Magazine article Marketing

Andrew Walmsley on Digital: Google Is Clouding Agency Probity

Magazine article Marketing

Andrew Walmsley on Digital: Google Is Clouding Agency Probity

Article excerpt

From time to time, Google likes to remind us that it is a technology company, rather than a media one. While it admits to being in the advertising business - 99% of Google's revenue comes from ads - chief executive Eric Schmidt says: 'That doesn't make us a media company. We don't do our own content - we get you to someone else's content faster.'

Setting aside the nonsense of this position - many broadcasters haven't produced their own content for years, but are still media companies - this outlook does manifest itself in Google's attitude to advertisers.

Quite rightly, Google's priority is its audience. Look after that, it reasons, and the ad revenue will follow. So why is the company running around in circles trying to induce agencies to spend money with it, when its model is so successful?

For 2007, Google has announced that it will continue its Best Practice Funding (BPF) scheme - a rebate paid to agencies for spending money with it. This is distributed only to agencies over a certain size, not direct advertisers, and is tiered, based on their spend with Google in a given quarter.

The official line from the company's Googleplex HQ in California is that BPF is for agencies, not clients, and that it aims to encourage the former to invest in services to support search. Second, replacing agency commission with BPF creates a level playing-field for all search advertisers.

However, most agencies are contractually obliged to pass media discounts on to their clients, so BPF doesn't reward them. For agencies that keep the rebate, meanwhile, it is an inducement to spend money on Google to generate these payments, rather than a reflection on the merit of the channel.

Creating a level playing-field in search is a worthy objective, and Google's abolition of agency commission makes sense in this respect. Agencies are paid by their clients - commission is allowed for in that agreement, anyway. But what Google has done is to replace a simple discrepancy in the market (some got 15%, others nothing) with a complex and inconsistent one. Customers now get varying percentages - and some still get nothing. So the playing-field is no more level than it was before.

This complexity has another consequence. BPF has created a forecasting headache for agencies and advertisers. Most can't predict with certainty at the beginning of the quarter what they will have spent by the end. The rebate is paid two months after the quarter has ended, so if advertisers want to reinvest it, they have two options: they can estimate the amount they will receive, and risk overspending, or wait for their rebate before making a decision. …

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