Crunch Time for Agencies - Rumours of Agency Kick Backs being Pulled

7 comments
Thread Title:
Threadwatch Rumours
Thread Description:

Rumous are coming in anonymously via rumours@threadwatch.org that the "big two" PPC providers in UK (Google & Overture) may be pulling lucrative agency kick backs in 2005.

Agencies with large ad spends are currently enjoying up to 15% commissions on ad buys from the larger players and that may all be about to go POOF!

Currently, Google apparently say that Agencies must be a member of the IPA to get agency discount but according to Threadwatch sources this is known to be not the case. Overture and Google both discourage strongly any talk of agency discounts.

This could impact agencies in more than just the immediate and obvious financial sense as many agencies are reported to be sharing the kick backs with their clients in order to close the deal. One top industry exec was quoted:

"I am lead to believe that agency discounts are to be pulled in q1 05 by
the big 2, change of business model needed for many people."

Information is still coming in so if we get more, you'll see it here.

Comments

Agency kickback

Was only a matter of time b4 this happened.

I put my hand up to say that I was involved in negotiating the % back in 2002 for a number of reputable PPC companies.

Problem has gone out of control, with agencies offering a % of the 15% kickback back to client.

Its actually silly when you think about it, grown men running multi million £ companies on agency kickbacks.

serve em right for trying to be clever :)

The good PPC companies have also CHARGED a % on top, not the other way round.

Shak

This is normal

..for advertising in general in UK and mostlikely US.

It's nothing new for agencies to get a commision, it's common practice among publishers/agents in the UK - I worked in ad sales for a few years and we always had to factor 10-15% into the price and you're right shak, the SMART agents charge ON TOP of the rate card for their services, not take money off like peasants desperate for a deal...

It's never really an issue of money anyway, unless you're buying toilet roll or some kind of other common thing, the cost rarely comes into a purchase IMO

Nick

Cost shouldn't.....

The cost of managing campaigns should be factored in to any ROI calculations and then the agency that succeeds in delivering good results can say truly they have earned their money.

Looking at the real reason the discount is given should indicate it's worth.

Reduced marketing costs, reduced headcount, reduced space needed to house the bodies.

The alternative to agency discount will be a significantly smaller specialist agency base of agencies that "get it", clients paying either for consultancy or much higher fees making outsourced PPC less likely and a significant increase to the headcount of all providers and all the nice HR stuff that goes with it.

Jim Banks

Member no.300

Welcome Jim! Glad you made it in there m8, please introduce yourself..

Not being a PPC guy I can only relate this to my regular ad industry experience, and maybe because of that i just cant see why google and ov would consider this such an issue? - So slap the fool companies that are using it as bargaining power and tighten up your system, where's the big deal? this is how it works everywhere else right?

Or am I missing something? If so, please fill me in...

If you get an agency to run a banner ad campaign

they'll most likely be on 10% comission (in the UK). I don't see Google or Overture scrapping this as they're currently working hard to win over the online media agencies with a large traditional (banners, pop-ups, rich media) client base and convince them to come play in the PPC playground. The comission is the only way they'll come to the party (of course they're free to mark it up, and they will, but they won't stray too far from the comission model).

I think what they probably do want to stop is the 'regular self-employed PPC manager on the street' getting the 10 or 15% comission.

Agency kickback

There are 2 different aspects to this which i would like to touch upon.

1, The problem isn't the 10 or 15% kickback, it's the fact that PPC bid mgmt agencies are using this as a short term weapon to gain business by offering say 5% back to client, purely in the interest of increasing turnover.

I have advised a number of clients in the PPC arena when choosing agencies, and the proposals make good reading :)

2, Whilst I appreciate its standard practice in the media, PPc bid mgmt is NOT just about BUYING ad space, it requires more, a lot more if I go by the hours Jim Banks from webdiversity seems logged on.

Reducing clients CPC and CPA whilst bid prices are rising aint the easiest thing to do, PPC bid mgmt is a value added service and the strong will survive, its NOT like back in 2001/2002 when all you did was hit ENTER and the traffic would come.

phewwwwwwwwwwwwwww

Shak

Already Happening

Just had it on very good authority that Google have already started to pull discounts - on long term clients too.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.