About two weeks ago, Google Europe announced sweeping changes in its relationships with advertising agencies involved in paid-search marketing. According to a press release issued by Google on September 28, “Under the Google European Third Party program, Google will deliver training, tools and support to third parties, enabling them to deliver more value to their clients.”
The program, which starts in Europe on January 1, 2006, will be open to qualified third party agencies carrying at least five clients with two Google Advertising Professionals on staff. Payments, previously calculated on a commission basis will now be factored on new business brought to Google by agencies and growth of current accounts. Google is also capping remuneration rates from approximately 15% to 12%.
Google claims to be leveling the playing field for third party advertising agencies however the UK based Institute of Practitioners in Advertising (IPA) Digital Marketing Group has expressed “deep concern” over the move.
According to Wayne Arnold, Vice-chair of the IPA DMG, “It is clear that Google’s recent announcement has raised a number of unacceptable concerns for our members. At the heart of this is the move to “best practice-funding” which creates a lack of remuneration transparency for our clients and has the potential to create an un-level playing field in the market.”
Arnold is referring to the way Google will be issuing rebates for ad agencies that deliver larger blocks of clients or larger accounts. The rebate program will enable larger agencies to discount advertising spending for their clients, a luxury of scale smaller firms will likely not be able to take advantage of.
The owner of a small UK SEM firm told UK based MediaWeek that his agency stands to lose between 15,000 – 20,000 pounds (approximately $25,000 – $30,000 USD), due to the changes.
The IPA is meeting with Google representatives this week to outline their concerns. While these changes do not affect North American marketers, they might indicate changes coming on this side of the Atlantic in the near future.