Agencies taking over existing Google credit card accounts - commission!!

[meta4]

I represent a worldwide ad agency who manage Adwords on behalf of many clients as well as various other types of online advertising. We currentley spend large amounts with Google and recieve agency commission for some clients.

We are running into huge problems when attracting new clients because Google will not allow us to collect agency commission if the client is currently an adwords 'credit card' customer. They do not want to losr the agency commission and we do not want to charge a managment fee to the client.

My Points are:

1) Many of these clients are unable to increase their spend on adwords due to being unable to manage them successfully any longer. With the expertise of an agency they would be able to increase spend and everyone would profit.

2) I can obtain agency commission from Overture and Espotting under the same circumstances. Why should I buy media with someone who gives no discount? If a client is running banner campaigns, TV advertising, ppc, radio etc, and Google are the only media owner who do not supply discount why should I plan with them? They do not seem to care....

3) They are happy to take new business from us if the client is not an exsiting credit card customer. They don't want to miss out there!

4) They say that depending on the size of the client they may review this policy. i.e. someone the size of Unilever comes along and wants to be managed by an agency this is acceptable and we can have the commission.

Has anyone else come across this problem? There are many small - medium size ppc clients who need to outsource to agencies because they cannot manage their ppc work any more and also need access to experts. With Google being the only media owner to refuse agency commission on these clients they not only prohibit agencies attracting new clients but make themselves look stupid when we have to explain the situation to the client.

Any comments appreciated.

:)

[Adam C]

This is a very familiar situation. My (unstructured) thoughts:

i. You should seriously consider charging a management fee.

ii. It is difficult for an agency to act in the best interests of their clients if there are financial incentives to allocate budget towards particular providers.

iii. Its not just the commissions from Google that you won't get. There's also a level of support that you won't get which will make it more difficult to grow the account.

[Chris_D]

Hi Meta4, and welcome to the SEW forums!

You are going into a gray & murky place with these questions!

The whole 'accredited media buyer' and 'agency commission' system is applied inconsistently by the PPC publishers. They make up the rules as they go along.

I reckon Google & Overture should level the playing field, and make a stance, and either:

1. abolish ALL 'agency commissions' - and I mean abolish all 'hidden' commissions - and enforce transparency in the industry irrespective of who manages the account; or, alternatively;
2. Pay identical 'agency commissions' to SEM agencies as are paid to 'off line accredited media buyer' type agencies and apply the rates consistently.

An earlier thread might be worth reading:

http://forums.searchenginewatch.com/showthread.php?t=177

The issue with your point three is that it appears that Google is actually happy to pay you commissions on new business you bring to their table. Most non 'accredited media buyer' (i.e specialist SEM agencies) don't get that commission from Google.

[AussieWebmaster]

These have got to be European agencies....

[KeywordMonkey]

I've used this approach before now (of course it depends on the client and I make this transparent for them to understand):

Client has X to spend. Of this, Y amount is allocated to Google. The client knows we have to charge a fee for managing Google as we get no discount. We've all got businesses to run, after all.

So, of the money allocated to Google, our fee is removed, the rest is spent with Google.

End result?

Less money for Google.

Whilst I too have wider reservations about the agency discount model and the practices it could encourage in the less scrupulous agency (but the trusted partner schemes counter this in theory), it feels to me like Google are trying to take everyone they can as a direct client.

I know they are growing their team of account "maximizers" (i.e. account managers / editorial optimisers), probably for this reason, in the UK.

Of course, there have been rumours Google and Oveture will end agency discounts (http://www.threadwatch.org/node/669)for ALL but a select few agencies in the UK.

If the client is too small (in staff but maybe not small in budget) to have anybody in-house to do PPC and do it well, they want to hire an agency to handle Google, Overture, Espotting etc. as well as tracking and reporting, not to mention any related SEO and web design issues etc.

These advertisers can't rely on (or trust) the engiens to do it for them - the PPCs don't have the staff, expertise or, frankly, the inclination to do a quality job for them.

Agency discounts can effectively pay for the agency's services and this means the advertiser can afford to use the PPCs. It's as much a knowledge and time issue (the advertiser's staff don't have any to learn PPC) as a money issue for many.

Take away the discounts and one of two things happens with these potential advertisers: either they reduce their PPC spend and pay an agency fee, or, they don't do PPC.

This is expecially true of SMEs and local search.

Overall, I believe transparent discounts (that the advertiser knows about too and understands pay the agency's fee) should go to agencies that do a good-to-excellent level job.

They should cut out the "traditional" ad and media agencies who do PPC badly - the ones who never keep a PPC client for more than 6 month's, do not use tracking, do poor keyword research, don't deep link etc. But I doubt they will, as they are part of big advertising houses with real clout.

[Chris_D]

There is an inherent flaw in the whole "agency comission" business model. The renumeration of the 'agency' under a 'hidden agency commission model' is based on the premise of getting the client to 'spend money' - rather than renumerating the agency based on any 'added value' it brings to either the client or the publisher.

Thus the agency is 'rewarded' for spending more of the client's money - rather than rewarded for achieving the clients goals (eg higher conversion rates, better ROI etc through the 'value' the agency adds to the publisher's product) - or for adding value to the publisher's goals (ie happy client, sees value in SEM etc).

The agency motivation (i.e. to earn more money) is thus to get the client to spend more money - so that the agency gets more commission. In the real world, in my experience, the agency commission model actualy leads to LOWER ROI for the client - and usually ends with an unhappy client who walks away from SEM because it 'doesn't work. Which isn't a good outcome for the publisher either.

Here in Australia, about 10 years ago, the Superannuation industry (which had a similar model of undisclosed commission to independent agents paid by the insurance companies) was forced to disclose the agent's commissions. That cleaned the industry out almost overnight - because it levelled the playing field, and made the agents either add value or find another career.

As I said in another thread a few months back:
There is a solid business case for a 'trailing' commission structure (the model used in many financial services markets) to be implemented by Google and Overture for SEM companies, who set up client PPC accounts, and manage these accounts for clients.

A trailing commissions structure process would allow for Overture/ Google to have a direct relationship with the end user client, from a billing/ credit perspective, (which is really what they want) and allow the SEM to add value, and get a small annuity share of the revenues for the customer they introduced and manage on a day to day basis.

The problem is - neither Google or Overture have actually realised the leverage this will offer in the market yet.

The first one to wake up will actually win.....

[AdamJewell]

While this model may make sense in the traditional media world or for banner buys, it seems completely inappropriate in the keyword space where placements are auctioned off.

[Mikkel deMib Svendsen]

As far as I see there is only one way for us to go: Show our clients all the reasons they should use us instead of going direct with Google. There are plenty of them but it really goes beyond the scope of this thread - so maybe we should start a new one for that ...

The fact is that most of us can uptimize much better than any Google editor and we can give clients much better strategy advise. For example, for one company it may be better to spend the majority of the budget on Overture instead of AdWords ... do you think the AdWords "uptimizers" will tell you that? :)

If you wanmt to stay in the PPC-management business you have to realize that your biggest competitor on this market is going to be the engines you buy from! Let's fight it ...