Goodbye Black Box

The days of ‘black box’ digital advertising packages appears to be coming to a close. Black box refers the idea that you pay your digital vendor or agency a monthly amount to provide a host of online services and they ‘optimize’ it among various digital elements such as paid search through Google and Bing, retargeting ads, banner ads, in banner video, search retargeting, or any of a host of other types of digital advertising. While there are positive points to this approach, it has also presented an opportunity for vendors to provide less than full disclosure regarding the ‘third-party’ fees they are actually charging to manage these services.

Google is about to change all that with two new requirements aimed at increasing transparency and accountability of third-party partners. Starting in November, agencies and other third-party firms and individuals that manage Google advertising for customers will need to conform to new third-party policies. The current policy mandates that third-parties disclose Ad Words media costs, clicks, and impressions at the account level. Now all management fees must be disclosed on invoices and be itemized to show the net cost of the Google portion separate from any management fees or mark-up.

Here are some excerpts from that communication

“Management fees. Third parties often charge a management fee for the valuable services they provide. When sharing Google advertising cost data with customers, report the exact amount charged by Google, exclusive of any fees that you charge.

For example, if you provide your customers with daily cost and performance reporting at the keyword level across all advertising networks, you are now also required to provide reporting on daily cost and performance specifically for AdWords keywords“

The new policy extends not only to what information needs to be provided, but also how:

“Share your Google advertising cost and performance reports in a way that makes it easy for your customers to access the reports, such as by email or via your website. Alternatively, you can meet this reporting requirement by allowing your customers to sign in to their Google advertising accounts directly to access their cost and performance data.”

Google has also made it clear what will happen if the third-party partner doesn’t follow the new rules:

“If a vendor violates this policy corrective action can include disqualifying them from Google Partners, AdWords API Standard Access, AdWords API access, and/or terminating your AdWords accounts if violations of these policies continue.”

Notice here the term “your” account, because while Google is referring to the third-party, it is actually your account, your campaigns that could be impacted. Reason enough to ask your vendor for your API number.

To a larger issue, beyond just the new disclosure requirements, is the topic of what will happen to pricing and service now that ‘all the cards’ regarding fees will be on the table. While my boutique digital firm charges a flat 20% fee (which we’ve been disclosing to clients for years), my own research suggests that some of the biggest names in the industry have a fee structure more typically in the 30% to in some cases approaching the 50% fee range.

One would expect these providers are already anticipating huge pushback from individual dealerships, as well as the manufacturers that co-op or reimbursement them, and are already working to re-price their services to either shift the cost somewhere else in the relationship, or reduce the level of service they provide. It’s also a fair guess that manufacturers will further clarify exactly what portion of these fees they are willing, or unwilling, to pay. What will be in impact of these changes? Since AdWords is typically the largest portion of a dealership’s monthly digital spend by far, these new disclosure requirements, and the fee structures they reveal, could prove to be a real game changer in the on line battle for customers. Stay tuned.

Based in Seattle, Ed Steenman owns and operates a full service advertising agency that provides integrated digital and traditional solutions specific to the needs of automotive dealerships. He can be reached at [email protected].

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Ed Steenman

Owner Steenman Associates & Advisory Board Member at BWC Strategy LLC

Ed Steenman is the owner of Steenman Associates that provides traditional and digital media services to automotive dealerships and dealer groups nationally. An internationally recognized writer and presenter on social media and digital strategies, Ed Steenman and his team have been on the 'bleeding edge' of the digital revolution both presenting and implementing digital strategies for a diverse group of clientele. Ed is a regular contributor to leading industry publications including Dealer Marketing Magazine and Construction Equipment Distribution Magazine, as well as a regular guest lecturer at Seattle University and a recurring judge for State DECA events. Recent engagements include keynotes and breakout sessions for Volkswagen of Mexico, the Associated Equipment Dealers Lawson Executive Summit in Chicago and others.