Thursday, August 16, 2007

European SEM Kick Backs from the Big Search Engines

The head of our sales team in Europe had the following insights to share on the practice of Google "kicking back" agency fees to European and UK SEM firms.

But, for starters, this link will tell you everything you need to know about BPF.

Basically, if you are managing spend on behalf of clients anywhere in EMEA then you qualify for BPF. Its payable on an incremental tiered basis.

Roughly speaking agencies get 3% for the first €1M spend under mgt in any one quarter; 4% payable on the next €1M; 5% on the next €1M; all the way upto a max 8% payment. To qualify, the agency brings the clients accounts underneath our MCC and the agency qualifies. This is the same for clients where we deliver technology only and clients for whom we deliver full service.

Y! and MSN pay differently. Y! pay a flat 10% on all spend under management and MSN pays a flat 15% on all spend = they need the spend!

Google will release their BPF plan for 2008 in late September 2007. It creates a uneven playing surface for clients booking direct and clients using agencies. It also means that many agencies can give services for free and just live on rebate revenue, but as these are payable at end of quarter on 60 day terns, cash flow is poor which typically equals poor service for end client.

While it’s fairly common practice for specialist SEM firms to pass back 100% of rebates to their clients. The larger digital agencies tend to keep it.

Commentary from REAL SEM firms operating in APAC and Europe: BPF and rebate stinks. It keeps bad search agencies in business. Large media agencies are used to getting handouts from TV/Radio/Press so think they can continue like that in the brave new world. If you do a decent days work and add value you deserve a fee and your fee is in proportionate to value; hence the good firms will be alright if rebates disappear.

Google doesn't need this cost of sale, especially given that wide spread practice for agencies is to hand it back 100%.