July 29, 2014

Performance Marketing in 2013: Companies and Regulation

Peter Klein, MediaWhizBy Peter Klein, senior vice president of media services at MediaWhiz

The performance marketing industry has undergone massive changes in 2012.

The list of challenges the industry weathered over the past year is long and varied. It includes news of several long-standing affiliate networks going out of business; email delivery getting more difficult; Facebook and Google all but banning affiliate marketing; the federal government becoming more involved in the cash advance and “for-profit” education verticals; the rise of real-time bidding (RTB); data management platforms (DMPs) becoming critical in display advertising; and mobile marketing efforts gaining prevalence among marketers’ digital strategies.

While performance marketers shift priorities and tactics on the fly, the good news is that money continues to pour into performance marketing for its scalability, ROI focus and measurable results.

With all that in mind, 2013 looks to be a significant growth year for the companies that continue to survive in performance marketing. Further advancing the industry’s prospects will be the increasing influence of Online Darwinism — a term I coined to describe the natural evolution of the performance marketing industry, particularly its ability to rid itself of rogue marketers and agencies.

Trying to predict all of the impending changes in performance marketing is no easy task. To simplify the matter, I have broken my 2013 predictions for performance marketing into the following categories: companies, media channels, vertical markets and regulation.

Today’s column looks at predictions for companies and industry regulation. A subsequent column will examine predictions for performance marketing media channels and vertical markets.

Companies
There is no doubt that we will see a continued and more aggressive consolidation of affiliate networks in the lead-generation space in the new year. Of those that are impacted, I predict that half will go out of business. The other half will merge with one or more of their affiliate-media sources.

Mailers and social/display/mobile-media buyers will be specifically affected by increased consolidation within the industry. They will join forces with networks to increase margin, reduce compliance risk and deliver on allocated budget, therefore creating a competitive advantage.

Adding more competition, the large “revenue-share” or product-sale-based networks, will continue to develop lead-generation divisions to compete with the current traditional CPA networks. We have already seen this with large players like LinkShare and Google.

Perhaps the biggest growth sector for performance marketing in 2013 will be the Software as a Service (Saas) and lead-quality products. These help performance marketers and advertisers pay appropriately for best quality. They also further eliminate fraud, a growing problem within the industry.

More affiliate networks and advertisers will use robust tracking platforms like Cake, along with predictive modeling services such as eBureau; lead monitoring/scoring technology from CPA Detective; and click-to-call tracking tools, such as RingRevenue. The latter will be especially important as more mobile campaigns are launched and the consumer desires immediate service.

There likely will be new developments in mobile compliance as well, since that is currently an opportunity in nascent markets.

Regulation
Although not unique to performance marketing, when any business or industry achieves significant scale, the government makes sure to get involved and impose regulations. The performance marketing industry will face a raft of regulatory issues in 2013.

Regulation in performance marketing began in 2007 with oversight of the SMS/ringtones in the mobile space. It has since moved to the education and cash-advance verticals, as well as the rebill space for product marketing.

2013 will bring more attempts at government oversight. This may include enhanced data-pass laws and newly imposed data-brokering guidelines, as well as deeper guidelines in the for-profit education industry. Many of these attempts will fail.

Performance marketers will become more proactive in becoming informed about potential regulations affecting their businesses and clients.

The hysteria surrounding proposed Do Not Track (DNT) legislation will surely continue. Marketers’ concerns that DNT will kill online advertising are over-hyped. Government regulation of brands’ online data-tracking efforts won’t destroy online advertising. If anything, it may improve digital marketing by forcing marketers to be more focused, innovative and relevant to consumers’ needs.

In 2013, more states will fail to pass nexus tax laws thanks to efforts from great organizations such as the Performance Marketing Association.

More importantly, 2013 will be the year that the big networks and service providers band together and set some real marketing guidelines. There will be an industry-wide push toward more stringent self-regulation efforts. Although I still think we are one to two years away from a true credentials/certification model, I believe 2013 will be the year that real efforts emerge to create strong industry standards and eliminate the unethical marketers and rogue companies.


Peter Klein is senior vice president of media services at MediaWhiz, an integrated digital media agency.

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