Affiliate Marketing Report 2008 - not a great year for Affiliate Marketing
The annual report of the state of Affiliate Marketing in the UK, as conducted by E-consultancy in association with R.O. Eye has just been released.
The report is based on a survey of 150 agencies and 259 merchants and as such is aimed fair and square at this audience. However as a UK affiliate it also makes very interesting reading. Here are some of the key highlights as I see them:
1. Since the 2007 merchants’ survey, the average proportion of online marketing budget designated to affiliate marketing dropped from 18% to 14%, while the proportion of sales ascribed by merchants to affiliate activity has decreased from 16% in 2007 to 12% in 2008.
Not a good start, not only has budgets dropped in this sector but sales have too. Or maybe sales have dropped because budgets have been cut?
2. The proportion of merchant respondents saying that affiliate marketing drives high volume has decreased from 26% last year to 15% in 2008.
Wow, that’s a huge drop. It could maybe be attributed to people’s perception of what “high volume” actually means, but still, not a positive outlook at all.
3. The proportion of respondents saying that PPC drives high volume has decreased from 52.5% in 2007 to 44% this year, although it is still the biggest driver of volume.
To be honest this is probably a good thing. I among many other affiliates I know have branched out into other areas and actively tried to lower our dependence on PPC. By investing a tiny fraction of what I used to pay for PPC into content creation and link building I’m seeing some fantastic results.
4. Communication between merchants and affiliates has not improved since 2007. The proportion of merchants reporting good direct communication with all affiliates has fallen from 13% to 12%. The percentage of those with good direct communication with top-tier affiliates has also dropped, from 29% to 25%.
Not good. But merchants/agencies, why don’t you do something to address this?
The report authors sum my feelings up about these numbers very well. Here’s a direct quote from the report:
During a worsening economic downturn, it is surprising that less money is being invested in affiliate marketing when it is purely performance-based and therefore inherently low risk for merchants. Part of this decrease may also reflect the fact that companies are getting better at tracking their sales and deduplicating across different channels.
Whatever the reasons, these figures represent something of a wake-up call for the industry and highlight the importance of well-managed affiliate marketing campaigns in ensuring that the channel is driving incremental sales.
The good news for affiliate marketing is that merchants continue to regard it as a cost-effective channel for driving customer acquisition. Some 46% of merchant respondents now say that the channel is very cost-effective compared to 44% last year.
Great to see that 2% more of merchants think that the affiliate channel is cost-effective, but this still doesn’t ring true based on the above survey results.
Some more key facts and figures:
5. A third of merchants (34%) say that five or fewer affiliates are driving 80% of their affiliate sales or sign-ups. A further 23% say that between six and 10 affiliates account for 80% of sales.
We can take this to mean that 10 or less affiliates account for most sales (80% or more) of the merchants polled. Very interesting, and something which I have suspected for a long time now.
6. According to merchants, the most valuable affiliates – as a group - are SEO / content publishers, deemed to be driving a major contribution by 42%. This compares to 36% for paid search affiliates, 26% for loyalty / cashback sites, 20% for price comparison sites / aggregators, 17% for email affiliates and 10% for affinity sites.
Very good to see that merchants recognise content affiliates as more valuable than PPC affiliates.
You can get a copy of the report in full here. It makes for fascinating reading, as you can see from some of the highlights above.
What are your thoughts on the state of the Affiliate Marketing sector in 2008? Is it really as bad as the report suggests? Or are we just suffering from the economic downturn, the same as everybody else? Please share your opinions in the comments below.
What I’m listening to right now: Mario – “Applebottom”
Tuesday, September 9th, 2008 at 11:44 pm and is filed under Affiliate Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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[...] the world of affiliate marketing, Kieron at here.org.uk posted about a report by E-Consultancy on the worrying downturn in the UK market. If you’re an [...]
Welcome to my blog. My name is Kieron Donoghue and I run UK Offer Media Ltd. I thought it would be fun to post a daily (well hopefully daily) blog, writing about my experiences in Internet Marketing and more specifically Affiliate Marketing. I'll include some personal stuff too, probably about my other passions, music and cars. Please feel free to post your comments and thoughts too.
Hi Kieron,
Nice to read your article here. My name is Wei and I am working as an affiliate marketing specialist in a Chinese online B2B trading company. I studied in the UK before. I think we can share some ideas maybe. My blog on Blogger has just started. Looking for your visit soon.
This makes for great reading. I read it last night and it kept me up until 3am thinking! yikes! It is great to see research like this, it really helps both merchants and affiliates and agencies alike to understand the moving market and create a more economical working relationship!
Hannah
Thanks for posting this, I wasn’t aware of the report. Are we to conclude that as online retail is continuing to increase at 30% pa that merchants are getting better at driving their own traffic and improving their conversion rates if the affiliate industry is as poor as they are suggesting in this report? Me thinks not.
A very interesting read. Suprised that the budget allocated to affiliate marketing has dropped overall given the current economic situation, it really is very cost effective for merchants.
Interesting also that only 26% of merchants regard loyalty/cashback sites as the most valuable
Useful post thanks Kieron.
Point 5 flipped is useful too - if a very few affiliates are making almost all of the sales, then a very few affiliates are making almost all of the commission too. (In fact even more disproportionately so as they will have the leverage to negotiate increased commissions over the masses).
So while the average earnings/affiliate may look attractive from the outside, I’ll bet the vast majority earn very little.
Hey it’s tough at the top but it’s tougher at the bottom!
Fraser I’m surprised it’s as high as 26%.
- m
ps what’s an ‘affinity’site?
I think there are some questions which unfortunately the survey does not answer though:
The proportion of the cake spent on affiliate marketing has gone down but is the cake smaller or bigger? - i.e. a smaller slice of a bigger cake could still be a bigger spend overall in fiscal terms
Also I think we would all recognise that in the last 12 months a) merchants have got ‘better’ at attributing sales to different channels, so is it just that some sales that last year were attributed to affiliate marketing are now being ‘correctly’ attributed to other channels.
b) in some sectors, particularly financial services there has been a readjustment of commissions to lower, more commercially sustainable levels - and long term this is actually probably a good thing for the industry as a whole.
And I agree with you Kieron that many of us have long suspected that for most programmes the overwhelming majority of sales come via a handful of affiliates.
Thanks for this report
I have noticed a decrease in my adwords ads clicks as well and was a little worried that something was wrong with my account
With regard to item 5 above, i don’t think that it is a new occurence that a small handfull of afiliates are the ones that make the majority of the sales. I think the concept of the superaffiliate has been around for a while.
What would be interesting to know is what proportion of the elite few are affiliate marketing newbies
Logically it doesn’t seem sensible that affiliate marketing budgets have dropped given what we know about the measurability of campaigns.
However, I think this may be more a reflection of who holds the purse strings and the level of understanding that person has of the affiliate channel. Plus how much ‘lobbying’ is done at the budget setting level and by who. Marketing directors have lunches with agency heads. Do they discuss TV brand advert campaigns or the ins and outs of affiliate websites ?