RO Eye reports affiliate marketing confidence

A report from RO Eye has revealed that while confidence in affiliate marketing is higher than ever, slashed budgets are affecting performance.

The Affiliate Marketing Survey Report 2008, conducted by E-consultancy and R.O.EYE, found that 46 per cent of merchants responding to the survey said they find the channel cost-effective for driving customer acquisition, up from 44 per cent.

However comparisons with last year's survey show that merchants' budgets have dropped from 18 per cent to 14 per cent.

Restricted budget has jumped from fifth place to second place in the hierarchy of barriers to successful marketing.

Despite the inherently low-risk nature of performance-based affiliate marketing programmes, less money is being invested in this area.

The research highlights the importance of a well-managed affiliate marketing campaign, ensuring the channel is driving incremental sales.

Almost 60 per cent of merchants surveyed acknowledged that affiliate relationships and sector experience are crucial to a successful programme, reflecting the need to prioritise investment in resource or outsourcing.

Other findings show that sales generated by search engine optimisation and content sites have eclipsed those of paid search and loyalty/cashback sites.

The biggest driver of volume remains PPC, which has decreased from 52.5 per cent in 2007 to 44 per cent this year.

A third of merchants say that five or fewer affiliates are driving 80 per cent of their affiliate sales of sign-ups.

A further 23 per cent say that between six and 10 affiliates account for 80 per cent of sales.

A quarter of merchants say they are not de-duping sales across different digital marketing channels.

More than a quarter of merchants say their organisations are poor at managing networks and monitoring affiliate activity.

For attributing the credit for sales, 41 per cent of merchants are using the last click method.

A quarter of respondents say that they are using a combination of methods while 10 per cent are now sophisticated enough to split the CPA across different channels.

The three biggest barriers to successful affiliate marketing, from the perspective of merchants, are lack of internal resource (47 per cent), restricted budget (29 per cent) and difficulty in attracting affiliates (28 per cent).

Linus Gregoriadis, head of research at E-consultancy, said: 'While the research represents something of a wake-up call for the industry, the good news for affiliate marketing is that merchants continue to regard it as a cost-effective channel for driving customer acquisition.

'There has been a slight decrease in investment in affiliate activity which can be attributed to several factors.

'While reduced budgets due to the economic downturn may be partly responsible, merchants are also getting better at getting traffic directly to their sites and they are also refining their approach so that they are not paying out for sales unnecessarily.

Mark Kuhillow, managing director of R.O.EYE added: 'The 2008 report has clearly sent out some key messages for the industry.

'With budgets being reduced as a result of the economic situation, this has had a direct effect on the traffic and sales merchants and agencies have received through the channel.

'While more merchants than in 2007 view affiliate marketing as a very effective channel, almost 70 per cent are spending less than two hours per week communicating with their affiliates and policing them.

'It is more important than ever to forge strong relationships between merchants and their affiliates to protect volume and the channel's efficiency.

'This report highlights the changes the industry has experienced since 2007 and exposes the end of 'easy pickings' for affiliates.

The Affiliate Marketing Survey Report 2008 is based on the findings of a survey of 259 merchants and 150 agencies in July.

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