UK businesses spent 1 billion on affiliate marketing and lead generation activities in 2013, 15% more (on a like-for-like basis) than in 2012, according to the second annual Online Performance Marketing study conducted by PwC for the Internet Advertising Bureau UK (IAB).
This generated 14 billion in sales via price comparison, voucher, cashback, loyalty and product review websites - the most common forms of Online Performance Marketing (OPM). This represents a return of 14 for every 1 invested by advertisers.
Across OPM sites - such as Comparethemarket, TripAdvisor, Vouchercodes, Nectar and Quidco - advertisers don't pay publishers to show the ad, they only pay if the ad causes someone to complete a defined action, such as making a purchase (affiliate marketing) or submitting contact details (lead generation).
In 2013, UK consumers made 150 million purchases via affiliate websites - three for every British adult - totalling 13 billion. 1 billion in sales was generated from Britons submitting contact forms. This means OPM now drives about 10% of all UK e-commerce retail sales.
OPM generated around four billion clicks in 2013, the equivalent of 10 million per day or 120 per second, about 5% of which resulted in a transaction. This high conversion rate and the high return on investment may explain the significant increase in advertisers (to 4,000) and publishers (to 12,000) now using OPM.
"It isn't just the big publishers, or 'super-affiliates', who generate revenue through OPM," said PwC manager, Dan Bunyan. "It's opened up a new and growing industry among the 'long tail' where Individuals and small publishers with specialist knowledge of a particular area can produce websites and then automatically generate advertising revenue."
Arguably, OPM taps into consumers' desire to find the best deals. Over half (52%) of British adults online report having visited a price comparison website in the past six months. Some 90% say they cash-in vouchers or redeem points (and half of these do so every month), while 12.5% has redeemed a voucher or deal using an app on their mobile phone.
Data from ComScore showed that, in November 2013 alone, 39% of the UK internet population (18.7 million people) visited a price comparison site, 35% (16.6 million) visited a voucher/coupon site, and 21% (9.9 million) visited a loyalty or cashback site.
The finance sector, driven by insurance and credit card advertiser's use of price comparison sites, is the biggest spender - accounting for 35% of OPM expenditure in 2013 - followed by retail (21%). The top five are completed by travel & leisure (17%), telecoms & media (9%) and gaming (7%).
"Consumers can save money in a variety of ways and get access to content online free of charge, and advertisers gain new customers; nearly 6 in 10 people become repeat customers of a company they only discovered through a deal or incentive site. At a return of 14:1, that's very cost-effective, and it also generates extra revenue for the publishers in the middle, large or small, via referral fees," explained Tim Elkington, director of research and strategy for the Internet Advertising Bureau (IAB).