The growth of online performance marketing in the UK is encouraging but there’s no room for complacency
As expected, the IAB and PricewaterhouseCoopers’ second annual study into the UK’s Online Performance Marketing (OPM) industry indicated continued robust growth for the sector.
The channel generated more than £14 billion in sales for UK advertisers in 2013 from just £1 billion of advertising spend, an impressive return on investment by any standard. And sales grew 15% over the previous year, picking up from the 12% year-on-year growth indicated in the last study. Once again, the report has provided fantastic ammunition to point to the enormous value that OPM delivers.
So, is performance marketing still “the advertising industry’s best kept secret”, as argued by the IAB’s Director of Research & Strategy, Tim Elkington, when the annual study first launched last year? Or has the marketing world finally woken up to its merits? Sorry to be slightly downbeat on these genuinely encouraging figures, but I’m still not convinced the latter is the case.
Don’t get me wrong, the fact OPM is growing at close to twice the rate of the Chinese economy is impressive stuff. But, the sector is still a relatively small part of the digital economy. By rights, it should be much higher.
That’s not to say that there aren’t publishers and advertisers who are pushing boundaries and dedicating substantial resources to OPM. In my career so far I’ve worked with brands who are investing hugely in the performance space and are fully committed to the industry. Argos is using site and network data to learn more about its audience and integrate its performance strategy with other marketing avenues. It’s this holistic view of marketing which should be driving the industry forwards, integrating performance objectives with wider marketing aims.
The Post Office is another example of a business which develops partnerships with affiliates to further its own marketing, building more brand collateral to ensure performance based investments deliver not only ROI, but build brand experiences for consumers.
As well as advertisers there is a publisher perspective to look at as well. Super-affiliates such as Quidco and topcashback are delivering benefit and integration with all forms of marketing throughout the customer journey. The performance industry has evolved to be more than the last click and is adding value along the path to conversion. Card linking technology, social shopping and responsive design being delivered by affiliates means the affiliate model, which many advertisers are unsure of at times, can be developed and delivered to suit appropriate advertiser requirements.
However, it’s still the ROI-positive investment figures that are proving too good to miss for many marketers. But the OPM industry is going to be more beneficial and see the recognition it deserves if this is delivered and integrated with all marketing efforts. OPM generated around four billion clicks in 2013, the equivalent of ten million per day or 120 per second. About 5% of these resulted in a transaction so click to conversion rates are far higher than traditional digital display. Integrating this model into other marketing activity will only serve to deliver increased ROI across the board.
The industry is growing and innovation is rife, so why my disappointment? Well, when you consider the obvious ROI benefits of the channel, arguably OPM should already make up a considerable chunk of the online economy. Although the number of marketers that appreciate the value of affiliate and lead generation is growing, the sector is still overshadowed by display and search. It begs the question, are we really doing enough to encourage planners to integrate affiliate and lead generation marketing strategies with display and social media campaigns?
Interestingly, the sectors driving OPM remain lopsided. Retail, arguably one of the most prominent vertical sectors in the online marketing landscape, increased share by 1% to 21% overall, falling short of the finance sector which accounts for 35% of spend. Retailers that are not taking a strategic approach to the dramatic growth in ecommerce, product search and mcommerce are missing out on a share of the market that is already huge and growing fast.
The major problem remains: the performance marketing sector still hasn’t mastered the art of marketing itself. Going forward, it won’t be enough to rely on the IAB’s annual study alone to grab the attention of the marketers and media agencies who are lacking in understanding of the benefits of the industry. We need to shout louder and target the people that matter. That means engaging decision-makers in a language they understand (so business, not technology).
The OPM study is only in its second iteration and is growing in both recognition and size with increasing contributions from networks, publishers and advertisers. As awareness grows, so does the robustness of the study which can only serve to build more awareness and paint an ever more detailed representation of the industry.
The move from multi-channel marketing in silo channels towards a holistic brand view with the evolution of omni-channel should be front and centre of our communications in 2014. Maybe then OPM will grab a slice of the online pie it deserves.
Richard Lane is Head of Publisher Development at Commission Junction, the world’s largest affiliate marketing company