Last year PerformanceIN published a piece under a similar headline. Now, following a panel discussion at Performance Marketing Insights: Europe 2014 on the same subject, we want to catch up on the development of performance marketing in what is a largely overlooked market: Latin America.
To take us over some of the bigger questions concerning performance marketing in South America we spoke to two industry veterans, and speakers from the panel ‘Exposed: Performance Marketing in Latin America’ at PMI in Berlin:
Santiago Darmandil is co-founder and chief operations officer at Vorcu, a Latin-American based affiliate network that specialises in e-commerce programmes. As COO, Darmandil has shaped his company into one of the very few affiliate networks that successfully run cost per sale programs for Latin American advertisers.
Agustín Gau started his professional career in 1999 when founding Mediatica, a company dedicated to developing Interactive CDs. In 2001 due to the Internet growth, he focused himself on this new industry, initiating AdVerit, one of the first digital marketing agencies in Latin America.
How developed is performance marketing in Latin America?
Santiago Darmandil: Not as much as we'd like. Most of the ad spend is still going toward branding or offline media. Affiliate marketing is still behind, and most of the affiliates are not local, even though local affiliates are the ones getting better results. We have to build an ecosystem that truly understands how to measure CPA costs across multiple channels, push for programmatic ad buying, affiliate marketing, and more, to build something that can be better for both companies and end users.
Agustin Gau: The best way to understand what is happening right now in Latin America is to imagine the European industry 5-6 years ago. This means that there are huge opportunities, especially with the knowledge and experience that US and European people have.
How big is the opportunity?
SD: The Latin American e-commerce market had a revenue of 48 billion US dollars in 2013, compared to 310 billion that the US market transacted during the same time. So, at this time, it is roughly 6 to 7 times smaller than the biggest market in the world. But, unlike the US market, it's growing at rates of 30 to 40% year over year. This is the right time to get in.
AG: Our digital environment is growing. Several studies confirm that it is the fastest growing region in the world. As an example, on a yearly basis, e-commerce is growing by 30%, online advertising almost 15%, online penetration 12%.
What are the main restrictions on industry growth?
SD: Fraud is considered a problem, but In our experience, it's in no way worse than in any other region around the world. Of course, it is extremely important to have a solid anti-fraud detection system both on your site's payment platform and within your affiliate marketing network.
AG: Definitely our low banking level is one of our main issues. 60% of our population don't have access to a bank account/credit card, but this is also changing being fuelled by an emerging middle class.
What advice would you give companies looking to start up in LATAM?
SD: Don’t go in with a remote approach. The Latin American market has many quirks and issues that are exclusive to it, and I would always recommend either setting up a local operation or partnering up with someone that has a local operation. Things like payment methods, delivery providers, and marketing partnerships need to be managed locally.
AG: There are too many opportunities in the region, because of sub industries that do not exist yet, as well as those who are in an early stage. In both cases your experience and knowledge should make the difference. Of course that being local is important, that's why I always suggest finding a local partner that can guide your first steps, but having the support of the experience will definitely make you save time, money, and increase your chance of success.
Some interesting business models to explore in Latin America at present could be: voucher codes / coupons, vertical ecommerce, price comparison. Regarding mobile opportunities- they are even higher because there aren't local established players.