Google's Announcement On Restructuring Marketing Commissions

Comment by Matt Trimmer, Managing Director of ivantage.co.uk

Google has advised that from 1st January 2006 there will be no agency commission. Instead the company is introducing its best practice funding system - a criteria-based scheme which aims to provide investment for third parties from Google in order to drive their search marketing capabilities forward and grow the industry. In other words all advertisers will be on a level playing field.

So, what does this mean to the search marketing industry?

Basically, Google only tends to deal with IPA agencies but historically there are also many small agencies that still get various levels of commission. Obtaining commission from Google isn’t easy, and when they pay it's done on an account basis. So, they may decide if one of your clients is believed to be Fortune 1000 and are spending £6,000 per month they may pay an IPA agency commission. Google has been gradually removing commissions from some smaller agencies (NON-IPA) for a couple of years.

Commission causes three issues:

The first is the main reason Google has done this: If everybody is paying for keywords on an auction based system, it is unfair that those clients using agencies effectively are bidding at 15% less, forcing non agency clients to bid at 15% higher.

The second issue is that it is common practice for the larger agencies not to charge a management fee (for pay for position –PfP- campaigns) to clients if their spend is big enough because agencies survive on the 15%. Even worse, some agencies are forced by competitive pressures or by their clients to refund a part of this commission. Some agencies manage PfP for 5-7.5% margin! Small agencies and those that don't get commission really can’t compete with the big boys.

The third issue is that by doing a bad job as I indicated spends more of your client's money but gets you more commission – Doesn’t make sense does it?I think the decision by Google to remove commissions is a very good thing for the search marketing industry and another thoughtful move by Google. It's always bothered me that agencies can earn money for doing a poor job. The truth is that if you target the wrong keywords, or neglect to link keywords to relevant landing pages, clicks and click charges escalate without a corresponding increase in conversions.

The agency is of course rewarded for this spend, normally at the rate of 15%. By removing commissions, I think Google is not only "levelling the playing field" for those companies that do not use agencies, but paving the way for a new era of professional search marketing where the quality of service is more important than the Dollar.

Although much of the detail still seems to be being worked out, Google's Best Practice Funding" seems to be open to all agencies that have invested in Google Certification and rebates are calculated across the client set as opposed to an individual high spending account. This, I think, motivates agencies to charge for managing Pay-for-Position campaigns rather than rely on commissions and further motivates agencies to work harder for their fees.

My only concern is that I hope the "Best Practice Funding" doesn't just become commission with a new name rather than a positive and proactive sign of the industry growing up!

By removing commission - all agencies have to charge and hopefully clients will begin to see that there is more to managing a search campaign then money.

Of course, it is possible with the "Best Practice Funding" that it just becomes another healthy commission scheme for the really very big. However, the emphasis is for companies to have qualified professionals and, I hope, high standards.

About Matt Trimmer

Matt is Principal Consultant and Managing Director of ivantage Limited and has over fifteen years experience in the IT industry working for a number of venture capital backed start-ups and corporate companies including Kerridge, ICL and Network Computing Devices. Matt has been involved with the Internet since early 1996 when his then employer (NCD) boldly entered the browser wars with Mariner.
A Chartered Marketer possessing a technical background, Matt is also an accomplished Internet marketing practitioner with hands-on experience of traffic generation, traffic analysis and conversion improvement. He has managed Internet marketing campaigns for Argos, Dixons, IBM, Lindy, Movie Market, Mothercare, Reed Business Information and Sony

About ivantage
ivantage helps clients improve their online profitability through traffic generation, traffic analysis, traffic conversion and traffic protection. ivantage specialises in Search Engine Marketing, Search Engine Optimisation, PfP campaign management, PfI Trusted Feed management as well as Web Analytics, website conversion improvement and online brand protection.
ivantage fuse the complex world of the Internet with sound marketing experience to produce powerful results for its clients, which include Argos, Argos Ireland, Homebase, Interflora and Confetti.

www.ivantage.co.uk