AdWords Resellers Say Google Plans to Stop Huge Mark-Ups on SMBs

Potentially dramatic changes appear to be on the horizon for some Google AdWords resellers. Though the search giant has been tight-lipped on the issue, the consensus among industry players speaking with ClickZ on Tuesday was that the “Authorized Reseller” program will be temporarily shuttered while honoring the few months left on individual firms’ contracts. In the meantime, Google will likely rename the program, they said, while definitely revamping it to include more transparency so resellers can no longer charge small-business clients huge mark-ups for AdWords ad placements.

Resellers Orange Soda, Dex One, and Yodle confirmed the rumored policy changes, which were first reported by Web marketing consultant Greg Sterling’s blog on Monday. Google spokesperson Deanna Yick declined to comment when reached by phone, instead pointing to the Mountain View, CA-based firm’s prepared statement that depicted the reseller program as “still active.”

Yodle CEO Court Cunningham’s talks with Google led him to characterize the program changes as ones that could “come down within the next couple of days” or “in a few weeks.” Jay Bean, CEO of Orange Soda, said, “Google says they are coming back with a bigger and better program. But we haven’t been given any indication on what that is.”

Indeed, uncertainty is in the air for the program’s 30-odd resellers, which include other brands like ReachLocal, WebVisible, AT&T, and Yellow Pages. The resellers typically run paid search campaigns – and organic search in some cases – for local SMBs, such as dentists, plumbers, retail shops, and restaurants.

At one point, Bean remarked that he merely “hoped” that Google would come back with a program at all. But when asked about the search giant attempting to cut out all middlemen to self-market SEM ads to SMBs, he responded, “If they were going to do that, they’d have to hire a two-to-three-thousand-person sales team. They haven’t done that at all.”

Bean said other resellers that marked up ads by “40 to 60 percent” were the target of the upcoming changes. He said his American Fork, UT-based firm normally charges 10 to 25 percent when reselling SEM ads, depending on the client’s AdWords budget.

“It’s hard to create $1,000 worth of value in the client’s mind for $400,” Bean said, while addressing the mark-ups that some resellers put on SMBs. “In [Google’s] mind, at least their clients will know where their dollars are going… I think in our industry, there’s not a lot of transparency with the small-business clients. Google’s been pushing for more transparency.”

Sterling, the consultant, said in his conversations with resellers that they fear losing account-creation tools and other technical features after all the dust settles. “Some of the companies involved really rely on those tools. I’ve had some people say to me privately that [they’d] be sorry to lose them.”

Meanwhile, Orange Soda, Yodle, and Dex One each suggested that their businesses would still work closely with Google in the future unless something surprisingly drastic is in the offing. Cunningham, from the New York-based Yodle, seemed the most optimistic. “I believe [Google is] saying, ‘Look, local resellers and national resellers are going to be treated the same way,'” he said. “The local market has matured enough to the point where that can actually happen.”

You can follow Christopher Heine on Twitter at @ChrisClickZ.

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