Email Media Planning & Buying Search

The 'Hidden' Marketing Channel: Performance Marketing

Posted by Keith Trivitt on January 22nd, 2013 at 7:35 am

The release today of a major report on the growth of the online performance marketing (OPM) industry in the United Kingdom represents a seminal moment for this young industry. The facts and figures it provides are evidence enough that performance marketing is here to stay; that it is a mature, growing online marketing channel that provides significant value to advertisers and publishers.

As Chris Johnson of A4U details in an excellent analysis of the IAB / PwC OPM study, the affiliate marketing industry in the U.K. has been valued (alongside lead generation) as a £9 billion ($1.43 billion) revenue generating industry.

Breakdown of Online Performance Marketing Spend in UK

Source: A4U

Key Highlights (courtesy of A4U)

  • There are c. 3,000-4,000 advertisers and c. 10,000 publishers actively engaged in Online Performance Marketing in the U.K. (in this instance — Affiliate & Lead Generation).
  • Advertisers expected to spend (through commissions, management fees, bonuses and other marketing spend) £814 million on Online Performance Marketing in 2012, generating c. £9 billion of sales for advertisers.
  • This spend was achieved through at least c.100 million transactions and an additional c. 70 million leads generated.
  • This is equivalent for c. 7-9% of U.K. digital marketing spend, and drives c. 5-6% of retail e-commerce in the U.K.
  • The largest end-sectors include Finance, Retail, Telecoms & Media, Travel & Leisure.
  • Market growth of c. 14% p.a (2008-11) and c. 7% p.a in 2012 (expected).
  • Cashback, voucher, loyalty and price comparison websites are the leading publisher types.
  • Sites designed specifically for mobile and tablet account for c. 4-5% of advertiser spend on Online Performance Marketing.

Leading Industry Sectors
Similar to the U.S. market, U.K. advertisers in finance, health and wellness and travel and leisure are some of the top spends of online performance marketing services.

According to The Next Web:

The biggest spenders in OPM are in the financial sector with insurance and credit card advertisers taking the lead with 45% of expenditure. This is followed with 20% by clothing, accessories and electrical and computing advertisers. The top five are rounded out with telecoms and media, travel and leisure and gaming.

Growth Forecast
U.K. suppliers of OPM services are experiencing a strong increase in demand for their services. According to The Next Web, between 2008 and 2012, OPM expenditure in the U.K. grew by 57%. Suppliers of OPM services and technology estimate that their revenue will grow by 25% this year.

What the Report Means for U.S. Marketers
The study of the U.K. online performance marketing industry is instructive for U.S. marketers in several ways.

First, it offers a comprehensive look at how OPM is positively impacting advertisers and publishers across an entire country. Recognizing that UK advertisers spent £814 million in 2012 on performance marketing services, generating c. £9 billion of sales, provides a solid baseline for performance marketers to use in generating additional new and incremental business opportunities with clients.

Second, it firmly establishes the proper role and value of online performance marketing. For an industry as robust as it is, OPM often suffers from a lack of broad understanding by advertisers and publishers of how it can benefit their business. This report makes clear that there are a variety of industries that benefit from performance marketing services (e.g., finance, travel, insurance, etc.). Consumers recognize the value of performance marketing campaigns, as they are estimated to generate c.100 million transactions and an additional c. 70 million leads.

The fact that OPM campaigns account for 7-9% of U.K. digital marketing spend, and drive c. 5-6% of retail e-commerce in the U.K. indicates that OPM is an important factor in brands’ retail and lead-generation efforts.

Finally, the report demonstrates to US advertisers that performance marketing is here to stay. After more than a decade of rapid growth, online performance marketing has matured to a point where it is a recognized marketing channel and increasingly comprises a larger percentage of advertisers’ online marketing budgets.

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