While I appreciate DM News' coverage of my SES talk, Ms. Abramovich missed my main point. She wrote:
Alan Rimm-Kaufman, founder and president of the Rimm-Kaufman Group, Charlottesville, VA, said that the best search engine marketing agency fee structure is pay per performance.As "pay per performance" is usually a synonym for "revenue share", no, I did not say that. My session was titled "The Best SEM Agency Fee Structure is Capped Percentage Of Ad-Spend". Even clearer, my 7th slide was titled "Bashing Revenue Share". Ms. Abramovich's headline -- "Poor results? Terminate client-vendor relationship in 15 days" -- grabs attention, but wasn't my main point. A contract shouldn't be terminated for a single poor week. A short out means if things are not acceptable for the client for sufficiently long, the client has the option to make a quick change. As a former retailer, I know fast outs are important and fair. Here's an overview of my talk
- Search is young: agency payment structures haven't converaged to the best model yet.
- Payment structures (not only rates) matter. When we review data from a competitor for a prospective client, we can typically detect the other agency's fee structure from the term list and performance data. Comp structures drive how agencies approach search.
- We think % of adspend is better than % of revenue (pay for performance) for several reasons:
- Sales on client's brand name. Sales from search on a retailer's brand terms are often highly significant. I gave one real client example where 48% of the sales came from 5 terms -- variations of their brand name -- which accounted for 4% of the cost and 0.03% of the active term list.
- Information sharing. If an agency is compensated like an affiliate, they operate like an affilate, not like a marketing partner.
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