While there has been no official announcement from Google and their Authorized Reseller program website is still live, rumors have been swirling that Google is ending it’s Authorized Adwords Program. The program as it exists today includes around 30 PPC Management companies and was designed to allow these companies to provide pay per click management services (Google Adwords) to the local SMB market. Companies who get approved in the program must achieve and maintain a client base of over 500 clients and get free API access.
Why is this a good thing for agencies and small businesses (SMB’s)? The program has been a great way for Google to gain more customers from the SMB space but has not been good for the SMB’s themselves due to the extreme markups by the Authorized Resellers and the lack of transparency to the SMB’s. For example, we have brought on clients who were previously using companies in Google’s Authorized Reseller program and found that they were getting only half of the clicks they should have been getting for the money they spent. We also spoke with a couple of the resellers about partnerships in order to funnel some of the smaller budget clients that our company could not service. We never formalized anything but quickly realized if they were willing to pay us 15% of the client’s ad spend just for the referral, they must be marking up the client’s ad spend to at least 30% and likely even higher. Google’s own website even advised the resellers to use a “Top Down” pricing approach including 50% margins. The business models spreadsheet on Google’s reseller website all include 45% margins (see http://www.google.com/intl/en/ads/premiersmbpartner/partners.html)
This type of markup is unheard of in the SEM agency world where a good PPC Management company may use a variety of pricing models for their services but rarely mark up more than 20% of ad spend and are typically closer to 10-15% of ad spend.
For SMB’s, this change will ultimately force PPC Management companies to be more transparent about their fees which is a good thing for the SMB’s that were not getting as much as they paid for. For agencies, it will be a good thing too and level the playing field. The market will become more competitive and SMB’s will pick agencies based on service an results.