Google has entered into a number of revenue-share arrangements with a selection of adtech vendors — little-known deals which some executives at companies operating in the space have described as unfair to smaller firms.
The deals promise adtech vendors big payouts from Google depending on how much their clients spend on search engine ads — including on other search platforms beyond Google. Some selected companies earn millions of dollars in these rebates from Google each year.
In 2018, California-based Marin Software inked one such “revenue share agreement” (RSA) with Google, under which the tech giant agreed to reimburse its new partner what has amounted to millions of dollars per quarter based on the volume of search revenue it manages for its customers across multiple search platforms. Marin offers search, social and display advertising management platform to advertisers and their ad agencies.
According to Marin’s most recent annual earnings report, published last week, Google paid out more than $12 million in 2019, and another $9 million in 2020. It’s a significant sum for a company reporting just shy of $30 million in net revenue and $12 million in gross profit for 2020 — and $49 million in net revenue and $26 million in gross profit the prior year. The agreement requires Marin to reinvest “a specified percentage of these revenue share payments in its search technology platform to drive innovation,” according to the SEC filing.
Marin said in that filing that it had “preliminary discussions” to extend its agreement with Google, which is currently set to end in September 2021. The company warned investors its “operations would be adversely affected” should the deal be terminated or adversely modified.
A Google spokesperson declined to comment on the record but confirmed to Insider that the company had a number of similar deals in place with other adtech partners. The spokesperson didn’t specify the number of agreements or the companies involved. Marin Software did not respond to requests for comment.
Kenshoo, a privately held digital ad buying platform that competes with Marin Software, has also had a similar revenue share arrangement with Google for a number of years, according to a person with direct knowledge of the deal. That deal is worth around “eight figures” annually to Kenshoo, the person said.
A Kenshoo spokesperson declined to confirm or deny the deal was in place. “We work closely with each media publisher/platform, Google included, to innovate within the digital media space, and to provide both channel and cross-publisher value in insights and marketing performance to the top-tier brands and agencies we support,” the spokesperson said.
Revenue-share agreements, rebates and other incentive programs have long been a contentious issue in the advertising sector. While ordinarily disclosed in contracts between vendors and their clients, advertisers have not always been aware of how many deals are in place industry-wide and many high-profile marketers have called for more transparency in their partner contracts in recent years.
For its part, Google discloses on its advertising policies help page that it periodically offers incentives — including cash payments, discounts on standard pricing, free media and access to special ad inventory — “to accelerate the adoption of and investment in Google’s advertising products, and to help partners build new capabilities to serve their customers.” (Advertising industry news site AdExchanger previously reported on Google’s incentive disclosures in 2016.)
Some smaller adtech startups have criticized what one executive described as ‘sweetheart deals’
Liam Patterson, CEO of UK-based adtech startup Bidnamic, told Insider these little-known RSA agreements were “a kick in the teeth” for smaller adtech companies struggling to survive the current turbulent economic conditions.
“These RSAs violate Google’s promise to provide a level playing field and mean that large retailers with big budgets that can afford to work with advertising agencies are better placed to win online,” he said.
Founded in 2018, Bidnamic helps clients use Google’s Shopping platform, and drive clicks to their online stores. But Patterson said that despite sending millions of dollars’ worth of investment Google’s way, he only recently learned deals like Marin’s were in place.
“I’ve been trying to speak to someone at Google about it but haven’t had any answers,” added Patterson.
Speaking to Insider, Clark Scott, the founder and CEO of Kentucky-based advertising firm Wyatt Online Media, was also critical of what he described as Marin’s “sweetheart deal” with Google.
“They’re not living up to their own standards,” Scott said. “It feels like a good old boys’ club, where they’re just pulling strings for their buddies.”
Google is facing mounting regulatory pressure in both the US and in Europe, related to allegations about anticompetitive practices within its search engine and display advertising businesses. Google has broadly refuted claims that it has engaged in anticompetitive behavior.
James Sarjantson, an expert in commercial and intellectual property law at legal firm LFC Law, told Insider it was difficult to say why Google might offer revenue share deals to some partners but not others.
“The agreement requires Marin to reinvest a certain percentage of the payments it receives exclusively into the growth, development, innovation and expansion of its ads business,” he said. “Clients spending their money with platforms like Marin will want to ensure that any agreements those platforms have with Google don’t unduly influence how and where they are being advised to invest their budgets.”
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