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Advertising Business Models – What You Should Know

When it comes to AdWords management companies, businesses have lots of choices.  We offer paid search management services, but so do tons of other agencies… and some of them are quite large.  So large, in fact, they are generating a significant amount of revenue for Google through AdWords spend.  Some agencies benefit from the SMB Partner Program, which offers several great perks for the agency and clients alike, and at first glance appears to be a pure positive.  And it pretty much is, for the agency.  For small and medium sized businesses, however, there are a few important things you should know before agreeing to work with any SEM agency.

Pricing and Percentage of Ad Spend

One popular pricing model for SEM agencies is one that is based on a percentage of ad spend.  It’s easy to see how this could lead to questionable suggestions down the road… after all, AdWords is designed in such a way that you can attempt to bury your competition with budget… so, if your ads are ranking 4th or 5th behind your competitors, an agency can tell you “you should increase your spend to catch up to them” without it being a lie.  Nevermind looking for opportunities to optimize your marketing budget with other channels.

This pricing model can lead to shady, and sometimes manipulative behaviour that every business owner should be on the lookout for.  More ad spend can produce better results, but that doesn’t always make it the best path forward.

Google Perks and Kickbacks

Take a look at the “Performance Incentives” noted at the bottom of this graphic:

To become one of Google’s Premier Partners, an agency has to be quite large.  Large enough to constitute a sizeable AdWords spend, which directly profits Google.  The “Performance Incentives” are there to encourage this spend.  Since the agency gets these kickbacks from Google, it encourages them to focus more of their clients spend in AdWords.  Now, we certainly aren’t out to vilify Google or their Partner Program, but it’s worth knowing how these agencies benefit from their client’s spend allocation, and it’s often built into their business model as a source of revenue.  Since it benefits them to recommend AdWords, it makes sense that they would recommend a higher AdWords spend as opposed to, say, Facebook or Bing.  But what if your marketing budget is better spent elsewhere?

AdWords Express and Writing Your Own Ads

AdWords Express is yet another options for businesses looking to get into the SEM world.  Unlike working with an agency, AdWords Express is designed with the business owner themselves in mind.  Working in conjunction with your Google Business Listing, AdWords Express makes it really easy for business owners to manage their own ad spend with AdWords.  Google representatives will even call businesses every few months to support them.  This support from Google is great, but just like with premier partners, it’s important to keep all of your options in mind.  It isn’t very likely for a Google representative to suggest lowering AdWords Express spend and reallocating some to other marketing efforts.  And avoiding having all your eggs in one basket is a bit of traditional wisdom that holds up especially well when it comes to marketing.

We Promise to Act on YOUR Best Interest

At COCG, we don’t charge a percentage of ad spend to manage your SEM campaigns.  We receive no “Performance Incentives” from Google.  Now, that’s not to say that we aren’t certified professionals in what we do… it’s just that we aren’t tied to any one marketing platform.  Our business model encourages us to recommend the best path forward for YOUR business, and not just throw more budget at AdWords for some kickbacks.  Whether that means building citations, writing new pages for your site, monthly SEO work, or anything else, we will only recommend what we believe will benefit you the most.  Not ourselves.  It’s worth keeping in mind when you hear from a big agency and the first thing they tell you is “you should spend more money on AdWords…”