At the beginning of the year, the Internet Advertising Bureau released their performance marketing study in conjunction with PwC. The results indicated that around 7-9% of digital marketing spend is now coming through the affiliate and lead generation industries. In addition, it estimated that publishers generated £8bn in sales revenue for advertisers running campaigns within performance marketing.
With such a significant amount of money being invested within the channel, it is only natural it will be challenged about the value that is delivered. Questions we commonly face as an affiliate network relate to how incremental the channel and the various publisher types that work within it are. Similarly we need to ensure that advertisers continue to be protected with stringent ongoing compliance controls and first rate checks and balances.
In addition, with consumer shopping habits and the devices they are using to access the internet evolving, there are additional challenges that face the performance marketing channel.
The incremental nature of the performance channel often comes into question. At its most basic level, incremental could simply be defined by sales that the advertiser would not have made had it not been for the involvement of a particular publisher.
However this is far too simplistic when we investigate incremental value. It could be argued that this is not enough and metrics such as average order values, repeat purchases and life time value can be seen as delivering incremental value.
Indeed, one of the publisher types that come under the greatest amount of scrutiny is cashback sites. By offering their members an incentive to transact it could be argued that these publishers are merely encouraging consumers that would have bought from the advertiser anyway to purchase through the cashback site in order to receive a discount. However, with the rise of the savvy online consumer who is price conscious and prone to switching, it could be argued that cashback partners can help with customer retention which in itself could be seen as delivering incremental value.
Data plays an important role when assessing the ‘incrementality’ of the channel. By understanding the touch points within a customer’s path to conversion, as well as the other metrics that indicate incremental value, advertisers can begin to understand the most valuable partners to work with.
The significant amount of money that is being spent within the channel has created a number of opportunities for both individuals and companies to prosper by tapping into new markets and attracting new consumers who may otherwise have been unreachable. Of course, whenever money is involved there will inevitably be a select few who aim to game the system. It is essential that affiliate networks are able to prevent this activity from happening. At Affiliate Window we have spent a considerable amount of time and money to ensure that we have an in depth knowledge of the methods that are used, how to detect them and how to stop them from returning.
For the channel to prosper even further, advertisers need to have full confidence that the sales they are generating through performance marketing are legitimate sales that have been delivered in an ethical manner.
There has been a considerable rise in mobile commerce over the past couple of years. With smartphone penetration and tablet adoption experiencing exceptional growth, the way consumers are accessing the internet has changed significantly.
While this represents a significant opportunity for advertisers that embrace m-commerce, it provides a challenge for the performance marketing industry. This challenge lies in ensuring these sales are tracked. While a number of advertisers have been quick to optimise mobile customer journeys, they have neglected to add affiliate tracking. Without this in place, sales through the performance channel will not be tracked and as a consequence, advertisers will miss out on a number of publisher opportunities.
While m-commerce is flourishing, there is still an element of education required to ensure that advertisers are making the most of this within the performance channel.
Cross device user journeys
The shift in the devices that are being used to access the internet have also had an impact upon user journeys. A consumer may research a particular product on their phone on the way to work, take another look on their desktop while on a lunch break before going home to transact on a tablet. This provides advertisers with a challenge in targeting individuals who have a cross device user journey and also impacts on the performance marketing channel. If a publisher site is clicked through on one device but another device is used to transact, the publisher will not be rewarded for generating the sale despite it being argued they held a high level of influence over the sale.
As a channel we need to understand the extent of the device crossover and look to ensure we can continue to reward publishers accordingly for their contribution to the sales journey. This continues to pose a significant challenge for all digital marketers, both in and outside of the channel.
So with greater focus and increasing budgets performance marketing proponents find themselves investing in new tools, technologies and developments to tackle the emerging challenges that will inevitably arise.