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The growth and evolution of the performance marketing industry

The growth and evolution of the performance marketing industry

By Matt Bailey, commercial director, Performance Horizon Group

Affiliate marketing contributed over £5 billion worth of sales in the UK in 2011. Predictions suggest that this year 71% of brands are increasing spend in the channel.

There is real optimism in the performance marketing industry; the sector is on a natural high with a greater understanding of the disciplines which sit within it; there is increased buy-in from brands and agencies spanning the UK; finally awareness has been raised thanks to a number of high-profile events and press stories. In addition, performance marketing related sales are on the increase as brands become savvier with their online spend.

In the industry, however, there is great disparity between what defines performance marketing. At PHG, we believe it is centred around conversions driven by partners across multiple digital channels, with the focus placed firmly on conversions.

Until now, the majority of performance partners were paid on a CPA basis, but we believe the key to successfully monitoring performance marketing is to have visibility over how the sales and leads are driven.  

With this in mind, it is clear that the all-encompassing umbrella of performance marketing offers much more than what the current affiliate networks provide. There is now an expectation from brands to wholly own their relationships with their key performance partners to ensure that when needed, customised and bespoke approaches can quickly be adapted.

A clearer understanding of which channels are working and which aren’t, alongside access to real-time data, is also vitally important within performance marketing. For brands to perform better they need the ability to track and manage their data so that they can more effectively budget and plan campaigns to make more informed decisions.

Working with this definition, here are the biggest evolutions in the industry in terms of publisher innovations and management:

Taking back control

Leading affiliates are now key sales channels for many big brands, with constant signs of a shift towards partner relationships being managed in-house rather than being outsourced. The newly created role of affiliate manager is one we are likely to see more of.

That said, managing an affiliate programme is no small feat when you consider how the affiliate programme fits with the brand’s business objectives, which is why agencies will continue to play a vital management role. An agency’s value and expertise in terms of development, relationship management and affiliate recruitment will continue to be one of the utmost importance.

Clearer attribution and knowledge share

As previously mentioned, better access to data means brands will have a clearer idea of how their budgets should be spent and which of their affiliates are the most valuable to them. Due to the introduction of new technologies that provide this data in real-time, the financing models for affiliates will change as a result. The CPA method will cease to be the most efficient method of incentivising affiliates.

The importance of consumer data in lead generation

Brands are increasingly using lead generation to collect consumer data, enabling them to connect and communicate directly with customers. Data collected by partners and affiliates is also invaluable to ensure the kind of people that buy a brand’s products are being spoken to directly.

This is being powered by advances in technology that allow much more granular targeting and better quality of data.

Driving sales to phone numbers

Whereas affiliates have previously been concerned about losing sales and revenue due to the presence of phone numbers on brands sites, the emergence of new technologies from companies such as FreeSpace and AdInsight means sales via phone can be attributed to the relevant affiliate.

The growth of mobile and social

Statistics suggest that by 2015 nearly 95% of mobile devices sold in Western Europe will be smartphones – not only does this suggest great opportunities for affiliates, but also for brands who offer transactional services online, as they must consider whether they need to offer mobile-browser enabled sites too. Therefore lead generation and pay per call could become mainstream methods on mobile devices.

Additionally the lack of utilisation of social media by affiliates has not been successfully explored to date, but we are starting to see a shift in this with the launch of social spaces and apps that have affiliate marketing at their core.

Monetisation for publishers

As the rise of performance marketing continues, we will certainly see larger and more traditional publishers look to revisit the channel to monetise their reach. We have seen partnerships like this before with incentives such as co-branded cash back sites, but this should become more mainstream.

This is only the beginning for performance marketing; it will become more integrated across brands and agencies meaning more media will be purchased based on performance, ultimately resulting in the possibility for advertorials to be rewarded on the number of sales secured from the piece.

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