As the digital marketing agency Optimus PM reaches 10 years in the industry, we caught up with its CEO Mark Russell and director Bruce Clayton to talk about a decade in performance marketing.
Performance marketing has grown and evolved so much while Optimus has been in operation. Are there any big developments that stand out?
Mark Russell: One big development that really stands out is the growth in the size of the channel and the transformation of the main affiliate business models over time. These changes have been dictated by the development of the paid search industry and the evolution of e-commerce as driven by consumer behaviour.
Bruce Clayton: We’ve also seen the transition of performance marketing from the digital problem child into mainstream acceptance. Going forward, we expect to see the continued evolution of publisher business models and enhanced understanding of how these models can deliver value for clients as an integrated aspect of their marketing plans.
In your experience, which trends have dictated the way performance marketing has developed in those years?
MR: We’ve been tracking a number of different trends. Of course, you have the broad economic trends, in terms of the combined forces of the recession and recent austerity measures. That obviously changes the thinking of companies when it comes to budgets and the focus on results. It also changes consumer shopping behaviours such as the customer seeking discounts and the rise of the voucher code and cash-back publishers. Voucher codes have become part of most retailers’ CRM strategies as well as a conversion tool, giving rise to a very large percentage of affiliate activity. This has been reinforced by customer behaviours as they search for and use voucher code boxes on the checkout pages.
Then you have the new technological trends, such as Google and the increased competition within the ever-growing online retail economy. This increasingly means competition involving eBay and Amazon. The move to tablet- and smartphone-based browsing also changes the game for performance marketing.
Then you have the appearance of TV-advertised loyalty programmes such as Quidco and TCB. With a greater amount of consumer awareness these are more mainstream than ever.
Furthermore, the Internet Advertising Bureau is addressing many of the questions and concerns surrounding online advertisers, so you can expect to see more changes ahead.
Can you give us a few examples of things that haven't lasted the test of time?
BC: Paid search affiliates have been squeezed out by the dominance of Google and the quality of search results. As the Google search algorithm gets better and better, it has reduced the scope for “black hat” tactics. We’ve also found that content marketing does not work via cost per acquisition (CPA), you have to be more creative about acquiring customers.
How do you feel the way agencies work has changed in the last decade? From our own view there seems to be a lot more collaboration between channels and departments than there once was...
BC: Yes and no - there are still pure-play affiliate agencies out there, so an appreciation of how an affiliate fits with other channels applies and clients are more integrated than they used to be. However, we still operate within a distinct channel for the majority of our clients.
Do you feel it's harder to succeed as an agency these days?
MR: Not necessarily - the rules of prudent business still apply. As much as people like to believe that “this time it’s different,” it’s really not. If you have skills and patience you can succeed in this business and deliver huge returns.
From this perspective, agency failures in the past 10 years have been a result of over-reliance on too few clients or mismanagement, not as a result of changes in the performance industry. These failures have in some cases resulted in a healthy skepticism around the use of agencies. That type of thinking has for a time hindered the development of our sector as a whole.
And is there more opportunities for people to start their own small operation than there once was?
BC: Startups tend to be easier in newer niches or channels where established agencies do not have the requisite expertise or understanding. Given that performance marketing constantly innovates, there will always be the opportunity for people to start their own small operation. The ease of doing that and eventual success depends on the degree of innovation, experience and available market share.
A decade in the industry is a remarkable milestone. What are you expecting to change over the next five years?
MR: We’re going to see a real emphasis on quality. At the end of the day, quality matters. You can define quality in a number of different ways, but the metrics we’re tracking are based around accountability; we are tracking all contributions to the customer journey, including those related to influence.
In terms of technological change, we also expect to see even more mobile transactions and more technology-based publisher models. As the pace of technological change accelerates, this is going to require continued adaptation to challenges.