The UK’s online performance marketing industry generates between 5% and 6% of all UK ecommerce sales, the first study of the industry has found.
The study, carried out by PwC for the Interactive Advertising Bureau UK (IAB), found that UK advertisers spent £814m on online performance marketing (OPM) in 2012 – and generated sales worth £9bn as a result.
The study looked at both affiliate marketing, where advertisers pay once a visitor clicks through and makes a purchase from an affiliate link or advertisement, and lead generation, where visitors submit contact details because of an advertisement. It found that in 2012 UK consumers carried out around 100m direct transactions worth £8bn as a result of affiliate marketing. Consumers submitted 70m enquiries resulting in £1bn in sales as a result of lead generation.
Popular examples of OPM include price comparison sites, such as USWitch or CompareThe Market, vouchers sites, such as VoucherCodes.co.uk, loyalty or reward sites, such as Nectar and cashback sites such as Quidco.
Tim Elkington, director of research and strategy at the IAB UK, said the industry’s contribution was not widely recognised. “Despite around 3,500 advertisers and 10,000 publishers engaging in online performance marketing it still has the air of a ‘best-kept secret’,” he said. “This is particularly surprising, considering each year it drives more than two online purchases for every UK adult and causes the equivalent of every UK person to fill out a form showing interest in a product – generating £11 of revenue for every £1 spent.”
Some 20% of OPM advertising spend comes from retailers, primarily those advertising clothing, accessories, electricals and computing. That makes retail the second biggest spender on OPM, second only to finance, which sees 45% of spend. The two sectors are followed by telecoms and media (10%), travel and leisure (9%) and gaming (6%).
Between 2008 and 2012, the study estimates, OPM advertising expenditure grew by 57%. Suppliers of OPM services and technology forecast revenue growth of 25% in 2013, while advertisers expect to spend 50-10% more on OPM in 2013.
Anna Bartz, senior manager at PwC, said: “Economically challenging times have seen marketing budgets squeezed and greater evidence required of return on investment. As a result, we expect that the attractiveness of paying for advertising based on an extremely measurable and specific consumer action will see more advertisers using online performance marketing as a key channel for driving sales.”
