Google’s recent revenue-sharing deal with Marin Software is the first time in Google’s history that it has given money to a platform rather than a publisher. This suggests that the economics of the digital ad management company are similar to that of a publisher, and speaks to the profitability opportunity for Google to keep Marin afloat. If it is more profitable for advertising channels to share the revenues with management platforms like Marin than to let them fail, the profit margins must be attractive. As an advertiser, your main goal is to generate results at the lowest cost. This historic partnership is a milestone in the digital advertising industry that brands should take into account and ask themselves, “What are the default settings on our advertising channels and are they bringing us the most effective ad spend?” “
Google offers a lifeboat
The deal announced Dec. 17 with Marin is the first time that Google or one of the dominant advertising channels (Facebook or Amazon) has agreed to share their revenue with a platform, an exchange usually reserved for publishers. MarinOne, Marin’s long-awaited SaaS ad management platform, claims to unify your Google, Facebook, and Amazon advertising efforts as well as optimize your budget allocation across all channels. It’s designed to save brands time and money while generating revenue more efficiently, while still being valuable enough that Google is launching a lifeboat.
Think about it
Marin’s revenues have been at half-mast for some time as their business portfolio is also steadily declining and their revenues hit half of their 2015 peak. Their stock (MRIN) was barely hovering above their 52-week low at $ 2, and their heavy cash consumption in 2018 left them just $ 13.4 million of unallocated cash at the end of the third quarter. Then Google’s revenue-sharing deal came to save the day with original revenue expectations for the fourth quarter down nearly 35% from last year, at a range of 11.6. to $ 12.1 million and an operating loss of $ 5.4 to $ 5.9 million. Marin has since adjusted their expectations, maintaining a range of $ 14.6 million to $ 15.1 million in fourth quarter revenue and an adjusted operating loss of $ 2.4 million to $ 2.9 million. Their stock price quickly climbed to $ 12 during the week and is now hovering around $ 6 per share. As stated in the deal, much of Google’s estimated $ 3 million in fourth-quarter revenue was intended to be reinvested in the development and expansion of Marin’s enterprise technology platform. Another sign of the importance of advertising platforms for the continued growth of advertising channels.
The revenue sharing agreement expires on September 30, 2021, with the possibility of renewal.
Who benefits whom?
Marin will receive payments from Google over the three-year agreement based on revenue generated through its platform in relation to its customers’ spending on Search Network ads appearing on Google Search and not Google. While Google continues to dominate the search engine arena, they are also required to pay for non-Google search income, primarily from Microsoft Bing. In other words, Google pays Marin a bribe for all revenue-generating search traffic.
It is clear that the revenue sharing agreement benefits Marin Software and why they are motivated to partner with Google. To decipher what Google will gain from it, you have to read between the lines. One assumption is that if Marin closed its doors, its customers would eventually find their way back to Google Ads. But the disruption to Google’s ad revenue would have been significant enough that they chose to share the profits with Marin to avoid any disruption to their advertising business.
This deal is historically intriguing, signaling that we are entering a new stage in how online business is generated and rewarded, but also unique in that Google has a competing product, Google Ad Manager. Even though Google has a conflict of interest in partnering with Marin, the deal still makes financial sense for the search engine giant.
Who is watching over you?
What creates such profit margins? This is because Marin customers and other Google Ad Manager users are probably not spending their advertising dollars wisely and efficiently.
Case in point: Google reduced the amount of control over exact match keywords by now allowing like words to match exact match keywords instead of exact match. For example, “online flowers” and “online flower” which are high search volume terms, have surprisingly different conversion rates and therefore deserve different CPCs, yet Google has now removed this feature, in theory, to make it easier for the user, but in reality, Google ultimately benefits.
Digital advertising is extremely complex with endless variables that need to be managed across multiple channels, making it easy to overspend for underperforming ads. Because results vary so much between platforms and brands, advertising channels end up controlling an advertiser’s spend instead of the other way around – with you at the helm.
All businesses are committed to maximizing their profits, and the digital advertising industry is no exception. Which means advertisers shouldn’t assume that an ad channel is looking for them and it’s more important than ever that they ensure that ad platforms and publishers don’t inadvertently take advantage of them, the advertiser. or brand. Since the Marin-Google deal is probably just the tip of the iceberg, they should keep an eye out for similar deals that may emerge this year.
However, they shouldn’t panic just yet. Instead, it should be seen by advertisers as yet another warning to end unnecessary digital ad spend and take control of campaigns. However, first they need to recognize that there is a problem, and then they need to stop relying on ad publishers and deepen their ad spend and campaigns. Third, they should take advantage of the tools and services available to help them regain control and win in digital advertising.
The biggest mistake they can potentially make is not acting on another warning sign regarding big ad publishers. So, in early 2019, advertisers should start executing their marketing plan, but they should remember that there is no better time than now to take a closer look at their digital marketing and make the changes that will have a impact. positive impact on growth and income.
Dave Atchison is the Managing Director of New Engen