Special Report : Profit Sharing - The Performance Marketing Model of the Future

Andreas Reiffen, who recently joined the Clicks2Customers team in Cape Town, and who hails from Germany, has done some very interesting research in the field of Performance Marketing, something that I have been a huge advocate of. It’s been the founding belief of Clicks2Customers that search marketing can only exist in a performance metric driven environment and that we see ourselves as an extension of the merchant themselves, as we invest in people, technology and infrastructure, and then leverage that investment across multiple clients on a pure risk basis. The amount of money we spend on R&D around search is not easily covered by all but the largest of merchants. By leveraging this cost across multiple clients, we are able to deliver a superior service, at cost incidental to the revenues.
Those in the know will agree that Search Marketing is infinitely more complex than what 99% of search marketers will agree to - and often this is just to massage their already fragile egos as this industry advances and becomes too complex for them. In most cases it’s their own ignorance which does not allow them to see the true complexities of the situation, and instead, rely on common thinking to solve complex problems around search, to the detriment of their clients. For example, the typical agency will tell the client how they manage keyword bidding effectively over thousands of keywords - keyword bidding is NOT search marketing.

To this end, we have established that the best way for a service provider and a merchant to co-exist is in the performance marketing space, where profit share is ultimately the goal, but an interim measure like revenue share can be a good proxy for profit share, if structured correctly.

When I speak to all but the most sophisticated of search marketers, including merchants themselves, the single biggest issue is that CMO’s, Marketing Managers & others within an organisation do not understand the channel, worry themselves with things like Brand bidding & display URL’s, when in actual fact, they have no real understanding on the impact of decisions made regarding these, but they think they do. And if these are their biggest issues, then they’re doomed to mediocrity in the search world. This reality is that search marketing is in it’s infancy, and during this period of time, education is very important. We’re trying to push the envelope and build the industry by releasing research like the cookie report that we released last month, as well as the profit sharing report mentioned in this post.
Profit shares bring along its own levels of complexity (which is detailed in the report), but suffice it to say that search marketing models with fees based on a either % of spend, hours or fixed fees are becoming as ancient as the Dodo.

Andreas has done a remarkable job of putting together fact, assumption and raw data to establish the argument as to why performance marketing works. Traditional & New Media agencies that offer paid search marketing services are on the backfoot with regard to search, as their metrics are not in line with the search engines themselves and their performance is not linked with their remuneration. I have been to many meetings where all I hear are complaints about their search providers, but they won’t change them, due to fear that the new provider might do even worse. It’s a sorry state of affairs. Often the agency has such a grip on the client due to the fact that they handle more than just search, the opportunity to expand the search side of the business is neglected. This is where affiliates & performance marketers often perform the best, which leads to even more insecurity from the agency standpoint.
What makes our business unique is our relentless belief that satisfying the search end user is of paramount importance and all other metrics will eventually revolve around this. This is the reason why we advocate performance based search marketing as a channel within search marketing. Search engines are platforms for marketing to end users and satisfying the needs of searchers - you still need a partner that is focused on understanding what the user wants, how each engine attempts to satisfy their users, and how to align the merchant’s interests with them. Focusing on the searcher will make any Search Engine Marketers (SEM) successful. Google have done a remarkable job of keeping their eye on this goal, and given their success, it would be a good idea to take a lesson out of their book.

I highly recommend that you read the Clicks2Customers Profit Sharing report!

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