A WHITEPAPER

CHRISTMAS & TRENDS IN BLACK FRIDAY:

NEW CONSUMER TRENDS SHAPING AFFILIATE MARKETING

By Kevin Edwards, Global Client Strategy Director

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Contents Contents ................................................................................................. 2

Introduction ............................................................................................. 3

1. The Black Friday steamroller .................................................................... 4

2. Smartphones as an influencer channel ......................................................... 7

3. Christmas commission trends................................................................... 12

4. Not all sales are created equal: tablet shoppers ............................................ 14

5. The UK has fostered a truly global audience ................................................. 17

6. 2015 and beyond ................................................................................. 18

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Introduction

Christmas 2014 for Affiliate Window will be remembered for several key statistical

phenomena, never seen on the network before.

These events are part of the ongoing evolving e-commerce (and m-commerce) landscape

and will in turn morph into new developments as devices change, consumers alter their

purchasing habits and new technology is launched.

Trying to make sense of any trading period so soon after the event is never easy: but

retrospectively taking stock and drawing both conclusions and anticipating future

developments is important for campaign planning as well as for anticipating affiliate models

to come.

Trying to second guess the key milestones from Christmas 2014 that will be remembered in

years to come is an interesting challenge: will it be viewed as a watershed year?

There’s a distinct possibility it will. What is clear, as will be discussed in this document, is

that consumers’ changing purchasing behaviour is set to collide with some critical new

network product releases that could substantially move affiliate marketing on for Affiliate

Window and hopefully the wider industry in 2015.

Here we will set out both what those trends are and how our new technology could help

drive innovation and new commercial models within the industry.

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1. The Black Friday steamroller

Thousands of column inches have been dedicated to the sheer volume of sales

delivered by Black Friday. Similarly endless reams of statistics have been regurgitated,

so whilst we’re guilty on some accounts of doing the same here, we will attempt to be

selective rather than just reiterating the obvious.

By now we all know Black Friday performed variably for retailers, and that was largely

dependent on logistics and margins.

For the first time ever major brands talked about Black Friday in ways that they hadn’t

before. This US shopping event seemed to have cemented itself in the UK retail calendar

for the first time. 2013 witnessed significant success for a smaller group of but this year

was the first time the event was embraced so wholeheartedly and so universally.

Whether it was the success that John Lewis (ever the retail barometer), enjoyed and

vocalised both the previous year and in the run up to November 30th that was a further

catalyst, or the advanced press coverage that whipped up shoppers in advance (only to

condemn them on the day for isolated over exuberance), it’s clear Black Friday may have

disrupted retail patterns permanently.

Black Friday is one half of the bookend for the US Thanksgiving weekend (Cyber Monday

acting as the traditionally online focused counterbalance). As such it’s always an

interesting comparison to make between the two days: one high street in emphasis, the

other online (with deals running concurrently on both).

This Christmas just passed we number crunched the performance and, for the first time,

peak trading was registered in November:

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This Black Friday hype seems to have translated into traffic peaks between 7am and 9am,

in marked contrast to the comparative restraint of Cyber Monday, which correlated more

with a normal day’s trading with resultant lunchtime and evening spikes.

Only late in the day did Cyber Monday overtake the sales performance of Black Friday, as

the online feeding frenzy waned.

Interestingly a significant number of consumers appeared poised and ready to check out

the biggest and best deals as Black Friday began, with the sales gap between the two days

particularly wide in the early hours of the morning.

For retailers the importance of capitalising upon that early interest and consumers’ sense

of urgency is obvious.

This graph shows the four peak trading days that were identified across November and

December as being of critical importance to online traders and gives the clearest

indication of how phenomenal the performance of Black Friday was:

In the space of a few years the trading calendar has been transformed. To illustrate this

we've plotted the percentage of all sales that were tracked across November and

December on a daily basis, comparing 2010's trading period against 2014's and, whilst the

data isn't like-for-like from an advertiser mix point of view, we're confident there is little

variation that could impact the overall trend:

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Aside from Black Friday, taking a look at the previously biggest trading days (the first two

Mondays in December) indicates that in 2014 there was a very minor uplift on the second

Monday, historically considered the most important day in the e-commerce calendar. Roll

back to 2010 the first Monday in December fell late on 6th and this was the peak day across

the two month window (it's worth pointing out the Mondays did not fall on the same date

in 2010 as they did in 2014).

Of additional interest is the relative lack of downturn in 2014 after retailers' cut off

delivery dates for Christmas, compared to previous years. Also, for the first time, last

year's Boxing Day over-indexed (just) against the period (the average sales performance

indicated by the green line). Christmas Day remains relatively quiet but nowhere near as

much as it used to (look at the orange line for Christmas Day, 2010, it shows sales

performance was proportionately at around 60% of the level seen on the same day in 2014.

Clearly, not only are consumers shopping earlier, but they're also discovering retailers are

increasingly going into sale pre-Christmas, ‘smoothing out’ general trading. It's interesting

to note that despite many having last delivery dates on or around 19th December, sales

held up remarkably well. Boxing Day now firmly emulates the high street in being the peak

sales' trading day post 25th December.

The jury is out about the wider fallout of Black Friday and what retailers will choose to do

in 2015. The subsequent delivery problems some retailers suffered due to huge consumer

demands, questions about the profitability of the offers, not to mention some MPs calling

for the event to be banned, will undoubtedly lead to a better executed strategy in 2015.

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There remains an important piece of analysis to be done about whether Black Friday will

simply squash traditional Christmas trading into an earlier, truncated period. At the very

least retailers will surely embrace it as a time when great media exposure is focused,

purely and simply, on shopping.

With retail remaining a fiercely competitive battleground, it will be hard for advertisers to

completely turn their backs firmly against it. 2015 will surely be about better planning and

less panicked bandwagon jumping.

With that in mind, what other insights were revealed in our analysis?

2. Smartphones as an influencer channel

We know that consumers use smartphones to browse the Internet in ways they don’t

on other platforms. What is interesting about Christmas’ trading is how this manifested

itself in conversion rates.

Take a look at Black Friday and Cyber Monday: there is a dichotomy between sales and

traffic, and a general trend that clicks track at a higher rate than sales on handsets:

Let’s break down one of the peak days for handset traffic – Boxing Day – and we can see it

throws up some interesting results (click traffic is indicated by the triangular markers,

sales by the circular ones):

View Affiliate Window’s 2014 Black Friday vs. Cyber Monday infographic here.

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Study the data and you’ll notice a two hour window when handset traffic comes close to

overtaking desktop, almost becoming the single largest source of clicks on the network.

This is obviously significant, but not hugely unexpected.

Combined, tablets and smartphones exceeded desktop traffic for chunks of Boxing Day:

Given Affiliate Window’s traffic is invariably premised on buying products online, as well

as rewarding on a CPA basis, we need to focus on the commercial imperative of converting

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this traffic. For a network to be tracking more than 30% of its clicks at 9am on Boxing Day,

but converting that into just 22% of its sales we have to question whether the commercial

model we operate serves handset traffic well.

Notice how handset sales rarely exceed 20%, yet at no point does traffic dip below 25%

and for three hours it hits 30% plus: it's the only platform that drives a higher percentage

of clicks than it does sales, and by a sizeable margin.

Compare that to tablets, which traffic-wise bring in a similar amount to handsets. If we

ignore the early hours of the morning when sales are low, there is a late morning spike

and after midday they consistently drive around one in four sales.

The picture is more pronounced when we view revenue driven. Because average order

values are lower, when combined with a poorer conversion rate this has a double impact

on the device percentage share. Take Boxing Day handset clicks, sales and revenue as an

example, all things being equal all three lines plotted on this graph should be very close to

each other:

Compare this to tablet performance. The important thing to note is the order of the

coloured lines: for anything converting strongly on a high average order value we can

expect the grey revenue line to sit above the blue click line. There is an obvious contrast

between tablet and handset performance.

At the time of day when handset traffic on smartphones seems to be more inclined to be

based on casual, without intent browsing (7am to 10am), consumers using their tablets are

actually converting (and spending) at a higher rate than at any other time during the day:

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At the heart of this question is whether smartphone traffic may result in more casual

browsing, with less buying intent (therefore potentially less valuable from an acquisition

perspective), or could there be a fundamental failing to reward influence at the centre of

our business model?

Consider the non-linear sales path that shoppers could feasibly take: initial view on a

phone, maybe browse a tablet or laptop, they then consider the purchase across the day

or a longer period of time. Finally they return through any or all of these devices to

complete a purchase.

If an affiliate ad on one device was the prompt that led to the purchase via someone

accessing the retailer direct on another platform, it’s currently almost impossible for

networks to track that sale.

Consider how many affiliates drove intent via smartphones on Christmas and Boxing Day

morning, only to see sales track on another device for which they were never credited?

Now this has always been the case but there is no doubt the path to purchase has become

more complex. Consider that only four years ago tablet and handset sales combined

accounted for around one in 50 sales, by the end of 2014 this was close to two in every

five:

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And in fact both tablets and smartphones tracked the majority of sales across small

periods of Christmas which perfectly illustrates the care of duty we have to our affiliate

programmes to ensure they are adequately rewarding publishers.

Whilst we have to recognise that handsets are influencing devices, from an affiliate

marketing, last click CPA perspective, we now to have to push the importance of greater

cross device tracking, because smartphones may be anathema to our channel. Until we

have that customer journey visibility we’re working with significant pieces of the jigsaw

missing.

This is a critical technical project for our network: any companies not exploring their

options on this issue are storing up longer term problems for the sustainability of their

affiliate campaigns.

Late last year Affiliate Window published some initial data that showed that as many as

one in three affiliate sales may start on one device and complete on another. 2015 will

see the rollout of our cross-device initiative, 18 months in development, that will finally

showcase to the industry what is happening.

What could be the consequences? We’re hopeful that many early sales’ funnel affiliates

will see how their traffic is actually driving conversions and we may also see longer click

to sale conversion windows, both of which could stimulate significant discussion within the

channel.

This will be intrinsically linked to our assist and influence project that will launch in the

next few weeks. Based on providing a mechanic for advertisers to reward influence (as

well as sales), this follows in the footsteps of our assist and influence reports, available to

both advertisers and publishers.

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3. Christmas commission trends

Black Friday has historically been known as an event focused on big box electrical

items. As such the average order value continued to outstrip other days in the trading

calendar. That said, it’s worth considering that commissions on these items tend to be

lower than other sectors (it’s also worth remembering that not all commissions are

paid as a percentage and some, like insurance, utilities and telecoms tend to be bigger

fixed commission amounts).

As this chart shows, commissions peaked erratically but Boxing Day posted the second

lowest commission rate of any day. This is in keeping with some retailers’ decisions to

offer lower commission during sale period: an ongoing bone of contention with many in

the industry, but is also indicative of lower product commissions on electricas, a staple of

the Boxing Day sales.

Given the high average order value driven on this day (presumably consumers stockpiling

bargains, purchasing certain product categories that have higher AOVs or spending that

extra for the perceived bigger reduction), the gap between AOV and ACV on this day is a

glaring outlier on the graph:

If we take a comparative reading: commission tracked as a percentage of the average

order value, and plot across the month, we can see that Black Friday is a relatively

average day, with Boxing Day posting the lowest percentage (half that of peak). The

yellow line is the average for the period:

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The message may be for affiliates, take the time off like most other people if you want

the hours you spend working on this day to be as financially rewarding as at other times of

the year.

Given we interrogated 2010’s Christmas trading data earlier for general trading trends, we

thought it would be interesting to see whether commission levels have changed much over

the period. Again, we’re not comparing exactly like-for-like here and telecoms’ clients

will potentially skew the data to a degree, but we were pleasantly surprised to see how

well commissions have held up.

Given there is a general concern about ‘commission erosion’ within the channel, our data

didn’t seem to show any top line evidence of this:

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4. Not all sales are created equal: tablet shoppers

As a network we’re probably guilty of focusing heavily on the challenge presented by

handsets and how to make this traffic work harder within a channel premised on

performance.

In doing so there is the risk of overlooking the success of tablets: a device that performs a

double whammy, high conversions plus strong average basket size delivering the highest

commission per click.

This insight is nothing new. Every month Affiliate Window publishes a monthly tracker of

sales delivered by handsets and tablets and compares it to more traditional desktop

activity and the trends have been consistently the same over the years. As previously

mentioned tablets offer an almost reverse picture to handsets.

We have often communicated that we believe this is because an overwhelming number of

tablet transactions are driven by iPads. We make the assumption that iPad users are web

savvy, wealthier and are comfortable spending more and transacting frequently.

That said this trend is changing with the increased proliferation of Android devices that, it

could be said, are diluting the consistently strong performance of tablets.

If we consider that research shows that tablets may be easily movable objects but rarely

stray far from home, then it’s not much of a stretch to conclude they have replaced

laptops for browsing and purchasing.

What is also insightful is how many premium retailers figure in the top 20 advertisers by

percentage of tablet sales for December 2014:

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There is a distinct pattern here, higher end, fashion orientated retailers dominate the list,

quite different from our smartphone champions. They are in a sense classic iPad brands

that we would logically expect to perform well.

Looking at the traffic split between Android and iPad sales over the years, Android always

presented a disconnect between the volume of devices sold versus the percentage of

clicks delivered.

For years the split tended to be 75:25 in favour of iPads but this has undergone a

noticeable shift in the past few months, with the gap closing by 20 percentage points in

the past five months:

This is a significant shift considering how stubbornly iPads dominated traffic delivered via

the network.

What hasn’t transpired however is a noticeable shift in sales delivered by Android tablets,

an annual narrowing of 17 percentage points between the two operating systems from

around 83% of sales delivered by iPads to around 74%: a marked contrast to the 60% of

clicks that the Apple devices generate:

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So within tablet activity, again we have a dichotomy. iPad users are shoring up the

tablet’s reputation for delivering higher value sales. Comparing conversion rates as

indicated by the traffic and sales split shows an obvious divergence and so does average

order value:

What will be interesting in 2015 is whether Android will overtake Apple tablets and if more

and more consumers start transacting on them. To date the profile of a tablet customer

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doesn’t appear to have changed but with growing proliferation and with the launch of new

devices this may be one to watch.

5. The UK has fostered a truly global audience

Affiliate Window operates in two main markets, the US and the UK, with the latter

accounting for the lion’s share of our revenue. That said affiliate marketing knows no

boundaries and the network attracts affiliates from around the world. Additionally

many British retailers successfully sell their products and services across borders

without having a local presence in those countries.

Affiliate Window has previously reported that British brands are taking advantage of

increasing demand for their goods and Christmas 2014 seems to confirm their international

appeal.

We split out every sale recorded on Boxing Day to understand which countries were

shopping when many British consumers were similarly seeking out online bargains.

In total our retailers tracked affiliate sales across 132 countries on Boxing Day. Stripping

out the US and UK here are the top 20 countries by volume of sales, average order value

and total revenue:

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The picture varies hugely when we start to drill down into individual programme

information but viewed from this overall perspective it’s clear that advertisers, whether

through deliberate intent or natural appeal, are attracting plenty of overseas custom.

We expect this trend to continue into 2015.

6. 2015 and beyond

We hope you have enjoyed some of our Christmas, Black Friday and Cyber Monday insights.

As with any data it is only useful if you feel it changes your perception and therefore

approach to existing ways of doing things.

Data will be at the heart of many of Affiliate Window’s projects in 2015, not least the

aforementioned cross-device tracking and payment on influence metrics. It’s important

the industry doesn’t stand still and continues to innovate in line with other digital

industries and technologies.

Peak trading is always important beyond just the financial and commercial impact it has

on our affiliates, advertisers and other companies we work with. It offers us a snapshot of

how affiliate marketing influences consumers and shapes buyer behaviour. As we all

continue to grow so it have an even greater impact in 2015 and beyond.

The Strategy Team, Affiliate Window, January 2015

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