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.

One fresh idea that is often overlooked in campaign development is the critical role that your company’s domain name plays in successful search advertising. The right domain—or portfolio of domains—can help spur your company’s rise to the top without the perpetual cost of search advertising.

One company, Bobbleheads.com, is a perfect example. Although bobblehead dolls are a niche product, the popularity of these collectibles has created a fiercely competitive market. Entrepreneur Warren Royal was looking to enter that market when he purchased the domain names bobbleheads.com and bobblehead.com in 2008 for $29,112 and $36,000 respectively. Although such an upfront cost might sound steep for a startup, natural website traffic alone brought a monthly average of 13,500 visitors to bobbleheads.com, and the website was the second result in a Google search for “bobbleheads” – all without any search advertising. Since then, Royal’s business has thrived. He is seeing over 1,000 visitors daily and has turned down offers to buy his business for several hundred thousand dollars.

Clearly not every business can afford a “category killer” domain such as bobbleheads.com, but there are a number of ways to boost your company’s online presence with a sound domain strategy. If you haven’t already, ask yourself which keywords people would search for when looking for your business and consider incorporating those words into your company’s domain portfolio. Adding descriptive or geographic (.de, .co.uk, .eu, .fr, .es, etc.) names to your portfolio can grow online traffic and help consumers find your company online. Elevating your business above other online noise is the end goal of any search advertising investment, but it is important to entertain other means to the same end. In a neck-and-neck race, minor advantages make all the difference.

It is a critical time in our industry and responsible companies must take action.  First and foremost, companies must examine the resources they have available to communicate and educate. If you have research at your disposal, use it in your message. If you have graphics and creative, leverage it to create something both compelling and easy to understand. I'll say it again because it bears repeating. Make it easy to understand. Consider your audience and don't use jargon or reference stats that are not mainstream measurements.  If it looks like Sanskrit and needs translation, your efforts will be wasted. Use basic terms and references that are universal and relatable.

If you don't know where to begin or what outlets and channels are effective, partner up with someone who does. The NAI and IAB are great organizations to get involved with, whether it be with their initiatives or finding resources and likeminded companies to mount your own initiative. If you strike out on your own, I highly recommend aligning your messaging with the standards they have set. 

We at AudienceScience have launched an effort to speak to consumers about targeting in language and channels that are clear and comprehensible. Our consumer education video, http://www.audiencescience.com/consumer/education.asp , takes audience targeting down to the basic facts, with entertaining and informative graphics and animation, providing consumers a step-by-step look at how the targeting process works, and also the precautions that are in place to protect their privacy. Feel free to pass it on; we're happy to help education efforts across the board.

Ultimately, do what works best for your company and speaks to its strengths and expertise. Just do something. It's one thing to advocate self-regulation, its another to prove our ability to do so by taking action. Even if the minimum you can do is just getting involved with industry organizations like the NAI and IAB to help with their consumer outreach, the action you take will only benefit the industry as a whole and your company in the end.

With an increased focus over the past few months, we as an industry have been concerned with getting the most with limited budgets and maximizing what we can offer our customers and partners for their the same or lower dollars than available in the past. Basically, strategizing ways to weather the current economic storm. Interestingly, in a new take on the recession, the IAB commissioned a groundbreaking study to examine how our industry is actually benefitting the U.S. economy reflecting how the ad-supported Internet has a positive impact regarding revenues and job creation. According to the report, interactive advertising is responsible for $300 billion of economic activity in the U.S. and a total of 3.1 million Americans are employed by our interactive ecosystem.

The study examines this impact with a broad scope, addressing improvements in productivity, research and social infrastructure, as well as business innovation and even reduction in environmental waste. Taking it one step forward, from an interactive marketing standpoint, it seems that targeting can be seen as playing a significant role in this positive impact on the economy.

How does targeting benefit our economy? Given that there is the necessity for ad supported content, it follows that consumers benefit from that advertising being relevant.  Relevancy drives engagement and results.  Results drive value for advertisers – they can realize their ROI at higher rates with targeted advertising.  Higher rates from advertisers means higher payouts to content publishers.  Content publishers get the monetary support they need to continue providing free content while improving the visitors overall experience on their site.  Better experience, return visits, etc.

Better results for advertisers means more demand in the market. More demand drives economic value.  And that benefit doesn't just apply to ad revenues; it also extends to ecommerce, branding and even offline sales. Targeted advertising has been shown to cut advertising costs and drive sales, which applies to brands selling products and services online as well as providing branding benefits to offline sellers. The report notes that "Advertisers and their agencies have recently found that the more precisely they can target messages to potential buyers likely to be interested in those messages, the more productive Internet advertising can be."

The rest is snowball effect; the better all these companies do, the more people they employ, the more those employees can afford to make purchases, and the better the overall health of the economy will be. That's simplifying what is an unbelievably complex system, but it does illustrate the fact that targeting has been undeniably beneficial to the growth of online advertising from a revenue standpoint, and by extension, that industry's contribution to the U.S. economy as a whole.

The IAB report is not a short or easy read, but it is a fascinating one. To view it, visit: http://www.iab.net/economicvalue

There has been no change in management and we will be providing the same industry leading service upon which we have built our reputation. The name is new, and we will continue to offer our leading audience technology platform and targeting marketplace, recording billions of behavioral events daily and reaching over 385 million unique Internet users. As we look forward to a new era for the company, our focus remains on empowering Web publishers, marketers, networks, exchanges, and agencies to create intelligent audience segments to connect people with relevant advertising.

We made the formal announcement at the IAB Annual Meeting last Monday, and had a great time at the event. I was able to check out the New York Times new interactive capabilities and hear Omar Hamoui and Eric Bader talk mobile. Brands Battle Back and Great Debate panel were lively and informative. There was a lot of conversation about the need for BOTH art and science to get the internet to truly become the marketing vehicle it has the potential to be.  I must have heard the word “audience” 200 times during the two days, and each time I felt as though we were getting brand recognition around our new name!

From there, I headed back to NYC for OMMA Behavioral to deliver my keynote “2020 Vision, the Future of Behavioral Targeting.” I believe that in 2020, BT spend will exceed search spend because search is only one of many indicators of intent, whereas BT combines multiple indicators to find the most qualified audiences. On a broader level, Internet spend will exceed TV spend. This is already imminent with the proliferation of DVR and Internet TV, It makes sense--consumers are spending their time online, advertising dollars follow consumers. The drive for efficiency and performance will only accelerate this trend in the coming decade. These ideas were supported by what I heard on the show floor that ROS display ad budgets are shrinking but BT budgets are increasing. More and more agencies & advertisers are relying on BT and retargeting as key performers.

The recent FTC report on BT was brought up during every panel, which illustrates the desperate need for standards in the industry. Self-regulation requires its code of conduct, which the NAI has been working to solidify, but the questions still go beyond those recommendations. Data ownership, data retention, PII and Opt-Out standards are all issues that need a great deal of work and thought on the part of the industry. The Behavioral Targeting Standards Consortium (BTSC) is designed to address these issues, to get involved, visit www.btstandards.org. I also recommend that everyone get involved with the NAI and IAB respectively.  We are all in this together so the more we develop standards and self regulation, the stronger our industry will be. 

I sat with a gentleman at lunch who has started a company that claims to have 100MM unique records, all of which have a) offline personal information, b) the email address for that person, and c) that same person's IP address so they can be targeted by display ads.  Of course, "it's 100% opt-in."  So are the EULAs we all accept in MS Office, but at some point the notion that someone has "opted in" won't be enough.

Then, that evening I had the pleasure of attending an outstanding dinner sponsored by JEGI and Booz&Co.  The attendees were many of the "who's who" of online and both of these companies put together an amazing evening. Among those attendees was IAB CEO Randall Rothenberg.  A key discussion he brought up during the evening was that government regulation over our activity IS in fact coming if we don't police ourselves right now.  In fact, he's written about it extensively on his blog. This is a serious issue and while none of us wants the consequences, none of us is doing much about it either.

The two events of the day bring us to the famous "just because you can doesn't mean you should."  In this case I'd propose it's "just because you can means you shouldn't."  Our desire to develop the perfect form of BT has clearly, in some cases, gone overboard.  But it's not enough to just be in the camp of folks who is doing it right.  It means we need to strongly dissuade those who are doing it wrong from ruining it for the rest of us.  This is best accomplished not by us as vendors, shaming those who cross the line, but by advertisers, who can resist the tempation to buy from these folks, increasing the visibility and lending credibility to companies who harm most while helping a few.

Our industry has accomplished so much that is wonderful in recent years.  Do not let "Do Not Call" become "Do Not Target" by using techniques you know would make the user uncomfortable because of the depth of information we have about them.

He cites that most marketers don't understand or can't keep up with the constant change and increasing complex equations being used.  Who's fault is that?  Not the people making advancements to our industry!  He then compares this to modern medicine, to which I wonder if the chairman of the AMA would tell those on the brink of devising a cure for a terrible disease, "STOP - your work is too complex.  Others won't understand it!"

There's obviously a huge difference between audience measurement and modern medicine.  The most obvious as it relates to his AdAge-proclaimed "rant" is that with medicine, the average patient doesn't care to understand why the cure works, they just want it to work.  In marketing, everyone wants to know exactly why the new algorithm works better than an old one.  Fair enough, but put that on the folks who devise the algorithms to explain their work more clearly and effectively, not on the industry to stop improving the quality of our measurement because "it's too hard."

The thing is, to those outside our industry this BT thing is quite complicated.  Differences between cookies, anonymous ISP data, and intercepting ISP data are gigantic to us but to those outside the industry (read: Congress) it all sounds the same.  So when called upon to testify about the not-so-legal kind of BT, not only did AT&T, VZ and TWC not show up but they went ahead and sold the rest of us out by promising that the future of observed user logs will be completely opt-in.  Are you kidding me with this?

I think I speak for many in the industry when I say I'm disappointed in this showing.  Certainly an attempt at education was warranted.  Anonymous ISP data use is far less harmless than PII exposure and availability used in other forms of direct response and these folks volunteered to lose the war before even assessing their opponents. Now would be a good time for the IAB to step up, call a time out, and help the ISPs politic backward and out of this one.

The numbers look great-- a 15.2% increase over the first half of 2007.

Unfortunately, these numbers are a look back into the now-historical past given the current 700 billion dollar bailout and collapse of banking institution after banking institution. 

If nothing else, the disappearance of brands like Wachovia, Washington Mutual and Lehman Brothers means that there are fewer national financial advertisers now than there were (see this New York Times article about WPP's winning the Wachovia account and now kept wondering what it all means) a few weeks ago. Moreover, so much of online display advertising's growth has been on the back of now-challenged mortage refinance and other financial direct marketing, it means that the second half of 2008 won't look as rosy as the first.

As our industry's trade association, the IAB -- and its research partner PriceWaterhouseCoopers -- should have framed this report's good news as unlike to be followed by another two quarters of double-digit growth.

What the report did say about financial was slight but telling: "Financial Services advertisers represented the second-largest category of spending at 13 percent of 2008 first six-month revenues or $1.5 billion, down from the 15 percent ($1.5 billion) reported for the same period in 2007" (page 12).

Now, don't get me wrong: I think that as the economy tightens and marketers are pressed to reduce spend many will turn to more-accountable interactive advertising. (I wouldn't want to be a broadcast television or newspaper media buyer in Q4 of this year.)

It's going to be an interesting few months until the IAB's next report.