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PPC Agencies: Ad Brokers or Client Advocates?

Sometimes I get irate when I see what some PPC agencies say, and indeed what they do with their clients’ accounts. In my tirades I’ve often posed the question:

“Do these folks really not understand how search works, or are they criminal enterprises that steal from their clients through lies and deception?”

However, Alan always encouraged me to “be nicer” to people and I’m trying hard to follow that advice.

There’s another explanation for poorly run campaigns that is probably both more charitable and more accurate at least in some cases: many agencies view their role differently than RKG does. Namely, they view themselves as advertising brokers.

In many respects this is the traditional relationship between advertising agencies and their clients. The agency provides creative guidance, expertise and ideas, and often negotiates placements with publishers (Print, TV, Radio, etc.). Their compensation is based on how much media they buy for their clients, with the notion that successful campaigns will be broadcast widely, lead to more ads and more media buys. The markup charged by agencies (15 – 20% of ad spend) creates incentive to develop campaigns that are a hit, and also to sell their client as much advertisement as they’re willing to buy.

As a retailer, I certainly worked with agencies that facilitated advertising, but they called themselves brokerages. We worked with List brokers, Print Ad brokers, and Package Insert/ Alternative Media brokers. We were willing to pay them their mark up to keep us from having to manage the logistics internally. However, we always knew that they weren’t really on “our side” of the table. It was a three sided table, the advertiser, the broker, and the publisher, each with their own interests. We knew that the broker would push us to buy more than made sense to us, that was their job, just as every home buyer should realize that “their” real estate agent actually works for the seller.

When Alan and I started RKG we chose a different model. We wanted our management fees to be based on the amount and quality of our work, and our relationships with our clients to be more in the vein of a partnership. We wanted to be viewed as part of their marketing team, paid fairly for our work but ultimately working as advocates for our clients’ interests.

We did accept convention in establishing a fee structure based on advertising spend, but we put caps on both the maximum and the minimum monthly fee to keep the fees in line with the amount of work we do. We didn’t invent Christmas, and while big programs do tend to require more from us than small programs, they shouldn’t scale off the charts.

Funny that from this perspective those other agencies don’t look evil, or incompetent, they just look like brokerages. Maybe my complaint with them is in not being more transparent in that regard.

As an advertiser, how do you know whether your PPC agency is more like a broker or more like your advocate?

The fee structure is one piece. Fees that scale off the charts don’t make sense in PPC. Companies that can spend lots of money cost effectively on PPC can do so primarily because of market conditions, not because of any particular brilliance of their agency. If there is a ton of search for your products, you have competitive offerings and the space is full of competition, the search volume and CPCs will create a big program whether it’s well managed or not. Revenue-sharing arrangements are no better, and are usually worse when commissions are paid for search on your trademarks.

The other tell-tale signs might come from how you answer 4 questions:

  1. Have they ever suggested reducing spend?
  2. Have they ever suggested not trying a new program or strategy pushed by the engines that would require you to spend more money?
  3. Have they ever resisted your suggestions to spend more on the grounds that their experience suggests it would be ineffective?
  4. Do they frequently push you to advertise more aggressively than makes sense to you?

No PPC agency will call themselves a brokerage, but asking the questions above of their clients might help you get the straight scoop.

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