From Jan 1st 2009 the current Google Best Practice Funding programme will be no more.  The programme aimed at rewarding agencies who show growth of both clients and revenues by rewarding a % rebate on all spend with Google is being scrapped.  This move has been coming for a few years with Google gradually changing the programme and its conditions to slowly reduce the amount returned to agencies.  Originally set at the market rate of 15% for agency purchases Google has tweeked and changed their model to bring it down to a level where the bigger agencies are currently on receiving 6-8% commission on their sizeable Google budgets through the current Best Practice Funding Scheme.

This obviously as cause agencies to rethink their current commercial agreements with clients and could see some major shake-ups in the search marketing agency world as existing contracts become unmanageable without the commission in place.

What has become clear in the last couple of weeks however is what Google now plans to do with agency commission, they are going to use it to grow their non-search products.  It has been clear to see recently for those who deal with Google on a regular basis, that Google is desperate to expand their product mix outside of paid search.  They have launched media planning tools, display ad creation tools and have used every given opportunity to push the Google Placement Network.  Similarly with Youtube and their video advertising options, there has been national roadshows to agencies broadcasting the availability of their video advertising options.

And now this week Google has announced that they will be introducing agency commissions on all YouTube advertising (nma article here) and it is thought that the rebate amount is going to be back up to the 15% agencies enjoy on other media channels.  There are also rumours in the industry that a commission is set to be introduced on advertising across the Google Placement Network, although only for the largest players.

So it appears Google no longer feels it needs to compete in pay per click advertising due to its dominance, and that it is better placed rewarding advertisers in the areas it wishes to grow in.  You cant really fault them on that logic.  The removal of Best Practice Funding is unlikely to see agencies pulling spend from their Google Adwords campaigns, as it remains the best performing search engine around.  But by offering an incentive to broaden the products utilised they can begin to make headway in other areas.