LONDON: Online performance marketing (OPM) is growing fast and now accounts for one tenth of the UK's online retail sales while offering a win-win situation for both advertisers and consumers a new report has claimed.

The second annual Online Performance Marketing study, conducted by PwC for the Internet Advertising Bureau UK (IAB), said that UK businesses had spent £1bn on affiliate marketing and lead generation activities in 2013, representing a 15% increase on 2012, and generated £14bn in sales.

The most common forms of OPM include price comparison, voucher, cashback, loyalty and product review websites where advertisers only pay publishers if the ad causes someone to complete a defined action, such as making a purchase (affiliate marketing) or submitting contact details (lead generation).

In all, UK consumers made 150m purchases in 2013 via affiliate websites, amounting to £13bn in value. A further £1bn in sales was generated from Britons submitting contact forms.

Dan Bunyan, manager at PwC, put the figures in perspective: "OPM generated around 4bn clicks in 2013, the equivalent of 10m per day or 120 per second, about 5% of which resulted in a transaction."

A high conversion rate and a high ROI meant there had been a significant increase in the numbers of advertisers and publishers now using OPM, he said, adding that smaller businesses were benefiting.

"It's opened up a new and growing industry among the 'long tail' where individuals and small publishers with specialist knowledge of a particular area can produce websites and then automatically generate advertising revenue," he explained.

The report suggested that OPM tapped into consumers' desire to find the best deals, with 52% of British adults online having visited a price comparison website in the previous six months.

Nine out of ten respondents said they cashed in vouchers or redeemed points, with half of these doing so every month. In addition, one in eight had redeemed a voucher or deal using an app on their mobile phone.

Tim Elkington, director of Research & Strategy at the IAB, said that OPM had ushered in "a new era of savvy and careful consumerism", where everyone was a winner. He noted that nearly six in ten people become repeat customers of a company they only discovered through a deal or incentive site.

Finance (35%) and retail (21%) advertisers currently account for over half of OPM spend, followed by travel & leisure (17%), telecoms & media (9%) and gaming (7%) in the top five.

Data sourced from IAB; additional content by Warc staff