An increasing number of new entrants to the affiliate marketing scene, a rise in fashion retailers embracing the channel and increasing potential for the booming mobile channel – just a few of the key findings from a cutting-edge industry study unveiled today.

PerformanceIN has been given an exclusive peek at the only independent survey that looks into the current usage and intention of Australian companies engaging in affiliate marketing.

The 2013 Australian Affiliate Marketing Benchmarking Survey, supported by PerformanceIN, was commissioned by online performance marketing agency and affiliate network, dgm Australia, and conducted by market research company edentify, in September 2013.

This is the second annual study into the use of affiliate marketing by media agencies and advertisers in Australia, and is launched at a time when the industry, globally, seems virtually insatiable as the thirst for knowledge and insight into the booming affiliate channel intensifies.

Five key findings

Key findings from the survey showed:

  • There are clear signs of ‘solid growth’ for the affiliate marketing channel across both media agencies and direct clients.
  • The high number of new entrants to affiliate marketing indicates there is more room for growth in the channel.
  • Fashion retailers are the newcomers to the affiliate marketing channel.
  • Coupons, cashback and loyalty/rewards have experienced growth in popularity as types of affiliate being undertaken.
  • There is more potential for the mobile channel to deliver more sales, as well as more companies to adopt a mobile optimised web presence.

The survey received a total of 156 responses, with media agencies accounting for 39 respondents and direct clients 117 respondents.

Newly promoted CEO at dgm Australia, John Matthews, has been one of the main driving forces in creating the survey and stressed how vital it is to have the facts from the study, to showcase the affiliate space.

“Unlike the UK we don’t have an organisation such as the UK IAB Affiliate Marketing Council over in Australia, so surveys like this are such an important tool for us, and indeed other companies within the industry.

“The Australian affiliate marketing and performance space is really growing and this is even more evident with the opening of other global companies such as Rakuten LinkShare, OMG, and more.”

Proportion attributed to channel & new entrants

Some of the immediate highlights of the survey surrounded new entrants to the affiliate channel:

  • One in three respondents overall is new to affiliate marketing, indicating they have been engaging in the channel for less than a year.
  • Nearly two thirds of respondents have used affiliate marketing for three years or less.
  • By sector, half of respondents from consumer electronics are new to the channel (in 2013), 42% of fashion retail respondents are new, as are 29% of online retail respondents.

When asked about their spend on the affiliate channel for the past year, 65% of survey respondents said they increased spend and 18% said their spend remained the same.

The good news was that direct clients intending to increase investment year-on-year increased from 53% in 2012 to 61% in 2013. Yet the opposite was true of agencies with the number of respondents reporting an intent to increase spend dropping from 71% in 2012, to 63% in 2013.

Compared to other online channels, when asked if they increased spend on affiliate in 2013, compared to the year prior, 43% of respondents said yes. For agencies, there has been a drop in those claiming an increase in spend on affiliate over other online channels, at 44% in 2013 compared to 61% in 2012, which Matthews said may be explained by agencies funnelling more spend into other performance channels including their trading desks.

However, for direct clients there has been an increase in those claiming greater affiliate spend at the expense of other online channels, at 43% in 2013 compared to 29% in 2012.

While average spend is down for both agencies and direct clients, with 24% spending more than $25,000 per month in 2013 compared to 44% in 2012, the survey found there was actually a much higher number of respondents spending under $5,000 per month (47% of respondents in 2013, compared to 22% in 2012).

Matthews said this is an incredibly important finding, as yes, the level of higher spend is down, but importantly, what must be noted, is that there is a much higher number of respondents saying they have engaged in affiliate marketing for less than a year (29% in 2013 v 12% in 2012).

This shows a clear rise in the increase of new users to the channel and accounts for the drop in average spend.

“Over the last two to three years we have really started to see a shift and in my mind, there is absolutely no reason why Australia can’t get to the mature state that the UK is now in,” Matthews said.

“The key thing for us is that this shows the newcomers to the affiliate space. It is backing up what we have always said, that while the market is still relatively immature, once people begin to cotton on, and understand the basic principles, they soon see the value.”

Matthews said there are only a few of the big retailers who have fully engaged in the channel, but many high street retailers are now beginning to get their heads around how it works and what can be gained.

Treat affiliate channel as a sales channel

Another issue the survey looked at was the departments that affiliate marketing budgets come from, and if they are capped.

While there was a slight decrease in respondents allocating their affiliate spend from the marketing budget, this remained largely true across the board with 79% saying their affiliate spend comes from marketing, compared to 83% in 2012.

“Affiliate marketing should come under the sales budget and should not be restricted or capped – marketing budgets by their very nature tend to be finite and as such, as an affiliate campaign matures, it can result in budget having to be reallocated from other channels or restrictions placed on the affiliate activity itself,” Matthews said.

“This in itself defeats the purpose of affiliate marketing as often it is reliant on other marketing activities, such as ATL, to create the brand and consumer awareness of the products to drive demand that publishers and brands are able to capitalise on.”

The survey found that the number of respondents who were capping their monthly spend on affiliate has halved since last 2012, to 22%.

The most significant change in attitudes towards affiliate budgets was in agencies; where in 2013 just 22% of respondents said they capped budgets, compared to 63% in 2012. For direct clients, capping dropped from 34% of respondents in 2012, to 21%  in 2013.

Matthews agrees that the decrease in capped spending appears to be recognition that the affiliate channel is more closely related to sales than marketing – as publishers are only paid when transactions are verified.

Growth in fashion retail and finance remains strong

Due to significant growth in new entrants and spend in the fashion sector, 2013 was the first year the survey separated fashion retail from other online retail.

One of the trends spotted in the survey was the strong signs of growth in the fashion retail sector. While these survey respondents indicated the lowest proportion of their spend in the affiliate channel, the sector also has the highest number of respondents indicating they had been engaging in affiliate marketing for less than a year (42%).

While fashion was the category most likely not to engage in affiliate marketing with 30% not utilising the channel, more than any other reported category, it was the sector most were likely to take their affiliate spend from their e-commerce budget. This suggests a closer link between affiliate and sales, rather than marketing, which is still the most common across the board.

Half of the fashion retail respondents indicated they spend under $5,000 per month in the affiliate channel – reflective of the number of new entrants in the past year – while 73% said their affiliate spend represented less than 10% of their overall online spend.

The survey also found that fashion retailers like a wide range of affiliate types, with content and aggregators the most popular at 58% of respondents, followed by comparison engines, coupons, loyalty/rewards and cashback.

Finance sector still mature

As is with many other global markets, the most mature sector in affiliate marketing came out as finance.

This sector engages in the highest amounts of affiliate marketing, spends the most in the channel, is the most likely to manage their own campaigns, and is most likely to de-duplicate affiliate sales against other online channels.

Spend is the highest of any sector, with a third of finance respondents saying they spend over $100,000 a month on affiliate marketing. This is double the response from 2012, and significantly more than the 47% of respondents overall who spend under $5,000 per month.

This sector has been engaging in affiliate marketing longer than any other sector, with 34% of finance respondents saying they have used the channel for 6+ years, and two-thirds having used the channel for 4+ years.

The survey found that aggregators and comparison engines are by far the most popular types of affiliate marketing that finance respondents engage in, while the other sectors including fashion retail, online retail and consumer electronics prefer a wider range of affiliate types.

Cashback and coupons

While nowhere near as developed as the UK and US cashback and coupon scene, the survey found that coupon take-up as an affiliate channel has been on the up. A total of 56% of respondents indicated they utilised coupons in 2013, compared to 29% in 2012. Loyalty/rewards use also increased to 45%, from 27% in 2012.

While comparison engines remain the most popular type of affiliate marketing undertaken, cashback use has more than doubled – to 44% in 2013, up from 18% in 2012.

This leap in respondents using cashback as a type of affiliate marketing is linked to the rapid growth experienced by the retail sector in the past year.

“We have seen cashback popularity among retailers in more established markets such as the UK, and expect to see this type of affiliate marketing jump up again as the retail sector continues to grow and establish itself locally,” Matthews explains.

“Historically, due to the lack of merchants involved in the channel, the cashback model was not as viable in the Australian market, as the cashback sites are reliant on a broad cross-section of clients and offers, however as more advertisers engage in the channel we are starting to see models such as cashback and loyalty really grow.”

Education

Another major area for improvement within affiliate marketing in Australia is education.

“Knowledge of affiliate marketing in Australia is improving, but there is still some way to go,” Matthews begins. 

“We are familiar with many of the IAB Affiliate Marketing Council’s policies and regulations; and that is the closest thing we have to an educational body on affiliate marketing.

“When the OPM study came out last month, which dgm supported financially, its findings were shared with everyone here and we do our best to spread knowledge/facts/figures on the industry with the companies we work with too.”

Matthews said people are ‘having’ to understand more about the channel as it begins to feed more and more sales and marketing structures.

The survey found that perhaps unsurprisingly, CEOs at companies that do not currently use affiliate marketing have less knowledge of it. It also showed there is little difference year-on-year in CEOs’ knowledge of affiliate marketing.

Knowledge remains higher among direct clients, with 58% saying their CEO has good or excellent knowledge of affiliate marketing, compared to 49% of those at agencies.

Catching on to mobile

For the 2013 survey, dgm Australia added questions on the mobile channel for the first time. The results showed that less than 10% of sales were being driven by mobile for the majority of respondents (58%).

Retail displayed the highest attribution of sales from mobile, with 15% of respondents in both online retail and fashion retail saying mobile drives more than 30% of their sales.

Consumer electronics has the lowest sales results in mobile, with three-quarters of respondents indicating that mobile drives less than 10% of their sales. This is despite the fact consumer electronics has the highest number of respondents saying they have a mobile optimised website.

Overall, just three in 10 respondents said they do not have a mobile enabled website, and this is the same across both agencies and direct advertisers.

In a recent Mobile Report published by dgm, it noted that Australia is driving more clicks from smartphones and tablets compared to the UK, however sales percentages are the same or below those in the UK where more advertisers have mobile optimised websites.

“We believe once Australian advertisers offer a better mobile shopping experience to the customer, this will close the gap,” Matthews said.

Matthews said dgm Australia will continue to produce the annual survey and will look to expand the mobile section and to dig deeper into the affiliate channel, and may also explore other performance marketing areas in the 2014 study.

A more detailed look at the comprehensive report is available to download from the DGM website.