Google, which apparently is going to sell AdWords in China through a distributor system, is catching flack from those distributors, who believe their 20% comission is too low.
According to Gwinnett Daily Online:
Google has been actively expanding its presence in China over the last few months. The search engine giant set up its first China office in Shanghai in April of 2005 and has already entered into distribution agreements with three Chinese distributors for its ad services, namely Shanghai HotSales, Beijing-based ce.net.cn (http://www.ce.net.cn), Xiamen-based zzy.cn (http://www.zzy.cn), while negotiating with a fourth distributor, so far identified only as a Shenzhen-based company.
Each of these four distributors will be responsible for selling Google’s ad services in specific geographical regions of Mainland China. Google, in return, will give them up to 20% of ad sales, plus up to 20% of services fees charged to ad buyers.
Now, I always thought that 20% is a pretty standard commission. In fact, I have a standing offer to anyone, even readers of this blog, to procure advertising for this blog in exchange for 20% of the sale. The article claims that commissions are much higher in China.
“Google’s competitors in China, such as 3721, give as much as 50% of sales revenues to top distributors. Comparatively, this makes Google’s offer far less motivating,” the source said. “I am doubtful Google’s ad services will sell well in China.”
For just under half of Google’s ad sales, this is a non-issue, as Google is also playing the role of ad sales provider. In the Google Network, where Google AdSense is provided, Google is pulling a commission off sales that it provides for all partner websites. In that case, Google’s provided 20% to the Chinese distributors could be construed as just under half of Google’s own commission, even though Google does not provide numbers as to how much of commission it takes.
For text ads on Google’s search sites, such an arguement doesn’t work, not without some creative accounting. Conceivably, Google AdWords could be seen as billing Google Search for its services, then remitting a portion of those profits to the distributors. A little odd, but I’ve been with organizations that do exactly that.
I believe the reason for the distributor structure is because Google is going with strict monthly pricing for ad sales in China, rather than pay-per-click. Google China calls it pay-for-performance, of P4P.
AdWords is Google’s branded pay-for-performance (P4P) advertising service that places relevant text-based ads both within Google and on external websites. Google’s AdWords services cost between RMB 600 (USD 73.98) and RMB 3,000 (USD 369.91) per month for Chinese advertising clients, depending on traffic level.
Nathan Weinberg writes the popular InsideGoogle blog, offering the latest news and insights about Google and search engines.
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