Source: Google Shutting Reseller Program

This is a follow up to my earlier post on the rumor that Google was shuttering its AdWords reseller program.

I got an email this morning from someone, who asked not to be identified, and who said that Google confirmed the local AdWords reseller program in its current form is being shut down. The individual added that Google said the program may be reconstituted at some point in the future, although the timing of that was uncertain.

It thus does appear that this program, which was developed as a scalable way for Google to indirectly bring more local-SMBs into paid search and as a way for local publishers and media companies to bolster their online ad offerings, will be coming to an end.

I’ll be reaching out to Google for more information and potential confirmation. However, in response to the earlier rumors, Google issued the following statement:

“The Google AdWords Authorized Reseller Program is still active. We remain committed to building relationships with third party partners that enable small and medium-sized businesses to realize the benefits of cost-efficient, targeted and measurable online advertising solutions like AdWords.“

This is all double hearsay, as they say in the law, but the source is highly credible.

___

Update: From another source I just was told that the program in its current form will end in a couple of days at the end of March. Existing resellers will lose free API access at that time, which is potentially significant. (Publishers will still have access, they’ll just have to pay now.)

This same source said there was discussion that a new version of the program would be introduced at some point later this year.

Overall, this is a potentially significant development for the local market. For some players it will represent an inconvenience and for others it could have a more serious adverse impact. It will likely motivate further “diversification” of traffic sources among local publishers and sales channels.

Update 2: Here’s a more upbeat perspective from another party involved:

Google previously provided higher levels of support (and in some cases incentives) to local resellers and has decided that local resellers should be treated like other agencies where they have and account manager and pay for API access, since the local channel has matured.

I view this as a sign of success for local that the channel does not need extra care and feeding but can stand on its own. The churn issue is not a channel issue – Google has high churn for smbs who use adwords directly.

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21 Responses to “Source: Google Shutting Reseller Program”

  1. Tom Crandall Says:

    Greg,

    How do you believe the closing of the program will affect the largest resellers and their customers?

  2. Greg Sterling Says:

    API access and account creation tools. Some folks were apparently receiving some “incentive payments” too, which will end I believe. Google is frustrated by high markups on its traffic and heavy churn and it presumably is trying to address that in the program.

  3. Sources: Google Terminating AdWords Reseller Program (For Now) Says:

    [...] local AdWords reseller program, I’ve received two separate confirmations of this today from credible sources. Both confirmed that Google is indeed shuttering the current form of the program and one said that [...]

  4. Mike Says:

    Hey Greg,

    While the second update certainly puts a more positive spin on the news it doesn’t reflect the reality of the situation and the ripple effect this change will have on the publishers/resellers it impacts (who, in aggregate, are managing many tens of thousands of small budget PPC campaigns worldwide). As you know, average monthly PPC budgets for most of these organizations are well below $300/mo (even at the high end in this channel monthly PPC budgets are well below $1000/mo).

    These are not agencies managing $100k/mo or even $10k/mo campaigns. 9 out of 10 regional/national agencies wouldn’t touch the campaigns these publishers/resellers are managing. Yes, there are local agencies that can and do effectively support these advertisers today but at no where near the scale of the large resellers (like AT&T, Reachlocal, Dex, SuperMedia, Yodle, etc.).

    Treating these organizations as agencies is a simple response to a complex problem that will exacerbate some of the issues already plaguing the channel (as, among other things, publishers scramble to find traffic from other less reliable sources and, due to increased API costs, do a less professional job in setting up and optimizing these campaigns thereby further diluting the product).

    As you and your audience have discussed on many occasions, the resellers’ margins on these products are quite small (and/or negative) even when they keep 50% or more of the retail price. Given this, taking away the incentive plan and adding API costs to the mix (especially for resellers who are actually optimizing and attempting to set-up and manage these campaigns the right way) is definitely a non-trivial development for the local market. It is most certainly not a validation of or “a sign of success for local”. It is the exact opposite of that.

    As you and others have indicated, it is the action of a company that is questioning the value of the channel and is deeply concerned about churn, 100% CPC mark-ups, and the negative impact the performance of these products is very likely having on its brand (at the end of the day, all of these companies are really selling Google – no disrespect to Yahoo and Bing).

    For an engineering company that has grown to over $20 billion in revenue on a largely self-provisioned platform (with the notable exception being the agencies that manage the PPC spends of many of the largest Google advertisers), these types of results bring into question the value of these “feet on the street” (or phone, in the case of Yodle and others). I get that and share their concerns.

    However, I personally believe that the resellers in this space (and their sales organizations, given the proper training) can add a great deal of value to the local ecosystem. They do, however, need the support of Google and the other search engines. Small businesses today are still sold advertising…they don’t buy it (I’m talking on scale here). This costs money. Add to that the complexity of Google’s product (in terms of proper set-up and management) and the resulting cost of bringing these products to SMBs and supporting those SMBs at the monthly retail prices they are willing to pay and doing it at scale and you end up in the “Mountain View, we have a problem” situation we find ourselves in today. All you have to do is look at The Reachlocal S-1 to see that (a company which has a higher average order value and doesn’t have near the infrastructure costs and baggage of the yellow page organizations who account for the majority of the accounts being sold through this channel).

    Unless Google is willing to do more to support these resellers in their effort to bring these products to their advertisers (put more stringent guidelines in place and add transparency requirements to enhance the overall quality of the product in the market but increase incentives, don’t eliminate them) or invest in the resources to do it themselves (build its own sales and support organizations), they will be leaving a non-trivial amount of money on the table (or perhaps they believe they can capture it through simplified products like the Enhanced Listing product being tested in Houston and San Jose).

    Given the challenges of local (and, in particular, local PPC), maybe they are OK with that or, as I indicate above, are in the process of shifting their go-to-market strategy to reflect a simplified product strategy (focused on the Local Business Center). If not and they are actually intent on capturing this revenue but do, in fact, reduce or remove reseller incentives altogether in the next iteration of the reseller agreement, then we may all get a chance to see what a Google local sales organization looks like much sooner than we initially expected.

  5. Greg Sterling Says:

    Mike:

    I think there’s no question the program is valuable for all involved. Your points are well taken. We’ll see if/when a new program shows up what changes have been made . . .

  6. Joe Says:

    Mike +1 buddy…great job

  7. Mark Armory Says:

    This is Google’s response to the high markup and bad customer service we see with some resellers like Reach Local. I have seen from campaigns I’ve taken over, anywhere between a 3-400% markup on clicks. This has to hurt considering Reach Local is at the IPO stage of the game.

    Also there are alot of companies like AdZoo that claim they are resellers when they are not.

    From what I hear the resellers that have run clean campaigns and have invested in their platforms will be unhindered by this. This is just Google’s way of doing “quality control”.

    The real loss IMO is the SMB market that was just starting to take off.

  8. SuperMedia Renews Local.com Deal, And . . . « Screenwerk Says:

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  10. George Says:

    Google stepped in for many reasons. Churn is high on their own Do It Yourself Platform so that ISNT one of the reasons they made this move. There simply are too many guys in the field now opening their call with “I am with Google”, “We work with Google”, etc then selling them a product where a lot of the money goes to management and other Search Engines. Google DID NOT make this decision to punish their largest resellers like Webvisible, ReachLocal or Yodle. They will continue to sell Google as if nothing happened. Its probably a step they should have taken long ago but since Google doesnt have that local salesforce it probably took awhile for the damage reports to filter back. The real shame here is the companies that will sell a $100-300 package to a lawyer, dentist, enter highly competitive vertical here and claim the campaign will bear fruit. This is what Google wants to shut down. Accounts sold at this level ALWAYS Churn, ALWAYS Run Horrible and ALWAYS GIVE GOOGLE A BAD NAME. Google doesnt want a bad name due to shady salespeople hawkingt something doomed to fail from the start.

  11. Dave Smith Says:

    we have heard similar that reseller program is not interesting for Google and is under evaluation.. we dont understand how google will get small businesses if not through the reseller program..

  12. Greg Sterling Says:

    It might be: a combination of simplified ads (enhanced, local listing ads) and telephone sales. Speculation on the last point.

    Also, if Google were to do a national ad campaign involving traditional media for its simplified self-service ads and/or the LBC it would see significant uptake in my view.

  13. Brian Says:

    Any new information on the Impact to Yodle and Reach Local? Will this change lower the cost to end users? I’ve read the article and post but so far have not read anything that speaks to what’s in it for the end users. Obviously no one likes to pay huge marks ups for keywords and 3-400% is hoggish. And you know what they say… Pigs get fat, hogs get slaughtered…

  14. Greg Sterling Says:

    Brian:

    Not sure what the impact (if any) will be yet.

  15. Mike Says:

    George,

    You’re correct, churn is high for SMBs that are self-provisioning on Google, but it should be lower in the reseller channel (due to the fact that the resellers are managing the program on the SMB’s behalf and supporting the SMB throughout the process). On paper, it should be an inherent benefit of this type of hands on approach to selling and supporting SMBs. In reality, however, that is not how it has played out. Churn for resellers is as high as 100% and, from what I’ve heard consistently in the marketplace, normally well above 60%. Now there are a host of factors at play when it comes to these churn rates, but at the end of the day there is no doubt that churn is a very real factor in Google’s decision to re-evaluate this program.

    I would also agree that Google is not reassesing the program to “punish” its largest resellers (companies like AT&T, RHD/DEX, ReachLocal, Yodle, etc.) but you can be certain that the churn rates, mark-ups, and lack of transparency of Google’s largest resellers have played a substantial role in its decision to modify the reseller program. Companies like these account for the largest number of accounts (active and cancelled) and are the most visible companies selling in this space today. If Google was satisfied with these organizations and the manner in which they are representing Google products in the marketplace, we wouldn’t be having this conversation right now.

    As for these large resellers ability to sell SEM as if nothing happened….we won’t know that for certain until Google provides us with details on what the reseller program looks like going forward.

  16. Google: 20% of Searches ‘Related to Location’ « Screenwerk Says:

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  17. Chris Says:

    Google is going to shut “Authorized Reseller of Adwords” down at the end of Feb, 2011. You would think Google would be concerned with all the money they would loose from eliminating this program(which they’ll convert into something more transparent) but Google’s response was…”Why would we be so concerned, we just walked away from Asia!”

    The unknown will be what does Google come up with to replace this so click markups aren’t manipulated like they are today.

  18. Solving Search Engine Marketing Mysteries | Part 4 Says:

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