Affiliate marketing techniques have witnessed dramatic growth recently, with 78% of brands surveyed reporting that they will increase their investment in affiliate marketing over the next 2 years, according to research conducted by E-Consultancy, and sponsored by online affiliate network Buy.at.
In fact, the survey found that 78% of brands had already increased their spending on affiliate marketing strategies since 2005, and the same number also plan to increase their spending over the next two years.
Significant growth
Nearly one-quarter of those that are spending more reported having doubled their spending on the channel in the past two years. Two-thirds of respondents said that the number of sales generated by affiliate marketing has increased over the past two years, and 40% said they have more people employed to manage affiliate marketing than they did two years ago. Half of those expect this number to continue to grow over the next two years.
Linus Gregoriadis, head of research for E-Consultancy, said: "The findings reveal an industry that is still expanding rapidly, with further growth expected as merchants seek to get maximum returns from this channel."
According to Kevin Cornils, CEO for Buy.at, this trend is perhaps due to broadcast advertising starting to decline: "Performance marketing has emerged as a silver bullet for the marketing industry. Search marketing has reached its peak, but affiliate marketing is still in a high growth phase. This represents a huge opportunity for both affiliates and marketers that understand the channel and appreciate the benefits of true pay-for-performance advertising."
Barriers to success
The survey highlighted a consistent message that brand owners believe they could still get more from their affiliate marketing activities, with four out of five merchants saying "I wish I could get more out of this channel" and 31% of merchants saying they wish they could get more out of the combination of affiliate segments they use.
The biggest barrier to success, however, was "a lack of internal resources" with one-third of merchants citing this as an issue. Problems with tracking were also seen as a barrier to success by half of all respondents. Interestingly, one-third of merchants surveyed agreed that spending in the channel is held back because they simply don't know how much incremental volume it will deliver.
Respondents also saw "difficulty attracting affiliates" and "websites that don't convert traffic very well" as being minor barriers, and only 13% of merchants feel they have "good communication" with all their affiliates. However, an affiliate network's relationship with its members was deemed the most important consideration when choosing a network, with almost half of the respondents rating it as "extremely important".
Potential for new business
Cornils concluded that there remains huge potential for growth in affiliate marketing, and most of the barriers are easy to overcome by understanding what makes a programme attractive to affiliates, by improving communication with them, and by using technology to provide better service and sales analysis. Cornils, said: "There is a need for more education in this market, but those that understand the channel and invest in it are doing very well. As a result, this is a buoyant time for the affiliate marketing industry."
Evidence of increasing professionalism within the channel comes from the 38% of respondents agreeing that "the affiliate marketing channel is becoming more mainstream and professional", although 50% agreed that "it's changing but there is still some way to go".
Vertical growth
In the financial services sector, 68% of marketers said they had invested more in affiliate marketing, with half having more than doubled their spend in the past two years. Again, 72% of them plan to increase this spending over the next two years.
In the gaming space, 75% have increased their spending since 2005, along with 62% of retailers, 64% of telecoms companies, and 71% of travel companies. One in five telecoms merchants had at least doubled their spending on affiliate marketing since 2005, as had more than one-third of travel companies. The highest increases came from charities, utilities, and gaming merchants, all of which had increased their spend by at least 100% over the past two years.
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