Saturday, 17 November 2007

No More Pseudo-Discount

Earlier this year Google announced that they are set to remove their Best Practice Funding. The BPF is a rebate that Google pays to advertising agencies that meet certain criteria to help develop search as an industry, training and research being major criteria.

The discount stretched between 3% and 8% depending on the volume of business an agency delivered to Google. There was also an additional discount for agencies that increased their spend by 5% in a a quarter.

However it became apparant that some agencies were not using the discount in the way it was intended. Mark Howe, UK Director of sales at Google has referred to the BPF as a "pseudo-disocunt". The reality is that a significant proportion of agencies pass some or all of the rebate directly on to their clients. In effect, the Google rebate has become a tool for deliver competitive advantage. Some clients even change their agency on a quarterly basis to ensure that they received the full benefits of the addtional discount.

Consequently, agencies have always been heavily incentivised by the growth targets laid down by Google. This has led to large investments in marketing and the sales force in order to acquire new clients. Account management staff have also been targeted on driving additional revenue from existing clients.

I believe that there is now the opportunity to re-evaluate these objectives. With less focus on growth and market development agencies should channel their energies internally and start to deliver real value to existing clients through increased efficiencies and more stringent campaign management.

The removal of the discount levels the playing field for search marketing as smaller advertisers or those that had a direct relationship with Google never had the luxury of such a discount. They have had to rely on intrcate account management and tactical campaigns to deliver results to clients.

There are massive opportunities for product development within search that are lacking investment from the big players. There are large knowledge gaps with regard to effective PPC management that need to be bridged and there is a lot more opportunity for agencies to work closer with their clients and to more shared objectives.

For agencies, the removal of the fund is an opportunity rather than a threat. They can now prove that the training and research investments they have made will reap dividends for their clients.

Clients will benefit from the increased attention allocated to them by the agency. because by removing the rebate, a clients business, has become infinitely more valuable to the agency.

1 comment:

Fumbles said...

Interesting angle and I suspect you're right long term. However I doubt whether agencies see it this way at the moment, and I suspect there will be a few reductions in team size as a result.