Robert Glasgow- Understanding Affiliate markets in Europe
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Europe 2010
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Robert Glasgow- Understanding Affiliate markets in Europe
- 1. Understanding the European Affiliate Landscape Robert Glasgow, Managing Director A4uexpo Europe, Munich 18th May 2010
- 3. Head of Webgains Profit Centre
- 5. Merged with ad pepper media in May 2006
- 6. Launched Germany and France in 2006
- 7. Launched BeNeLux, Denmark, Sweden in 2007
- 9. Current and Future Trends
- 11. Emergence of first ‘long tail’ websites, all with potential inventory
- 12. Affiliate Networks exploded 2001-04
- 13. Network consolidation 2005 - current
- 14. Lead Generation business started to emerge
- 16. Second wave of long tail (Blogs)
- 17. Global advertisers require global solutions
- 18. Economic difficulties drive move to transparency and value
- 20. Appearance of long tail websites
- 21. Move by advertisers to lower-risk marketing model
- 22. Full transparency of transactions, activity and rewards, enabled by technology
- 24. Consumers will seize opportunities to save money when transacting, especially in the recession
- 25. Cross-border retail will grow
- 26. Internet use fosters cross-border transactions
- 27. Growth in credit formats, Euro currency, e-wallets
- 29. Consumers turning to voucher-code and cash-back websites
- 30. Issues surrounding “last-click-wins” becoming more apparent
- 31. Affiliates calling for a greater emphasis on transparency and communication across the sector
- 32. Affiliates developing innovative media methods
- 34. More agencies offering affiliate services to clients
- 35. Agencies setting up their own networks
- 39. Few affiliates operate across multiple markets
- 40. Different types of affiliates strongest in different markets
- 41. Low barriers to selling internationally allow merchants to expand across borders
- 43. Population and GDP
- 44. Number of on-line merchants
- 45. Value and quantity of on-line retail transactions
- 47. Numbers and types of affiliates
- 48. Speed of adoption of new formats
- 49. cashback
- 51. mobile
- 52. widgets
- 53. Adoption of affiliate tools
- 54. Product Data feeds
- 55. forums and self-help communities
- 58. Strong affiliate movement with multiple forums
- 59. Early and strong adopter of discount voucher codes, with dominance by a handful of early-moving affiliates
- 60. Cash-back sites important, and not shy of demanding fees from networks (either kick-backs, or click commissions). Big affiliates also want lifetime value payments or ongoing rev-share
- 61. Movement towards post impression tracking
- 62. Many networks depend on ‘pop-under’ networks egaegency
- 63. PPC drives a high percentage of sales
- 64. email database exploitation still very strong
- 66. Unregulated business practices in most areas – affiliate is no exception
- 67. Lots of spyware, plug-ins, spam, poaching etc
- 68. Lots of cookie stuffing and post-impression cookie dropping
- 69. Huge amount of media broking – campaigns churn through many platforms
- 70. The biggest opportunity, the most competition
- 71. Changes on Google adwords opens up bidding to all-comers
- 72. ‘Patriotic’ consumers and affiliates promote own-country products
- 73. Threat of Nexus Taxes could seriously affect affiliate industry
- 74. Performance Marketing Association has been set up but no major networks have joined
- 76. Agencies dominate industry
- 77. Very tight consumer protection and data protection legislation
- 78. Demand from agencies and affiliates for post impression tracking
- 79. Highest proportion of population in EU are online buyers (73%)
- 80. Relatively slow adoption of ecommerce and affiliate marketing
- 81. conservative population with security concerns
- 82. reluctance to adopt new payment methods
- 84. Strong Forum usage prolongs ‘collegiate’ approach among many affiliates
- 85. Consumer debt hang-over has seriously damaged online sales and hence affiliate commissions
- 86. Consumers have adopted discount voucher codes and cash-back sites
- 87. Recent Google adword changes have opened up bidding
- 88. 32 Networks listed on the forum, but 6 are really big players
- 89. Strong move to Internationalise platforms
- 91. 64% of retailers have sold cross-border in the past year – highest in EU
- 92. Over 10 domestic networks plus 3 multi- national operate already
- 93. Low tax and offshore jurisdictions make attractive business start up environment
- 95. Affiliates prove to be slow movers to professional model
- 96. Slow adoption of normal affiliate tools – product data feeds, forums, RSS feeds
- 97. Recent changes to regulations have allowed introduction of discount voucher sites
- 98. Strong focus by Government on consumer protection forces this market to look cross-border for opportunities
- 99. Very high 3G usage brings mobile media to the fore
- 101. 3 years ago = 3 networks
- 102. now = 25 networks
- 103. Popularity of hybrid campaigns eg. cpa/cpc, or cpa/cpm
- 104. Incentive sites reward with products, not cash
- 105. Very few voucher sites
- 106. No cash-back sites
- 107. Affiliate sites, in general, outperform merchant sites on natural listings
- 109. Thank you for your interest! Webgains UK Dragon Court 27 - 29 Macklin Street London WC2B 5LX Tel: +44 (0)207 269 1248Fax: +44 (0)207 269 1249
Notas del editor
- Hello everybodyIntroduction about myself: My role at Webgains, My Role at Commission Junction, My Role at Haymarket including RevolutionAbout Webgains, the history and growthHow Webgains has entered new markets and what we have learnt about the differences launching network in new countries.
- So what are we going to cover.We only have 30 minutes so we cannot look at every country in depth as we would be hear for days! So I am going to cover some basics and give you an overview of what to expect from some key territories in Europe and the USA.I will start with a brief history of Affiliate Marketing and the look at trends in the current market and what we foresee in the future.Then we will look at the individual markets with an overview of each country.
- Affiliate marketing or CPA advertising really started in earnest in the UK in 1999. CPA or cost per acquisition simply means that an advertisers only pays for his advert when a consumer has made a purchase or made an action (such as a given some information in the case of lead generation). In this respect it’s a no risk form of advertising.I had my first experience of affiliate marketing back in 1997 when I joined the Amazon affiliate scheme. At the time I didn’t know that I was an affiliate marketer I just saw an easy way to make money on the back of a website about Classic British Motorcycles that I had made for my dad. He would recommend books to his visitors who were interested in reading more about old motorbikes. In return Amazon would pay us 5% of the purchase price for every book that was sold through our little website. Needless to say we didn’t make thousands of pounds or even hundreds but I knew that we were onto something and every time Amazon paid us a commission I felt we had made money for old rope or more accurately a hobby was suddenly making us money. And as I will point out later content sites such as the one I made for my Dad are still KING!Post 1999 in the UK with the emergence of “Long Tail” website – content sites with niche specific URLS and high converting search terms, affiliate marketing really took of with an explosion of networks entering the market from 2001 – 2004. At the time I was working at the UK online marketing trade magazine and we were running weekly features on affiliate marketing and our pages were full of adverts for new companies entering the market, all offering CPA tracking and catalogues of new brands that affiliates could partner with. From 2005 onwards, the networks consolidated and we have a situations now where there are 6 big players in the market which I would certainly count Webgains as one!Broadband penetration is built rapidly in the UK and this obviously spurred the growth of online buying and from 2005 onwards large brand names recognized that affiliate marketing was a key part of their marketing and sales budgets.
- Most recently we can say that affiliate marketing has shed the image of a place to dump unwanted advertising inventory. Affiliate marketing is now a sophisticated marketing channel driving millions of pounds worth of sales. Its advertiser led and risk free. Affiliates invested more and more into their own websites, and the professionalization of affiliates is now apparent. Going back to my own experience as an Amazon affiliate driving sales from a “hobby” website, there are now affiliates who are individually driving huge numbers of sales and earning thousands of pounds a day in commissions. Most recently an affiliate grew to the point where they bought the network through which they were driving the majority of there sales. Some affiliates are now large companies in their own right with lots of human resource to optimize their own channel and increase conversion and traffic. Along with these “Super-affiliates” we have seen a resurgence of the long tail sites – in the form of blogs, where niche and content really comes into its own. Merchants love websites where the content is product specific and research has shown that it’s these sites that have the highest conversion and most loyal consumers.This most recent growth and awareness that Affiliate marketing is an important element of a brands marketing budget has lead to Global advertisers requiring Global solutions and by that I mean a merchant often needs a network that has reach into foreign markets and has the tools and resource to deal with all that entails, for example a invoicing in multiple currencies and paying an affiliate in their preferred currency is just one of these issues. This had led to Network such as Webgains and others opening platforms across globally and that’s where we currently stand. Recent economic difficulties have led to merchants wanting much more sophistication from their network and their programs. In the most basic terms there has been pressure on the network override (how network make revenue) and increase in their wants and needs in terms of the service and technology that a network can offer. Making sure every penny spent of on any sort of marketing is well spent and accounted for. On top of this of course, the consumer is now looking for the best possible price when buying and this has lead to an increase and explosion of sales driven through cash-back and voucher or incentive sites.
- So here we have some self evident truths born from the history we have just covered. Namely:Growth has been extraordinary and will continue, driven by:Appearance of long tail websitesMove by advertisers to lower-risk marketing modelFull transparency of transactions, activity and rewards, enabled by technologyBroadband penetrationConsumers will seize opportunities to save money when transacting, especially in the recession Cross-border retail will grow Internet use fosters cross-border transactions Growth in credit formats, Euro currency, e-wallets Pressure on banks to lower fees for cross-border payments across EU
- OK now we now, how the affiliate market has grown and where we stand lets look at some current trends in more detail and the individual markets in turn.I’ve already covered the first two points here in some detail but I will say we don’t see these points reaching a plateau any time soon and certainly in Europe in countries such as Denmark and Sweden Cash-back and voucher sites are only really just starting as they have only been recently legalized. A very apparent issue in the market is the “last click wins” model which all affiliate marketing currently operates under. To put this into context the last affiliate sends a consumer to a merchant is the one that gets paid. However, if you look at customer journey for a purchase of a new laptop, for example, there are lots of places that could have influenced their purchase. The average consumer may have Googled the term Sony Vaio, then read reviews on numerous websites, then visited a price comparison site to find the lowest price, then finally visted a cash-back site to make their purchase. In the current model, only the cash back site is paid a commission on the sale even though the sale was driven by at least 4 different affiliates. A good analogy would be having a fantastic football team that works together but only the striker being paid a salary. Currently there is no perfect solution on the horizon for this issue but with the pace and speed this industry grows we can predict that networks will be looking at tracking solutions that can offer every influencer in a customer journey a slice of the commission pie. This issue follows on to affiliates themselves wanting more transparency and communication with the merchants they promote. If sales are being rejected they need to know why, loyalty for promoting a merchant is not something that last long if sales are constantly being rejected. Affiliates are also creating their own pieces of technology to increase conversion rates and sales. Advertising agencies are more and more offering affiliate services to their clients and this has been in the form of full affiliate account management (taking the onus of the network) and in some instances actually buying a “white-label” CPA tracking solution and setting up their own network.Lastly, fraud continues to be a problem, and this is mostly in the form of cloned credit cards being used for purchases, however, Networks are developing technology to counter such practices and cancel fraudulent commission payments.
- So before we look at each individual countries market in detail we can have a quick overview of the European market in general.One word really sums it up and that’s Fragmented. By this I mean that there a many local networks, we count 10 local networks in the Benelux region alone. I mentioned that there are 6 large networks in the UK but there are countless smaller players. Of the 6 large networks only 3 have a true pan European presence. Moreover, as well as fragmented networks there are relatively few affiliates that operate across multiple markets and this in my opinion is because of launguage barriers rather than currency or banking regulations. For merchants there are LOW barriers to selling internationally and that’s especially true here in the EU. Finnallyalough banking regulations are slowly being harmonized we are not quite there yet – EXAMPLE!
- There are numerous things that define the differences between markets and these include:Size of opportunity – and we’ll look at this in more detail on the next slide. Population and GDP Number of on-line merchants Value and quantity of on-line retail transactions Broadband penetration Numbers and types of affiliates Speed of adoption of new formatscashback discount vouchers mobile widgets Adoption of affiliate tools Product Data feeds forums and self-help communities Regulations and laws Culture and Language
- So this graph looks at the opportunity from the Merchant Perspective, what exactly is the size of the opportunity in the given country?Along the Y axis on the left the GDP per head of population and along the X axis the Broadband penetration.5As affiliate marketing is really all about retail transaction. So what is the size of the market, what is the level of access for consumers and how much are they buying?The size of the bubbles on this rudimentary graph relate to the size of the population.So immidiate you think maybe you should be aiming for the Nordic Countries and Benelux, all with high GDPs and High Broadband penetration. But these are DIFFICULT markets to get into. They have relatively small populations and there are some legal issues which I will go further into later. So you may decide to go for the markets in the middle and hedge your bets namely Germany, France and the UK and this is most probably is the easiest decision. All three markets have great inertia and programs progress relatively quickly. All three markets have been quick to adopt new technologies and utilize all affiliate business models. Spain is an interesting market in that its in a really deep recession and therefore there is opportunities with budgets shifting from traditional markets to CPA. Also Spain gives you access to the whole latinamerican market which is a huge area for growth.Lastly but by no means least there’s the US market, by far the biggest market in terms of population and certainly sales. However it also has numerous problems. Firstly the market is very saturated and for every product you want to launch there will be competitors already out these who are established and benefitting from the economies of scale they have built. Furthermore the US is unregulated, the IAB have not set up any sort of council or published guidelines for affiliate marketing.