Performance marketing sounds a bit like performance art – something stage-y or showy, or perhaps some sort of weird adrenaline-inducing enhancements made to your advertising. In reality, it’s marketing where an advertiser pays a publisher or media partner after-the-fact and contingent on whatever was agreed upon, such as a click-thru or percent of sales. But get ready for something big.
The next generation of performance marketing sets out to emphasize a new type of payment model: clear measurement. Its pay-per-performance construct continues to dominate, but boosting this aspect actually defines performance marketing at its best because the digital landscape, quite frankly, demands more of it. And this sector of the industry is seeing many more types of platforms that allow real-time measurement generation, translating into more opportunities for advertisers to get creative – and get more cash in hand.
The Interactive Advertising Bureau (IAB) said previously performance marketing was easy to define: “Its objective was to drive a specific action, and advertisers only paid when that action, such as an acquisition or sale, was completed.” Its scope comprises such things as search advertising, pay per acquisition and email marketing (and much more). It’s not to be confused with performance advertising because performance marketing stretches further and can include non-advertising agreements, such as referral marketing and strategic partnerships.
But because technology continues to change with rapid-fire pace, its definition gets more amorphous. In fact, the IAB has said that in the future, all marketing will be considered performance.
The IAB states that not all performance actions are on par with each other. Carl Kalapesi, director of Industry Initiatives at the IAB, noted in an article on the IAB website, “Defining the Next Generation of Performance Marketing” that “the most important component of a performance marketing campaign is the performance action that is being measured, optimized and potentially monetized. The closer that consumer action is to the sale or final transaction, the more likely it can be used to calculate a true return on investment. For example, a lead form or phone call is closer to a sale than a social engagement.”
He also said that real-time or near-time optimization is critical for growth in the performance marketing sphere. “Real-time bidding (RTB) has been a part of search engine marketing for a decade and is a growing quickly in display advertising,” said Kalapesi. “It is now a central component in today’s digital marketplace, growing to more than $3 billion (estimated) in 2013 and expected to more than double again in the next few years. We expect that real-time performance optimization will move in lockstep with RTB over the next few years.”
The rub is that performance marketing is starting to peak as more means to track become available. And like any good marketing, the better the A-Z experience, the more likely you’ll get to the cash transaction.
For those interested in learning more about performance marketing, LeadsCon New York will take place Aug. 14 and 15 at the Marriott Marquis Hotel.