Key perceptions and strategies defined by UK affiliate marketers are seeing rapid evolution based on a report on the UK 2010 Marketing Statistics Compendium disclosed in October 2010. The report was released by Econsultancy in association with Affiliate Window, the UK’s largest independent network. When current upward trends meet the increase of the VAT in 2011, however, the future is unsure but the overall outlook is optimistic.

The UK affiliate market has  experienced positive growth trends in the last few years, even though online advertising has seen ad spend slow, according to the IAB: “UK online advertising spend grew at its slowest pace since the boom began last year, as the economy tempered a growth phenomenon that had previously grown like wildfire.” (paidContent:UK | Research: UK Online Ad Spend grew 4.2% in 2009) Affiliate marketing spend saw 38.2% growth to £72.6 million, and affiliate display contributes to over 10% of online ad display right now. At the end of 2009, the affiliate market expanded beyond £4bn in worth. It is estimated that £227 million in commissions and fees was paid to affiliates and networks.

The 2009 UK Affiliate Census concluded that 55% of affiliates saw the economic crisis as an opportunity. An impressive 25% of affiliates generate around £10,000 each month in revenue for their merchants – a total of £120,000 a year. The rest of the revenue breakdown has 31% of affiliates generating less than £50 a month, and 9% between £50 and £100 a month. (Econsultancy Affiliate Marketing Statistics Compendium 2010 via UK Affiliate Census). 34% of the affiliate marketers behind the growth work full-time in the industry, while 46% consider themselves to be part time.

Glancing toward the future, however, the impact of the VAT increase is proving to be a virtual wildcard for 2011. Effective January 4th, the UK’s VAT rate will rise from 17% to 20%. This means that the consumer will see an increase from the bottom line in all their purchases. A survey of marketing professionals by Linkshare yielded mixed results on outlooks for the industry: “30% expect to see a bigger focus on targeted campaigns compared to mass marketing techniques, with a fifth of companies planning to streamline their processes to increase efficiency and 18% anticipating 2011 will encourage a greater emphasis on measurement and ROI. Demonstrating confidence in the industry’s performance, only 18% thought their budgets would be cut as a result of limited resources and just 7% predicted a lack of funds would cause their company’s creativity to be stunted.” (Linkshare.co.uk | Digital marketing budgets predicted to boom in 2011…)

Retailers can choose to use the impending VAT increase as an opportunity to build stronger customer relationships, Liane Dietrich, MD of Linkshare UK indicated. Online retailers who choose to offset or absorb the increase could benefit from greater ties in customer loyalty and sales increase. “One of the biggest motivating factors for online shoppers is value” She says. (Econsultancy.com | VAT Rise Increases Focus on Targeted Market Campaigns) Only time will determine what the true impact on the industry will be for 2011 after the VAT increase; will merchants and affiliates conquer the VAT increase? Attitudes remain positive.

Future attitudes regarding marketing techniques could also prove positive for emerging sectors in affiliate marketing. Fashion is one such growing channel. Top brands are making the foray online and budget conscious fashion shoppers could plan on finding relief from High Street sticker shock on the internet. Premium shoe retailer Kurt Geiger is planning to launch a discount website in early 2011, joining the space with other luxe brands like Ermenegildo Zegna menswear. Other labels with existing ecommerce sites like Ralph Lauren and H&M have launched UK storefronts before the end of the year as well. (Drapers) Given the trends of UK affiliates and UK consumers – this is a move in the right direction. At the moment, nearly all of the UK affiliates involved in the Econsultancy Census survey promote UK merchants – numbered at 99%. US merchants do have a foot in the door, as they enjoy promotion from 27% of UK affiliates.

Interesting Details about UK Affiliates:
•    What threatens UK affiliates? 44% – Google’s role in the affiliate space as a threat, 43% – the increase in voucher, (coupon) code sites, 36% – rise of of super affiliates
•    Less than a fifth of UK affiliates are female – 18% (in 2007 17%)
•    The affiliate population is a bit older these days – Only 26% of affiliates are 30 or under, compared to 31% two years ago