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UK Performance Marketing is a £1.1 Billion Industry as Advertiser Spend Rises 8%

UK Performance Marketing is a £1.1 Billion Industry as Advertiser Spend Rises 8%

Advertisers in the UK increased their online performance marketing budgets by 8% in 2014 as activities in the channel were responsible for £16.5 billion in consumer spend.

Now delivering 1% of Britain’s entire gross domestic product (GDP), online performance marketing (OPM) is handing advertisers £15 for every £1 they spend, according the third annual Online Performance Marketing Study from the IAB and PwC.

The continued rise in budgets has led to OPM contributing directly to 10% of all UK e-commerce sales, while the level of return has risen from £14 against every £1 spent in 2013. 

“The fact that consumer spend is growing at nearly twice the rate of advertiser spend, indicates the OPM market is maturing and brands are becoming more efficient in how they drive consumer spending,” commented Dan Bunyan, senior manager at PwC.

“OPM has grown to a near-£17 billion industry due to the fact that all parties continue to benefit. Advertisers get new customers extremely cost-effectively, consumers save money and get access to free online content, whilst the publisher in the middle gets revenue through referral fees.”

Rising spend - rising return

The IAB’s account of sales driven by performance marketing companies in 2014 includes contributions from all the main affiliate publisher types, such as cashback and voucher sites, along with lead generation companies that get paid for a form or similar being completed.

This year, the findings revealed that while positive consumer reception has meant that four in five Brits (79%) have used an OPM publisher, the pool of investors by sector remains fairly small.   

A review of OPM’s progress last year saw 34% of all advertiser spend coming from the finance industry, with retailers accounting for 21%. Companies connected to the travel and leisure sectors were responsible for 19%, which meant the three combined accounted for nearly three-quarters of all money spent on performance marketing. 

Even so, the return generated from their activities cannot be questioned. In 2012, during the IAB’s very first study of the performance marketing industry, advertisers generated £9 billion in sales through an annual kitty of £814 million. 

Sales attributed to OPM hit £14 billion last year as advertiser spend hit the £1 billion mark. And now, with 125 million purchases coming via affiliate sites, companies within the performance space are boasting an even heavier return on investment.

Mobile drives spend

Drilling down into the actions behind the sales, the IAB and PwC found performance marketing to be another industry benefiting from the continued growth in mobile sales. 

Last year, advertisers increased their mobile OPM budgets by 72%, as spend on smartphones and tablets accounted for 17% of the industry’s annual takings.   

Separate research from the IMRG Capgemini e-Retail Sales Index had mobile sales accounting for 37% of the £104 billion spent online in the UK during 2014.

Tim Elkington, chief strategy officer at the IAB’s UK division, confirmed that advertisers were “heavily increasing” their OPM mobile spend due to the impact smartphones and tablets were having on retail.

Elkington also shone a light on the amounts generated by online performance marketing in comparison to specific areas of retail.

“Britons generate 10 million clicks every day in pursuit of getting a better deal or finding the right product – it’s an utterly ingrained part of today’s savvy consumerism,” he commented.

“To put it in context, at £17 billion it’s already as big as the beauty industry.”

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Richard Towey

Richard Towey

Richard serves as head of content at PerformanceIN. After many years spent covering developments from the automotive, sports, travel and finance sectors, he eventually turned his full attention to reporting on stories from the fast-evolving world of digital marketing. Richard now heads up the editorial team at PerformanceIN: the performance marketing industry's leading publication.  

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