Search Affiliate and Agency Model Comparisons
Business owners who are new in considering search engine marketing (aka paid search marketing) as a new marketing channel, often do not know the differences between a search marketing agency and a search marketing affiliate. Both business models can be used to efficiently manage PPC search marketing campaigns, from as small only several hundred dollars a month, to as large a couple of million dollars per month. In choosing the right service (agency model or affiliate model), the client (the business/website owner) should consider the factors below:
- Managing Marketing Budgets
- Taking Financial Risks
- Making Marketing Decisions
- Deciding Performance Rewards
Search Agency Model
The client supplies the marketing budget in which the agency needs to spend on the search marketing campaigns per month, so there is no financial risk on the agency. The agency is often happy to charge a monthly fixed amount on the budget spent.
Often with this model, the client is the party that makes the marketing decisions. Depending on the client’s marketing goals, it can be to increase sales, to improve brand-awareness, or to do search arbitrage.
The client even has the right to enforce the agency to start with a list of potential keywords which is chosen by the client, though it may not be the best list of keywords in terms of conversions and sales (if the goal is not purely branding). Also, the client can enforce the agency to advertise on behalf only a set of selected products (or services), which may be highly profitable to the client in terms of profit margins.
The advantage is that the client can closely control the agency in terms of marketing spend. The client often can decide how much the agency should deserve to be paid. Also, the agency has advantage of communicating closely and regularly with the client regarding new promotions and marketing strategies that will take place and may affect the agency.
The disadvantage of this model is that the agency can often put very little efforts in keyword research and other optimization of the campaigns. As long as the agency can finish spending the monthly budget on a few high traffic and high cost-per-click keywords, the target is accomplished.
Search Affiliate Model
The search affiliate takes full risk on the financial side, as the marketing budget is pre-determined and self-funded by the affiliate. The search affiliate works on a performance-based goal usually such as revenue share on a fixed period of time (cookie period) or a fixed payment on a per sale basis (pay-per-sale).
The advantage to the client is that, the performance-based model forces the affiliate to be adventurous and expand the keyword lists towards the longer-tail. This long-tail approach will gradually lower the marketing cost, and eventually the affiliate will often recover more than sufficient financially to re-invest in more rounds of keyword expansion.
The disadvantage is that the client has no clue how much exactly the affiliate earns (as the affiliate is not required to disclose the marketing spend to the client). The leaves some important questions to the client as the affiliate has been growing on revenues: Should the revenue share be increased, decreased or the same in the coming month?
Besides marketing budgets, the client often has no real control over how many keywords, on what search engines and what products (or services) the affiliate advertises. Also, the client has no right to control when the affiliate should or should not spend to advertise.
Posted on August 7, 2007
Filed Under PPC |
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2 Responses to “Search Affiliate and Agency Model Comparisons”
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This is a fair comparison of the two methods. I have worked for both sides in the past, so I speak from some experience.
The UK Pay Per Click agency I worked for did exactly as you said, focusing on a few generic high-cost keywords to get the conversions. Mediocre ROI indeed.
I have also dabbled in Search Affiliate Marketing in the past, and I am getting seriously into it at the moment. I am working on both the UK and Chinese market.
If I was a business, I would mostly probably choose the affiliate model. This will ensure a larger marketing reach (via more keywords) and set costs.
[...] share business model may require great amount of trust between the client and the PPC manager. Many PPC search affiliates are willing to use this [...]