The thriving online performance marketing (OPM) industry generated a whopping £14 billion in sales in 2013.

The figure comes from the Internet Advertising Bureau (IAB), which commissioned PricewaterhouseCoopers (PwC) to carry out a survey on the value and growth of the channel.

Results unveiled today (Tues), show that affiliate marketing and lead generation ad spend hit £1 billion, which was up by 15% (on a like-for-like basis) compared to 2012.

The £14 billion in sales, via price comparison, voucher, cashback, loyalty and product review websites – the most common forms of OPM, represents a return of £14 for every £1 invested by advertisers.

Figures in the report 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.

Savvy and careful consumerism

Director of research and strategy at the IAB, Tim Elkington, said OPM has ushered in a new era of savvy and careful consumerism. He said nearly six 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, Elkington said.

“It also generates extra revenue for the publishers in the middle, large or small, via referral fees.”

The £14 billion in sales is up £5 billion, compared to £9 billion created in sales in 2012, through OPM.

The recent 2013 study found that OPM now accounts for 10% of UK e-commerce retail sales. It stated that every month almost half of adults online cash in vouchers/redeem loyalty points, and that four in 10 visit a price comparison site.

The report also found that OPM drove around four billion clicks which converted to 210 million transactions. 150 million were affiliate transactions and 60 million were lead enquiries.

Manager at PwC, Dan Bunyan, said the four billion clicks in 2013 is the equivalent of 10 million per day, or 120 per second – about 5% of which resulted in a transaction.

Advertiser and publisher increase

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.

In comparison, the IAB/PwC’s prior report found in the UK, during 2012, there were 3,500 advertisers and 10,000 publishers engaging in the affiliate marketing and lead generation fields.

Bunyan said: “It isn’t just the big publishers, or ‘super-affiliates’, which generate revenue through OPM.

“It has 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.”

The study also found that finance and retail advertisers account for more than half of OPM spend.

The finance sector, driven by insurance and credit card advertisers’ use of price comparison sites, is the biggest spender, accounting for 35% of OPM expenditure in 2013, followed by retail (21%).

Travel and leisure accounts for 17%, telecoms and media 9%, and gaming 7%.

Marketing controller affiliate and email at BSkyB, Olivier Claude, said in order for the good stats to be maintained and improved, more investment is needed in the flourishing channel.

“Between 2010 and 2012, affiliate channel sales volumes grew by 33% and customer quality has improved,” he said.

“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.”

From strength to strength

Across OPM sites, such as Comparethemarket, TripAdvisor, Vouchercodes, Nectar and Quidco, advertisers do not 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).

This is the second annual report that the IAB and PwC has carried out on the growth and worth of the OPM industry.

Businesses in the UK produced sales of £9 billion through affiliate marketing and lead generation during 2012.

During 2012, UK consumers conducted around 100 million direct transactions to the value of £8 billion, as a result of affiliate marketing. On the lead generation side, 70 million enquiries (indirect transactions) resulted in £1 billion of sales across last year.

“Carrying out the OPM report is important because it showcases the fantastic results that affiliate and lead generation deliver for advertisers,” Elkington added.

“Being able to continually quantify the size and growth of the market annually will help it mature and have a more prominent seat at the advertising decision-makers’ table.”

Keep an eye on PerformanceIN for more analysis and coverage of this latest OPM report for the UK.

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