance and optimize based on performance in real time, I think is a step in the right direction. From then on, using the correct terms across all sectors of the industry is also necessary, in order to avoid confusion. Above all, we shouldn’t be ashamed to defend affiliate marketing’s role and significance in the performance marketing arena, not only as an actual marketing model, but as a term too.