Why has YouTube reduced agency commission despite a rise in investment?
Digital media agencies who have been making windfall gains over the last couple of years due to increased advertisers’ interest in digital platforms, especially YouTube, are facing tough times now. YouTube is believed to have slashed media rebates (agency’s commission) by 20-30 per cent recently along with a revision in the slab structure for rebates. This means that top media agencies have to settle with lesser commission now, while smaller players are no longer eligible for rebates, industry sources told e4m.
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“Media agencies so far were receiving over 2-5 per cent rebate from Google, based on the volume of ads in YouTube. Since the revision of slabs this year, agencies who were receiving 5 per cent rebates, now get only 4 per cent, and those who were getting 3 per cent, now get just 2 per cent. The one percentage point drop (which means 25-35 per cent less rebate) is punching a big hole in agencies’ coffers since big agencies handle India’s top advertisers whose YouTube investment runs into hundreds of crores,” industry executives shared.
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Other agency leaders alleged, “The bar to get the rebates has also been hiked, making smaller agencies with low investment volumes ineligible for commissions.” Notably, the drop in agency rebates is despite the fact that globally advertisers have significantly increased their investment in YouTube - the world’s second-largest search engine, over the past few years. e4m reached out to Google India seeking their comments for the story. Their response was awaited till the time of filing this story. Monopoly With over 2.7 billion logged-in monthly users globally, businesses can tap into a vast audience. No surprises that the video giant posted $8.1 billion in ad sales for the Q1 of 2024, a 21 per cent increase YoY. Overall, Alphabet reported revenue of $80.54 billion, up 15%. With nearly 600 million users in India, the Google-owned video giant YouTube is a significant contributor to Google India's ad revenue, which was Rs 28,040 Cr ($3.4 billion) in FY23. This was a 12.5% increase YoY. Google’s share in India’s digital ad spend (Rs 50,000 Cr) is roughly 55 per cent. While Google India doesn’t report YouTube revenue separately, it is believed that YouTube is currently a $1 billion-plus business in the country, with ads being the primary driver. The development has made digital agencies high and dry but we have no other option but to keep mum because of the tech giant’s monopoly, industry leaders allege. “The digital advertising industry is largely scattered with plenty of independent players who have a little say in the matter even as it's directly affecting their business models,” another executive claimed.
Tags : Alphabet Youtube Google Agency Commission