UK online performance sector generates £14bn in sales from £1bn ad spend in 2013, says IAB/PwC report

UK advertisers saw £14 billion in sales generated from affiliate marketing and lead generation in 2013, having dedicated £1 billion in ad spend to those channels, according to the latest study from the Internet Advertising Bureau (IAB)/Pricewaterhouse Cooper (PwC).

The report, which marks the second online performance marketing (OPM) study PwC has conducted on behalf of the IAB, revealed that advertiser spend on affiliate marketing and lead generation surged a like-for-like 15 per cent to £1 billion, delivering a return of £14 for every £1 spent in 2013.

Much of the £14 billion in sales came via price comparison, voucher, cashback, loyalty and product review websites, the most common forms of online performance marketing, with four in ten UK adults visiting a price comparison site every month, according to the report.

UK consumers made 150 million purchases via affiliate websites in 2013, totaling £13 billion with each adult buying an average of three products.

The amount of people submitting contact forms, classed as lead generations, led to £1 billion in sales, meaning online performance marketing now drives some ten per cent of all UK e-commerce retail sales.

Dan Bunyan, manager at PwC, said: “OPM generated around four billion clicks in 2013, the equivalent of 10 million per day or 120 per second, about 5 per cent of which resulted in a transaction. This high conversion rate and the high return on investment explains 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. 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.”

OPM is ushering in a new era of careful and informed online shopping, while tapping into people’s thirst for deals. according to the IAB’s director of research & strategy Tim Elkington.

“Characterised by deals, incentives and product reviews, OPM has ushered in a new era of savvy and careful consumerism. However, the industry is growing quickly because it’s an ‘everyone wins’ situation," he said.

The report also showed more than half (52 per cent) of British adults online have visited a price comparison site in the last six months.

Meanwhile nine UK adults received cash-in vouchers or redeem points, with half doing so every month last year, and one in eight have redeemed a voucher or deal using an app on their smartphone.

UKOM-approved comScore data revealed that in November last year, 18.7 million people, representing 39 per cent of the UK online population visited a price comparison site, while 16.6 million people visited a voucher site and 9.9 million visited a loyalty or cashback site.

Finance and retail advertisers accounted for over half of all online performance spend last year, with credit card advertisers’ use of comparison sites accounting for 35 per cent of OPM spend. Retail accounted for 21 per cent of spend, followed by travel & leisure at 17 per cent, telecoms & media at nine per cent and gaming at seven per cent.

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