Google is to scrap its European search advertising payments system which is worth as much as £50m a year to agencies.

The programme, called Best Practice Funding, will wind up at the end of 2008. It was launched by Google across Europe, the Middle East and Africa in 2006 giving agencies that used the search engine to book ad campaigns a percentage of money back based on how much they spent on behalf of clients.

The aim of BPF was to drive search advertising across the region by allowing investment in technology, training and research to create better campaigns. BPF sees agencies get from 3% to 8% of their ad spend returned each quarter depending on how much money they place with Google and other qualifying factors.

Each agency qualifying for the programme has had two staff members trained as Google Advertising Professionals - 2,000 have gone through the process to date. "Agencies are now at a level where they don't need a subsidy," said Damian Burns, head of agency relations for Google EMEA. "Everyone should be equal in an auction system, there shouldn't be buying clout, the value for clients is in how well agency campaigns perform." Mr Burns did add that there had been a "mixed" reaction from some agencies at the news.

Some media sources argued that it is another example of Google using its hugely dominant position in the search advertising market. BPF was introduced at the same time as Google scrapped its existing agency discount system. The system, similar to how media agencies get discounts for buying TV ad slots, had been a more generous and straightforward mechanism rewarding agencies with more discount on campaign spend.

There was a backlash from a number of agencies at the time, despite no similar system being offered by Google in other regions. For those agencies that have based their business model on using BPF money as profit in place of the traditional discount for volume buying, then the news today means client contracts will have to be drastically overhauled.

"Many agencies saw BPF as a way of acknowledging bulk buying power without calling it a rebate," said the director at one major media agency. "Google has definitely helped grow the industry but on the other hand their market power means they can do this and no one can boycott them. Some agencies will now be more cynical of Google's attitude to the sector."

One senior agency executive pointed out that Google now has an increasing number of big clients that run their campaigns directly with the search advertising giant and don't benefit from BPF - putting them at a disadvantage. "BPF coincided with the end of the agency discount," said Mark Howe, the country sales director at Google UK.

"It is still wrongly assumed that this was a move designed to challenge the role of agencies. But, the end of the agency discount was completely about upholding the primacy of the auction model." One agency director estimated that BPF could see as much as "tens of millions" of pounds per quarter clawed back by UK agencies.

Google's rival Yahoo! last year modified its agency discount system for search campaigns to offer a maximum of 10% rebate, down from 15%. MSN has maintained its discount rate at 10%, according to one media agency source.

Source: media.guardian.co.uk

Yesterday a select group of fifteen or so industry luminaries attended a highly confidential meeting at Google’s headquarters in Mountain View to discuss the company’s upcoming plans to address the “Facebook issue.”

The meeting was so secret that all attendees had to sign confidentiality and non-disclosure agreements strictly forbidding them from discussing what was shown to them at the meeting. Notwithstanding that NDA, I’ve now spoken with three of the attendees off record to get an understanding of what Google is planning. Google’s goal - to fight Facebook by being even more open than the Facebook Platform. If Facebook is 98% open, Google wants to be 100%.

The short version: Google will announce a new set of APIs on November 5 that will allow developers to leverage Google’s social graph data. They’ll start with Orkut and iGoogle (Google’s personalized home page), and expand from there to include Gmail, Google Talk and other Google services over time.

On November 5 we’ll likely see third party iGoogle gadgets that leverage Orkut’s social graph information - the most basic implementation of what Google is planning. From there we may see a lot more - such as the ability to pull Orkut data outside of Google and into third party applications via the APIs. And Google is also considering allowing third parties to join the party at the other end of the platform - meaning other social networks (think Bebo, Friendster, Twitter, Digg and thousands of others) to give access to their user data to developers through those same APIs.

And that is a potentially killer strategy. Facebook has a platform to allow third parties to build applications on Facebook itself. But what Google may be planning is significantly more open - allowing third parties to both push and pull data, into and out of Google and non-Google applications.

In the long run, Google seems to be planning to add a social layer on top of the entire suite of Google services, with Orkut as their initial main source of social graph information and, as I said above, possibly adding third party networks to the back end as well. Social networks would have little choice but to participate to get additional distribution and attention.

Google has a number of heavy hitters engaged in the project. Amar Gandhi, who apparently wasn’t at the meeting and whose title is the rather unassuming “Product Manager, Orkut,” was previously at Microsoft where he unsuccessfully tried to integrate social networking features into Vista. Brad Fitzpatrick, the chief architect of Six Apart until he joined Google in August, is leading the charge to make the Google project as open as possible. Patrick Chanezon, Google Evangelist, is herding the cats.

Lots of people noticed Fitzpatrick’s social graph post (linked in paragraph above), connected the dots to his new job at Google, and speculated that Google’s has been working on something really, really big in this area. This is now confirmed and, unless Google changes the launch date, we’ll be seeing the beginning of it on November 5.

Source: techcrunch.com