Understanding the European Affiliate LandscapeRobert Glasgow, Managing Director

A4uexpo Europe, Munich 18th May 2010

My BackgroundFounder and MD of Webgains UK

Head of Webgains Profit Centre

Formerly MD of Affiliate Window in the UK

Webgains Roll-outWebgains was established in the UK 2005

Merged with ad pepper media in May 2006

Launched Germany and France in 2006

Launched BeNeLux, Denmark, Sweden in 2007

Launched Spain, Ireland, USA in 2008

Agenda

History of Affiliate Marketing

Current and Future Trends

Overview of Markets

Brief History 1: the early years

Affiliate Marketing entered the UK in 1999

Emergence of first ‘long tail’ websites, all with

potential inventory

Affiliate Networks exploded 2001-04

Network consolidation 2005 - current

Lead Generation business started to emerge

Broadband penetration (democratised by adsl

technology) drives growth in on-line shopping

Brief History 2: recent

Reversal of market perception: “a place to dump distressed inventory”

to “advertiser-led, low-risk marketing channel”

“Professionalisation” of affiliates, sophistication of marketing managers

Second wave of long tail (Blogs) Global advertisers require global solutions Economic difficulties drive move to transparency

and value Consumers drive trends

Some self-evident truths Growth has been extraordinary and will continue, driven

by: Appearance of long tail websites Move by advertisers to lower-risk marketing model Full transparency of transactions, activity and

rewards, enabled by technology Broadband penetration

Consumers 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

Current Trends CPA going from strength to strength, driven by advertiser

recognition of low-risk model

Consumers turning to voucher-code and cash-back websites

Issues surrounding “last-click-wins” becoming more apparent

Affiliates calling for a greater emphasis on transparency and communication across the sector

Affiliates developing innovative media methods

Social, Video, Widgets

More agencies offering affiliate services to clients

Agencies setting up their own networks

Fraud continuing to pose a problem

The European Affiliate Market: Overview

Fragmented Many local networks Some pan-European networks Few affiliates operate across multiple markets Different types of affiliates strongest in different

markets

Low barriers to selling internationally allow merchants to expand across borders

Banking regulations being harmonised but we are not there yet

Differences between markets? Size of opportunity

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 formats

cashback discount vouchers mobile widgets

Adoption of affiliate tools Product Data feeds forums and self-help communities

Regulations and laws

High

LowLow

High

GDP per head of

Population

Broadband Penetration

Spain

SE

FRUK

DE

USABenelux

DK

Opportunity?

France Major consolidation of networks in 2005 Strong affiliate movement with multiple forums Early and strong adopter of discount voucher codes,

with dominance by a handful of early-moving affiliates 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

Movement towards post impression tracking Many networks depend on ‘pop-under’ networks eg

aegency PPC drives a high percentage of sales email database exploitation still very strong New trade organisation ‘CPA’ (Collectif des Plate-

formes d’Affiliation) established beginning 2009

USA The wild west!

Unregulated business practices in most areas – affiliate is no exception

Lots of spyware, plug-ins, spam, poaching etc Lots of cookie stuffing and post-impression cookie

dropping Huge amount of media broking – campaigns churn

through many platforms The biggest opportunity, the most competition Changes on Google adwords opens up bidding to all-comers ‘Patriotic’ consumers and affiliates promote own-country

products Threat of Nexus Taxes could seriously affect affiliate industry Performance Marketing Association has been set up but no

major networks have joined IAB ‘refuses’ to set up an Affiliate Marketing Council

Germany

Affiliate market worth €210 M in 2008

Agencies dominate industry

Very tight consumer protection and data protection legislation

Demand from agencies and affiliates for post impression

tracking

Highest proportion of population in EU are online buyers (73%)

Relatively slow adoption of ecommerce and affiliate marketing

conservative population with security concerns

reluctance to adopt new payment methods

eCommerce market worth €19.3 B in 2008, with 15% growth

UK European leader in innovative affiliate marketing

Strong Forum usage prolongs ‘collegiate’ approach among

many affiliates

Consumer debt hang-over has seriously damaged online sales

and hence affiliate commissions

Consumers have adopted discount voucher codes and cash-

back sites

Recent Google adword changes have opened up bidding

32 Networks listed on the forum, but 6 are really big players

Strong move to Internationalise platforms

IAB providing clear leadership on contentious issues

Benelux

68% of consumers use on-line banking – highest in EU

64% of retailers have sold cross-border in the past year –

highest in EU

Over 10 domestic networks plus 3 multi- national operate

already

Low tax and offshore jurisdictions make attractive

business start up environment

IAB currently setting up Affiliate Marketing Council

Denmark

Highest percentage of broadband penetration in Europe

Affiliates prove to be slow movers to professional model

Slow adoption of normal affiliate tools – product data feeds,

forums, RSS feeds

Recent changes to regulations have allowed introduction of

discount voucher sites

Strong focus by Government on consumer protection forces

this market to look cross-border for opportunities

Very high 3G usage brings mobile media to the fore

Small market that punches above its weight in Europe

Sweden

Huge growth in networks puts huge pressure on fees

and margins

3 years ago = 3 networks

now = 25 networks

Popularity of hybrid campaigns eg. cpa/cpc, or cpa/cpm

Incentive sites reward with products, not cash

Very few voucher sites

No cash-back sites

Affiliate sites, in general, outperform merchant sites on

natural listings

Merchants starting to consolidate to 1 preferred

network supplier

Questions?

Thank you for your interest!Webgains UKDragon Court

27 - 29 Macklin StreetLondon

WC2B 5LX

Tel: +44 (0)207 269 1248Fax: +44 (0)207 269 1249