Country spotlight is an ongoing series on the UK blog, where our team of local and global experts showcase what there is to know about key regions across EMEA.
UK affiliate market overview
Worth £11.55bn in digital advertising, the UK is the largest market in Europe for e-commerce with UK advertiser spend exceeding Germany, France and Russia combined. As such, the UK is the most mature market in Europe for affiliate marketing, which is why it represents one of the largest opportunities for domestic and foreign advertisers in affiliate marketing worldwide and particularly in Europe. Affiliate marketing started in 1996 in the UK with the launch of the Amazon Associates affiliate programme globally and it hasn’t stopped evolving since.
Affiliate marketing in the UK
Research from the IAB showed that affiliate marketing generated £8.9 million sales in 2017, with a year-on-year growth of 9%. The Retail and Telco sectors lead the way, driving respectively 43% and 24% of total sales, followed by Travel and Leisure (16%) and Finance (11%). With a return on advertiser investment of £16 for every £1 spend last year, affiliate marketing continues to be a very profitable channel for advertisers.
In 2017 advertiser spend on affiliate marketing reached £554 million, an annual increase of 15.1%, the main driver of this increase is the affiliate spend on smartphone which grew by 49% year-on-year.
Overview of key players in the UK affiliate market
In 2017, the top 3 publisher types by spend were coupon (27%), cashback (25%) and content (25%) sites. TopCashback and Quidco remain the largest cashback sites in the UK founded respectively in 2003 and 2005. Loyalty and reward sites including charity cashback and employee rewards have been gaining traction over the past few years with key players such as Nectar, Collinson Group, EasyFundraising and Next Jump allowing advertising to focus on key demographics based on their publisher base.
The key players for coupons are VoucherCodes.co.uk, MyVoucherCodes, vouchercloud and Global Savings Group, whilst these sites have traditionally promoted voucher codes and offers through standard placements such as on-site exposure and newsletter inclusion, over the past few years, some of these sites have been driving innovation within the sector by developing new features and capabilities to their offering. For example, vouchercloud recently developed in-app targeting campaigns and Global Savings Group now offers influencer collaborations, content exposures and is white labelling voucher code sites for the largest media sites in the UK such as The Daily Mail and The Metro.
Even though traditional publisher models continue to dominate the UK affiliate landscape in terms of revenue, the interest from advertisers is moving particularly towards content and influencers as well as new publisher models such as mobile publishers, programmatic networks and technology publishers. To support the growth of the content and influencer models, advertisers are exploring new payment models to better adapt to these publishers, whose traffic is mainly driven at the top of the funnel as opposed to the last click.
In the UK, the largest affiliate network is Awin, other networks in the UK include Webgains, CJ Affiliate, Tradedoubler and Rakuten Marketing. One of the biggest changes within the sector has been the emergence of SaaS platforms, offering solely the tracking technology and platform for advertisers without the account management services. This has been a game changer for the industry, increasing the ability for advertisers to manage their service in-house or via an agency or affiliate marketing consultancy and advancing their technical capabilities. Key SaaS platforms in the UK are Impact, Partnerize and Cake.
What are the 3 key differences between the UK and US affiliate markets?
Due to its level of maturity, the UK affiliate market is comparable to the US, the pioneer country of affiliate marketing. With an internet population in the US about 6 times bigger than the UK, aside from its size, the affiliate marketing industry is similar in many ways. For any US advertiser with affiliate marketing experience in the US, it is essential to understand these key differences prior to entering the UK.
Affiliate networks and SaaS platforms:
In the US, the largest affiliate network is CJ Affiliate instead of Awin in the UK, even though both networks operate globally both in the UK and in the US. CJ was the very first network to make affiliate marketing accessible to online advertisers when they launched in 1998. ShareASale is also a large local affiliate network, it is a self-managed platform dedicated to in-house affiliate programmes and it was acquired by Awin last year to reinforce their position in the US. Like the UK, SaaS platforms such as Impact and Partnerize have also seen a strong growth in the US.
The US and UK markets have a similar share amongst loyalty and cashback publishers and voucher codes, the leading site is Offers.com for vouchers and Ebates for cashback. However, RetailMeNot which operates both in the UK and US is also a top voucher publisher for both markets. In general, flat fees for placement are incomparably higher in the US than in the UK which requires advertisers to spend higher budgets for affiliate marketing.
The main differentiation within the publisher mix between the US and the UK is Price Comparison publishers, which account for 23% in the US vs. 33% in the UK, where 46% of internet users had used a price comparison website between Oct 2017 and March 2018. Content and sub-networks have minor differentiation in both markets with respectively 11% vs. 9% and 4% vs. 3% for the US and the UK. In addition, mobile is well developed in both markets, standing at 28% in the US vs 26% in the UK.
In terms of promotional methods, PPC is most commonly used by US publishers in opposition to SEO in the UK, due to many UK advertisers prohibiting PPC activities.
The channel is primarily regulated in the US by the Performance Marketing Association (PMA), founded in 2005, this is similar to the IAB (Internet Advertising Bureau) in the UK, but focuses solely on affiliate marketing. It is the trade body in charge of setting the industry standards and best practices for advertisers and networks and is considered to be the most established trade body for affiliate marketing globally. One of the main issues for the PMA that is specific to the US, is the ‘Nexus’ law, a tax that is paid by publishers on advertiser sales. The impact of this law has been such that some advertisers have had to terminate their affiliate programmes. The industry in the US and UK have commonly been facing the question of affiliate disclosure that was tackled by the Federal Trade Commission (FTC) in the US and the Advertising Standards Authority (ASA) in the UK. This requires influencers and publishers to clearly disclose relationships with brands they are promoting online. As for the GDPR law that was implemented in Europe this year, there is currently no similar law that is present in the US with regards to data protection.
As a mature market for affiliate marketing, the UK has been at the forefront of major development within the industry, expanding its traditional model into new technologies, payout models and affiliate partnerships which have changed the way that we do affiliate marketing today. Worth £8.9 billion in sales in 2017, affiliate marketing remains a key driver for e-commerce growth in the UK and is a channel not to be ignored by brands.