The Ever-Changing Face of Performance Marketing

This April, we celebrated the 10th Performance Marketing Awards in London. Ten years ago, there were 14 categories. This year, they increased to almost 30, with at least double the amount of guests attending the event.

Whatever you choose to call it – affiliate marketing or performance marketing – this is an industry that is diverse and ever-changing!

Digital now accounts for 7% of UK GDP, with a record £8.6bn spent on UK online advertising in 2015 (up 16.4% from 2014) – and this growth isn’t predicted to stop any time soon.

How has the industry changed?

Performance marketing (let’s call it ‘affiliate’ for short) predates the internet as a concept of paying commission for referred business. Online, it’s been around since the launch of the PC Flowers & Gifts programme on the Prodigy Network in 1989. The date that affiliate officially became a recognised channel is debatable, but based on estimates (and because it adds some gaiety!), it would appear that 2016 is our 21st birthday.

We’ve had our fair share of pre-teen growth spurts and hormonal mood swings, and we’ve felt the angst of our teenage years – which I’m sure we all remember well. For any industry, however, 21 years is still very young.

The main change in these 21 years has been a shift in the publisher mix. We saw paid search dominate the early years before clients took it in-house, and more recently, cashback and reward sites have taken precedent.

In more recent times, we’ve also increasingly witnessed discussions concerning the value of the industry and how we feed the upper-funnel space, leading to a growth in other publisher types such as content, e-mail and adtech businesses.

The changes in our industry are driven by none other than the advertisers. In a world where “consumer is king”, we are all led by those consumers. In the affiliate world, our consumer is the advertiser themselves. Sorry to all the doubters out there, but advertisers are our king and the consumer is their king! We’ve spent 21 years listening to advertisers, because it is they who have paid attention to what their consumers are doing and where they are shopping. It’s this insight that has fuelled our growth, and we rely on our relationship with those advertisers.

We’ve become an industry of great listeners!

Where are we now?

A very wise man once told me that advertisers should use the affiliate channel as a sandbox. If we look at its history, paid search was initially trialled through affiliate. It’s now managed in-house, and is recognised as the most essential marketing channel.

Affiliate covers every aspect of marketing, and it’s easy to forget that affiliates have become masters of them all – because our business models depend on them! So here’s why the sandbox idea isn’t smart: as an industry, affiliates keep up with the latest technology – every development for every channel – and when you start taking everything in-house after it’s been tested, you sacrifice the economies of scale that our work with multiple advertisers delivers. This is a relationship that works best when both sides are invested.

What’s next?

Ah yes, this question!

Programmatic certainly appears to be the next big thing within performance marketing. In my 15 years of industry experience, I’ve seen its development first-hand. Programmatic is in a very similar place now to where affiliate was 15 years ago. The latest results from the IAB support the programmatic hype – 60% of the UK’s display advertising was traded programmatically in 2015, and this is set to rise to 90% by 2019.

There is a lot of pressure coming from advertisers for suppliers to be more transparent when delivering programmatic, and I do believe this is the next chapter in affiliate. Clearer results will be demanded. I expect display and affiliate to become inexorably aligned, as more display businesses are driven to work on a performance-based model.

If you want to find out why all this matters for your business, I’d love to hear from you.
David Ayre, Performance Director, MDNA
M: +44 (0)74 2712 6395