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.

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.

Even if you didn’t know what social discovery is, you probably find yourself using it all of the time. You get on Spotify and check out what your friends are listening to. You check Twitter’s trending topics for the top talk of the day. Stumble (Upon) some peer-shared images and scroll Pinterest for dinner recipe ideas. You get lost in reddit looking at the latest /r/news (or not). Social discovery is all over the web, and its because of us- the users. User generated content is quickly growing as a reliable source of information, and a reflection of the barrier breakdown that the web has facilitated between influencers and readers. Anyone can be an influencer and, thanks to the almighty interwebz, we’re able to easily share and gather information from anyone, not just the mainstream (aka old) media. Social discovery has, in many ways, empowered us as readers, users, and shoppers.

What is Social Discovery?

Social discovery can seem kind of a vague way to describe this blossoming trend. What it is meant to convey is that a user gets information about something based on reviews, advice, or input from another user (Techopedia). From there, social discovery sites can be broken down into categories, the primary ones being News, People, Location, Consumer, and Lifestyle/Entertainment (Business Insider). The most interesting of these when it comes to new trends and affiliate marketing would be consumer discovery. Friends share reviews and recommendations via sites like Pinterest, Polyvore, Amazon, and Yelp, often generating purchase intent for merchants without even trying. 71% of consumers agree that reviews make them feel more confident about making a purchase. (BI)

So now that we know what Social Discovery is, where does it derive its strength from? When it comes to recommendations, your friends know you best. Social networks are a great place to get targeted product recommendations from friends you share common interests with. As social networks grow and our online “friends” become less representative of our actual friends, these recommendations can lose relevancy, but users are able to follow the people and brands whose taste reflects theirs further honing the selections. Social curation sites are dependent on their users, so starting these types of communities can be challenging, but as evidenced by Quora and Pinterest, having the right early adopters leads to a stronger site and better experience overall.

Some of the most successful social discovery communities have become the biggest sites on the web, for example; Pinterest, Reddit, Tagged, Twitter, Tumblr, and Stumble Upon, to name a few. Each cater to a different type of content, and often different audiences, but all of these sites are effectively generating purchase intent whether they mean to or not. Aside from consumers sharing product recommendations with each other, brands are also using these types of sites to introduce their products to new audiences in a social and friendly way. However, the synergy of social discovery and buying behavior works best when the influencer is a person, not a brand.

How can Social Discovery sites use Affiliate Marketing?

So how can brands leverage social discovery best to influence purchase behavior? One suggestion would be through affiliate marketing. As evidenced by Pinterest’s experience with affiliate marketing, it is an effective and non-intrusive way to monetize that doesn’t affect user experience. Affiliate marketing could be utilized by the platform or the users, though both should be sure to exercise transparency and disclose when they use affiliate links. User-generated content sites would be best served by an automated affiliate marketing solution, while individual users hoping to use affiliate marketing on a social platform should consider joining a network, an automated link building tool, and/or URL shortener.

Skimlinks, an affiliate tool (formerly run on Pinterest), provides a low maintenance automated solution for social discovery platforms, affiliating product links for the platform. Skimlinks can be used by installing a line of Javascript code into the footer of your site, which means that it can only be instigated by site administrators. Skimlinks does have tools for social discovery users, as well. Say you wanted to share a link to a product from one of their 18,000 merchants- easily pull it from the Link API or URL Shortener.

One more interesting way that affiliate marketers are running with this mutually beneficial arrangement is with the advent of affiliate shop sites modeled after social discovery. Sites like Refer.Ly allow users to share their favorite items in an online collection that earns them affiliate commissions off of any purchase. Buyers go there to browse collections and suggestions and anyone from a casual consumer to a designer can open these “shops”.

One thing that is very important to note, however, is the importance of disclosure. When earning commissions by using affiliate links, it is essential that you share this information with your users, who will appreciate your transparency.

With the popularity of social discovery rising as the accessibility of affiliate marketing continues to climb, do you see these two businesses working closely together? Would you consider integrating affiliate marketing into your social discovery experience, and do you think you would prefer it to other forms of monetization like banner ads? Leave your comments below!

Images used under Creative Commons by andrewarchy and Forbes

Digital marketing is a great solution for retailers looking to target consumers throughout the holiday season. With multiple channels to choose from including email marketing, search marketing, affiliate marketing and mobile marketing, retailers should work with digital experts to determine the channels that will best meet their needs.
Based on consumer behavior in 2011, email marketing remains one of the most effective digital strategies for retailers. Chad White of Responsys stated that “To date in 2012, email marketing volume has already grown 20%, signifying that the channel will retain its importance, especially with the online holiday shopping season becoming longer and increasingly influenced by mobile devices.”

Retailers should look at acquisition email programs that provide reach, scalability and targeting since email is the key to reaching consumers at work, at home and on the go. By working with 100% opt-in lists that have been tested, retailers can benefit from high open and response rates and in return can benefit from an increase in sales.

Paid search marketing is one of the most sought after services this time of year and retailers should not wait to start implementing a search marketing strategy. In 2011, clients increased their paid search budgets by 31% to ensure their brand stood out in online searches. By determining key words or themes like Cyber Monday, Black Friday, holiday gifts, and free shipping, you can increase your visibility and online activity in the form of clicks and conversions. You can also take advantage of Google’s ad extensions by incorporating consumer reviews and social media into AdWords ads. This tactic allows you to stand out on the search engine results page with engaging products and advertiser information. By continuously optimizing for CPA and ROI by analyzing keywords, sales trends by daypart, landing page conversion funnels, negative keywords and more you can help stay one step ahead of your competitors.

Affiliate marketing is another key online marketing channel during the holiday season. According to shop.org affiliate marketing was the most successful online marketing channel used during the 2011 holiday season only behind paid search and email marketing. According to US retailers, affiliate marketing is the highest sales converter and therefore is a channel that should not be overlooked this holiday season. Networks like GAN and Linkshare provide access to top publishers with distribution in blogs, loyalty, rewards, shopping, and special promotions channels. By working with an agency that specializes in affiliate marketing, retailers can let the agency work as an extension of their marketing team to manage, optimize, monitor and scale their affiliate marketing program on these networks.

If 2011 was any indication, then in 2012 shoppers will be using their mobile devices, including smartphones and tablets, this holiday season to shop online, search for discounts and coupons, and scan QR codes for product information and locations. One third of consumers surveyed by Yahoo Advertising Solutions said they would like to receive holiday deals via their mobile device, making in-store purchases easier and faster. By strategizing creative ways to reach mobile users whether by encouraging an app download or utilizing display ads, retailers should look to implement a mobile campaign that focuses on design, content and interactivity.

With so many opportunities to expand your brand and acquire new customers this holiday season, retailers should look to implement a digital marketing strategy as it is sure to produce high traffic to your retail website and increase sales over the following months. By creating a digital marketing strategy now, you will be one step ahead of your competitors!

The Good: A Beneficial Partnership

Both merchants and affiliates can reap huge benefits from an affiliate marketing program. Amazon, one of the largest affiliate marketers in the world, has more than a million affiliates happily making money from their ads. Let’s take a look at the pros for both parties:

• Merchant Benefits: Free ad space, broader audience, greater brand exposure, and—did I mention?—free ad space. Merchants benefit from placing their ads on a wide variety of website types, reaching a much broader audience than they otherwise could—all for free (mostly—see below).
• Affiliate Benefits: Cash, cash, and cash. Affiliates can make money at home, at work, on the golf course, or on the beach. Just by devoting a small square of their website to advertising.

The Bad: A Risky Proposition

Just as both sides can benefit from affiliate marketing, both sides assume some risk as well. Don’t assume that affiliate marketing is all a bed of roses. Grit your teeth and take a look at the cons:

• Merchant Cons: False advertising and commission costs. An unscrupulous affiliate can use shady methods to promote your advertisement, causing significant damage to your brand’s reputation. Merchants can also take a hit in the commission department, especially if the advertisements require significant investment of time and resources to create and maintain.
• Affiliate Cons: No cash, low cash, stolen cash. Fraudulent merchants may end the affiliate program without warning and refuse to pay what they promised. They might also hook affiliates into the program by promising high commission rates and paying less than promised. Finally, affiliates face the risk of getting hacked and having their commissions stolen.

The Ugly: Schemers and Scammers

Because affiliate marketing offers potentially high dividends, it has become a target for nefarious internet bandits. Schemes and scams abound, but if you do your homework and know the risk, you can still benefit greatly from entering into an affiliate marketing agreement.

While affiliate marketing does carry risks, the potential for earning money and gaining exposure far outweigh the negatives. The key is to know as much as you can about the company you’re dealing with and talk to people who have dealt with them before in order to avoid the scammers.

Are you currently an affiliate marketer or a merchant who offers an affilate program?  If so, please share your tips and experiences with us below.