Few of Australia’s top retailers used affiliate marketing last year, a practice virtually universal among the top players in the US and UK, according to a recently released study.
Conducted by online marketing agency dgm in June 2012 and released in December, the study revealed that only one of Australia’s top 25 retailers was using affiliate marketing at the time, with the practice still in its infancy.
Despite not being widespread among the country’s largest retailers, the retail industry is one of the most prolific users of the technique, which had only been used for five years or less by 76% of advertisers who had adopted it.
The study, which polled 59 media agencies and 84 clients, found that while media agencies demonstrate a more sophisticated understanding of the practice, they may be denying their clients a slice of revenue by capping the budgets spent in the channel.
“Media agencies engaging in affiliate marketing for their clients are demonstrating a greater sophistication in the channel than advertisers who do their own affiliate marketing,” John Matthews, dgm general manager, says.
“Tactics such as de-duping – which is vital to the accountability of the channel – are handled very well by media agencies, perhaps due to their greater access to technologies that track, analyse and compare performance.”
On the issue of capping, Matthews says the decision was usually related to whether the spend on the channel came from marketing or sales.
“The affiliate channel should be considered a sales channel, as the advertiser only ever pays for validated sales that directly link to the affiliate or publisher,” he explains. “That makes it a fixed cost. However, the capping of budgets by media agencies seems to be because their spend in the channel is allocated out of marketing, which most often is a finite resource.”
Almost two-thirds of the agency respondents said they capped budgets, while only one-third of direct advertisers capped their spend on affiliate marketing. Despite the capping issue, media agencies still spend a greater proportion of their online marketing budgets in the affiliate channel than direct advertisers with two-thirds of media agencies allocating 10% or more of that budget to affiliate, compare to 46% of advertisers direct.
More than half (52%) the agencies said they spend upwards of $26,000 per month compared to 40% of advertisers direct spending that amount.
The survey also found the channel is poised for growth. 71% of media agencies had increased their spend on affiliate marketing in the past year, and the same number indicated an increase in spend in the coming year.
The most common type of affiliate marketing was comparison engines, used by around 65% of adopters, followed by content and coupons.