From the days of ‘hit and hope’ to a burgeoning nucleus of performance marketing, Australia has been steadily climbing the industry ropes to gain a place at the table.
While the performance marketing sectors are alive and kicking across the UK, US, Israel and many European countries, Australia has not been mentioned, as yet, in the same line-up.
Of course we know there are plenty of players down under that have been busy making their mark, but the country does not seem to have fully propelled itself into the global performance marketing limelight.
Is this a case of ‘slow and steady’ as it learns from the mistakes eager performance marketing-led nations have made across the pond? Is the advertiser desire and ecommerce infrastructure really there to support the industry? Or are we perhaps not giving the developing market, which is showing strong growth, enough credit?
We caught up with industry professionals from seven companies with a presence in Australia to get their thoughts on the current performance marketing landscape, and posed some of these questions to them.
Our line-up hailed from the likes of affiliate network, The Affiliate Gateway Australia; media agency MediaCom, global performance media network OMG; online booking and cart recovery company SaleCycle; global digital marketing tech and service company, Rakuten Marketing (part of Rakuten LinkShare), biddable media company GDM Digital, and online customer acquisition specialist dgm.
The current scene
On summarising the current performance marketing scene and highlighting the ‘best aspect of it’ in Australia, Max Bush, the network director at The Affiliate Gateway (TAG), said while some say Australia’s and New Zealand’s performance marketing is still in its infancy, he disagrees.
“Admittedly, Australia and New Zealand are young in the arena, but they are on the speedy track to catching up with the big boys in US and UK,” Bush said.
“With the rise and fall of multiple Australian affiliate networks the industry has established its footing in the market and is set on massive growth. Advertisers’ attempts to cut costs and harvest higher and higher ROI means they are utilising strict performance methodologies and testing new techniques on campaigns, such as retargeting and cart abandonment.”
Bush also said that ‘nimble, tech-savvy Australian publishers’ are getting creative by offering multichannel strategies to accommodate these demands.
Among the thriving channels he lists credit card and telco comparison, cashback, couponing and co-registration.
“While performance marketing is a young establishment in Australia, ecommerce businesses are sprouting everywhere here and coupled with the accelerating growth in internet and online payment penetration in Australia, it only means one thing to the affiliate world in the place down under – growth,” Bush said.
Opportunity to shape the industry
Dgm, which launched in Australia back in 2003, is headed up by CEO John Matthews. Matthews agreed with Bush in that the market is experiencing a lot of growth at present with a huge increase in the retail category specifically.
“There is lot of momentum right now and clients are willing to trial different tactics, to try and gain competitive advantage over their peers,” Matthews said.
Sydney-based affiliate director at MediaCom, Jo Thomas, who was former assistant head of performance marketing at DigitasLBi in the UK, said the Australian market still classifies performance marketing as affiliate marketing, similar to how the UK did a few years ago.
She believes the best thing about the market is the amount of opportunity there is to shape the industry.
“I spent eight years working in affiliate marketing roles in the UK so I’m trying to spread some of my knowledge and experience to clients and affiliates in this market to help develop innovative strategies for all parties,” Thomas said.
Chris Barron, the MD of Australia and New Zealand at OMG, said performance marketing in Australia continues to show strong growth, particularly in the finance, telco and retail channels.
“The most encouraging aspect of the continued strong growth of performance here is that agencies are finally starting to get it,” Barron begins.
“The big guys are now racing to beef up their performance know-how, and are for the first time building specialist performance teams and key affiliate personnel here in Australia.
“Clients continue to demand stronger ROI above all else, and agencies are realising just how important performance media is to delivering that.”
Barron said that with the arrival of a range of big high street retailers in the last two years, such as Zara, Mango, Topshop and now H&M, all with bricks-and-mortar and online stores, the locals have had a ‘serious shake-up’.
“Not only are they getting their online stores up to scratch, they’re also embracing performance media to find their customers online, before the new arrivals beat them to it.”
Big name brands investing in technology
A well-known industry name to arrive down under, which many say helped validate the sector, was Rakuten Marketing.
Anthony Capano, the MD of Rakuten’s Sydney-based hub, said the company was investing in research and development in the Australian market throughout 2011-12, before officially launching in September 2012.
He said when the company first started exploring Australia it found the performance marketing space was relatively immature, although clearly developing.
“In a few short years, it has grown and changed a lot,” he said.
“Digital marketing has evolved a great deal, with companies and marketers moving away from ‘hit and hope’ efforts in digital, to a more strategic way of working. CPA models have really benefited from this.
“In a broader context, there has been a big investment from brands in technology to improve their overall ecommerce user experience over the past 12 months, which means consumers are shopping online more.”
With the Australian ecommerce space tipped to boom in the coming year, Capano said this perhaps indicates why Topshop owner, Sir Philip Green, recently bought a 25% stake in Australian online retailer MySale.
“A couple of years ago we were having introductory conversations with advertisers and brands. Now when we speak to them they’re keen to discuss the digital channel on a more strategic level. That goes for both the pure-play etailers and the multichannel retailers,” Capano said.
Content shake-up needed
Having had clients in the country since 2012, SaleCycle’s made the move to open its first official office in March this year.
Charles Tidswell, SaleCycle’s chief revenue officer Asia Pacific, said the fact that the market is evolving means there are opportunities to skip a few of the steps which more mature markets pondered for a while.
“Focusing on affiliate, the current depth of Australian content available to merchants is challenging. The diversity and depth of content from affiliates isn’t as broad as markets such as the UK and US,” Tidswell explained.
“For the affiliate landscape to expand, and for marketers to invest more in affiliate, we need to see more content. At the same time, for more publishers to be interested, mindsets and technology need to improve.”
He also said that rather than remuneration focusing on last click, if it became weighted based on the level of engagement across the various stages of buying cycle, it would be fairer and suit independent publishers more - including SaleCycle.
Despite deploying intelligent emails to people who have abandoned their cart, at times where they would have thought they would be a last click, all too frequently Tidswell said the SaleCycle click is stripped against a Facebook or a Google acquisition, even within minutes of the SaleCycle link being clicked.
“This has a significant impact to our revenue. Remuneration needs to be fairer for the market to become more interesting,” Tidswell added.
Head of business development - affiliate desk (APAC), at GDM Digital, Tom Rickey, said one of the main themes being discussed within the industry is education.
“The majority of this work is being undertaken by the networks who need to convince clients to try a relatively new marketing method, Rickey said.
“Clients are often very cautious and in some cases seem to be watching their competitors to see if they make the move first.”
On the current scene, in terms of the publisher base, Rickey said the lack of maturity in the market means the breadth of affiliates available is more limited. While this might make things difficult for the networks, he said this does mean opportunities for publishers who can prove themselves early on.
“It is very refreshing to be having some different conversations around affiliate,” Rickey said.
“On my recent trip to Australia there was not a single mention of ‘the year of mobile’ or questions like ‘what do we do about attribution?’ The discussions are around how to get publishers to invest in the market, international partnerships, growth opportunities and promoting affiliate to a largely skeptical client base.”
“The opportunity to help shape the industry in a significant way is very exciting and it’s great to have that chance now.”
Catching up and comparisons
As described above, the industry certainly seems to be experiencing plenty of growth, but why has it taken so long to get going? Is it a fair to say it is still playing catch-up to the US and UK and should we be comparing such different regions?
“I think it is a fair statement, about playing catch-up, but based on the number of people starting to shop online and the affiliates already in market, I don’t think it will be behind for much longer,” Thomas said.
“We need to educate clients to ensure they perceive affiliate marketing as a performance channel and to ensure they are thinking of affiliates whilst developing their marketing strategies.”
Thomas said while there may not have been a delay per se, what with dgm kicking things off a while back, she said the difference is that other affiliate networks and agencies have now realised how much the market has grown over the past two years and now want a piece of the action.
Capano said there are two main reasons that performance marketing took a while to take off.
Firstly, there were initially some mixed feelings and lack of clarity about the affiliate channel in particular in this market. He said the industry has now ‘professionalised’ and become a lot more transparent, which is encouraging brands and advertisers to invest.
Secondly, he said advertisers were used to cost-per-impression (CPI) rates, and so were hesitant to move to a new model.
“Once we educated them about CPA rates we found brands were pretty eager to come on board,” Capano explained.
Bush said a decade ago Asia’s marketers could only look westward with envy as performance marketing shot upwards sky-high in US and UK. He said there wasn’t much playing ground when the market had low internet penetration, low credit card penetration and shipping issues.
Although the infrastructure has since improved, Bush said it now battles with the stubbornness of premium publishers who refuse to let go of their upper hand. He also thinks it will be a while before they see them welcoming the CPA model.
“The industry suffered inertia as there was simply a lack of affiliates when it first began here,” Bush said.
“As premium publishers are afraid to open their inventories; advertisers and networks had needed to persuade ‘regular’ publishers with high converting offers, landing pages and creative assets.
“The latest developments in RTB technology has helped a lot – it now enables retargeters to decide their purchase on ad impression based on the likelihood that a user will click on it and make a purchase on the advertiser’s site. This could just be the game changer if retargeting affiliates arbitrages with such intelligent tools.”
Stunted publisher growth
Matthews said while it’s very easy to say that performance marketing has only just started to emerge in Australia, as a business, dgm has been in operation for more than 11 years.
He said one area that has been slow to develop is the ecommerce market in Australia and this has definitely impacted the affiliate channel specifically.
“As readers of this website are aware, many publishers are reliant on a large cross section of advertisers to be active in a given vertical to really monetise their website content. The delay in many advertisers truly embracing ecommerce, meant that this stunted the growth in publisher verticals that are significant in other markets, with cashback/loyalty being the most obvious.
“With the recent growth in ecommerce we are now starting to see some of these publisher sites grow and that is only positive for the industry, as they are also increasing volume across the board, due to their ability to increase their own marketing spend.”
Matthews said at an overall market level, he broadly agrees with the Australian market being deemed as ‘playing catch-up’, however he said this is really dependent on the vertical.
He said finance, consumer electronics and travel clients have always been pretty advanced in their use of performance marketing channels - predominantly led by the large multinationals, which essentially forced the local players to learn and compete.
“We are also fortunate within Australia that we live in a country that many people want to move to, as such there is a large influx of talent from the so called ‘more advanced’ markets - so this is closing the gap in terms of innovation and also initiatives trialled both agency and client side,” Matthews said.
Rickey, who also said there is a surprising amount of expats working in affiliate in Australia, suggested talent had to be imported in order to compete.
He also stressed that one of the main reasons attributed to the delay in the take-off of performance marketing down under is due to some of the poor online retail sites in Australia.
Rickey said user design and navigation can be of a low standard which has a knock-on impact on user experience and conversion rates.
“While Australia may be behind in some respects, it is likely to grow at a much faster pace than we have in the UK as there is access to a growing list of great affiliates (both homegrown and imported); plenty of big online retailers who don’t currently work in the affiliate space for their sales teams to go after; an improving internet infrastructure and a healthy economy with consumers who have more disposable income,” Rickey added.
Tidswell said while the Australian market hasn’t adopted affiliate marketing in a similar way to the US or UK, it doesn’t necessarily mean there is a ‘gap’.
“I think it’s more related to market size, compared to the UK with a population of 63 million and the US with 313 million, there is less of a business model for Australia,” Tidswell said.
“Don’t forget China, in many instances they have skipped the affiliate model altogether. Brands are able to deliver nano content snippets via applications such as WeChat, which enables the delivery of relevant targeted content throughout the decision making cycle, so to a large extent bypassing the need for affiliates.”
Tidswell argues that it takes time for the market to see the results and the importance of performance marketing.
“Over the last few years email, social, web and mobile have become the priorities of Australian marketers,” he added.
“The new wave of younger, savvier and digital marketers will definitely be bringing about an evolution of the performance marketing scene in Australia. This is just the beginning.”
With so much growth taking place in Australia now, we asked our panel about their expectations for 2015 and beyond.
Naturally, all agree on the continued upward growth trend, more international retailers entering the market, increased client education, mobile growth, more competition and improved websites.
Capano said with Mashable having just hired its first person on the ground, he expects to see more digital publisher models coming to the market and more international publishers launching in Australia. From an advertiser perspective he feels attribution will be key.
“We’re also getting asked about the longer tail of affiliate-driven sales, such as blog and other content-led sites, so this is likely to be a big focus for us in 2015,” he said.
Tidswell, who stressed that it’s not about comparing the Australian market with the UK and the US, said marketers, publishers and the technology will evolve in parallel with consumers’ media consumption, and as there is less legacy, this evolution could happen quicker and more efficiently than current established markets.
Bush said he feels new verticals such as telecommunication and retail banking products will enter performance marketing in Australia and with their attractive pay-outs, perhaps more and more publishers will convert to the CPA model.
Rickey, who said there are no significant cashback partners in Australia, anticipates a wave of growth in this area, alongside increased activity in loyalty programmes.
“There is also likely to be a land grab for clients. Once the websites improve and clients catch on to the benefits of affiliate there will be an acceleration in the number of programmes opening and there will be some rapid growth for one or two networks,” Rickey said.
“There will be a tipping point where online retailers who see their competitor’s success through affiliate will follow suit in a sort of performance marketing domino effect.
“With all this growth, I expect we will see other networks following OMG and dgm to Australia looking for opportunities in new locations. Once this has run its course, one network will emerge as the clear and established market leader, as happened in the UK a few years ago.”
Do you agree with comments from these industry professionals above? Care to share your views on the market? Comment below and let us know your thoughts.