Google Referral Program

Posted: November 5, 2005

Google has had a beta referral program that was invite only for a while. It looks like they’re opening this up to more publishers.
Information here.

This has long been asked for and talked about.

I even went through the math once on Webmaster World about why large agencies should choose YSM before AdWords based on pure economics.

Entire WMW thread here.

It’s all about creating business rules, and knowing the nuances of these programs helps shape those rules.

Need to do some early morning math on business rules, this is always fun (and will probably have a couple mistakes, but it’ll show some logic ) It’s not meant to showcase anything other than why knowing everything about these programs is very important to many agencies (and thanks to AWA for providing a lot of answers on these subjects).

If an agency signs up 60 clients in a week whose average budget is $300-$500 a month (for ease, I’ll go w/ $400 a month). And, assuming these budgets are low enough (and in non competitive industries, thus they can spend their money wisely on overture or google - a big part of my business rules - but entirely separate logic as those clients fall into my premium services division):

If AdWords credit is based on twice the spend (i.e. they need to spend $200 on adwords for the agency to receive more credits).
It will take 2 weeks for the client to spend that money. (i.e. average spend $100/week, need to hit $200 in spend to meet credits). If that money is split with a client 50%/50%, that means the agency makes $50 additional dollars for those clients (i.e. $3000) after the initial two weeks.

After two weeks, the agency receives 60 more credits, which can be applied to the clients signed up the week before, which will now spend that money by the 2nd week, thus an agency can make an additional $3000 a week from the program (and thus can hire 2-3 individuals above what’s normally necessary to handle some of these client accounts).

If the average client budget falls below $400, say only 30 clients a week are spending $400, then it might be every 2 weeks that the agency receives more credits, thus only an additional $1500/week (and 1-2 additional people above normal to handle client accounts).

If the agency only ever receives 60 credits, then the program is worth using for 1-2 weeks a year, probably not worth adjusting a system to handle. Thus, only the premium clients who need both overture & google will receive the google credits.

On the same scenario, if an agency signs up 60 clients a week with overture, then they’ll make $20 for the signup, $10 on the account deposit (split w/ client 50/50%), thus $1800/week (plus the tiered bonuses w/ overture for signing up 240 clients/month). However, overture doesn’t have strict rules for the average budget ($30 minimum month), as that doesn’t matter as much as the initial client account - so less system business rules (this might seem like a small thing, but it actually shows part of the larger perceived ideological differences between google and overture).

Therefore, if the average budget is above $400, and google revolves credits, then it’s worth adjusting a system to use the google credits. If the average budget is below $400, then an agency makes more with overture.

If google creates the system where the credits revolve, then it’s worth using both systems and creating business rules based on budgetary spend and client account signups (i.e. if 100 clients are signed up a week whose average spend is $500, then 60 will be in google with a monthly budget of $400, while $100 is spent on overture, and the remaining 40 clients will definitely be on overture, and based on competition might have a google account).

Of course, this is for clients who can spend money wisely on either system, which is still the majority of all new advertisers. For competitive markets, then both systems need to be used, and thus those clients will receive all the credits from google.

Wow - post became longer than I expected, but still good logic. Of course, this doesn’t take into account the revenue that will be made by google by having an additional clients each month.