Digital marketing is a major growth area in Australia. However, many business owners remain uncertain about what digital marketing actually means. This is due to factors such as the:

  • relative newness of many digital marketing techniques;
  • use of technical terms such as SEO; and 
  • fact that digital marketing agencies will often offer some digital marketing services but not others. 

If you are a business owner, however, it is important to understand how digital marketing works. This article will explain what digital marketing is and discuss some possible structures for setting up the payment of your business’ media spend.

What Is Digital Marketing?

Digital marketing refers to any kind of marketing done online. Below are some common types of digital marketing.

Search Engine Optimisation (SEO)

SEO refers to the techniques you use to improve your business’ chances of appearing on the first page of results from a search engine such as Google. 

For example, if you own a plumbing business, good SEO will ensure that your plumbing business appears on the first page of search results when someone searches ‘need a plumber’ on Google.

Pay-per-Click Marketing

Pay-per-click marketing refers to advertisements in search engine result lists or social media feeds. How much you pay for these advertisements is calculated according to how many clicks each advertisement receives.

Content Marketing

Content marketing is visual or written content you use to draw visitors to your website and social media platforms. The aim of the content is to generate leads and sales once visitors are on your website. 

Social Media Marketing

Social media marketing is the use of social media platforms such as Facebook, Twitter and Instagram to promote your business. You can use your business page to share posts with your followers. Ideally, your followers will then share these posts within their own networks. 

Affiliate Marketing

Affiliate marketing is the payment of a commission when others refer new customers to your business. Online affiliate marketing takes place through your affiliates’ online platforms, such as blogs or social media profiles. 

Influencer Marketing

Influencer marketing is the payment of a fee to an individual with a large social media following to promote your business’ products or services. 

Email Marketing

Email marketing refers to directly sending emails containing marketing content and offers to individuals and businesses. 

What Is My Digital Marketing Media Spend?

Your business’ media spend is the money you spend on advertising. In a digital marketing services contract between a digital marketing agency and your business, the media spend will be the amount you pay to third parties for digital media ad space or services. 

For example:

  • digital media ad space could be an ad on the side of a web page; and 
  • a digital media service could be a set of sponsored Instagram posts by an influencer. 

What Are the Available Structures for Payment of Media Spend?

Digital marketing services contracts typically involve an agency purchasing digital media on behalf of you, the client. You will need to agree with the agency on how to calculate and pay the media spend. Below are some common ways you can structure the payment of your media spend.

You Pay for the Media Yourself

You may wish to pay for the media yourself. In this case, the agency will suggest the media to be purchased and provide a referral. You will then have the option to purchase that media or look elsewhere. 

Advantages Disadvantages

You have the final say on whether to purchase the media.

You have complete transparency surrounding fees.

The agency does not handle any payment details on your behalf.

The agency may be unable to manage the digital marketing after your purchase (i.e. to track the success of the ad) if they did not directly complete the purchase.

You may not have enough experience to always choose the best option.

 

The Agency Holds Your Payment Details

In this case, the agency holds your payment details and uses them to pay third parties.

For example, the agency may ask for your credit card details and pass these onto the third party at the time of the purchase.

Advantages Disadvantages

The digital marketing agency remains in control of digital marketing decisions and can direct media spend at the advertising they believe will best promote your business.

The agency manages your account with the third party, including tracking statistics, on your behalf.

The agency holds your credit card details and is at risk of losing them or having them stolen.

You do not directly control your media spend. Expenses you do not recognise may appear on your credit card bill.

 

You Pay the Agency and the Agency Pays the Third Party

Finally, you can choose to pay the agency for the media spend and allow the agency to directly pay any third parties. This option involves the agency invoicing you for the fees or the estimated fees required to cover the media spend. You will pay the agency’s invoice before the agency pays the third party.

Advantages Disadvantages
The agency is in complete control of the media spend and managing accounts with third parties on your behalf.

The fees you pay to the agency are likely to be an estimate. You will need to pay or receive the difference between the fee you pay the agency and the fee the agency pays to third parties in future invoices. 

A third party could come back to the agency further down the track and state that a further amount is due, in which case, the agency may pass this fee on to you.

 

What About Digital Marketing Rebates?

Digital marketing agencies often have deals with media vendors to offer them rebates for purchases of a certain volume or amount of media. This is usually calculated as a percentage of the overall spend. Rebates are available on all types of media but they tend to be offered at the highest percentage for digital marketing. Rebates can be a sore topic in the industry as the agency perspective and the client perspective are often at odds. 

Agency Perspective

For agencies, rebates may be key to making a profit. Your agency may not wish to discuss any rebates they receive with you, the client, as doing so may reveal commercially sensitive details of deals with vendors. Agencies will sometimes accept lower service fees in a contract because they plan to recover the difference through rebates. 

Client Perspective

As the client, rebates may appear to be an unwelcome agency ‘trick’. If a rebate applies, you will pay more to the agency for its media spend than the actual costs it incurs. 

For example, if you pay $100,000 to the agency for a social media campaign and the agency pays this amount to the third party, your media spend will be $100,000. If the agency receives a 25% rebate on this amount 12 months later, the agency will keep the $25,000 for itself.

Transparency

Because of the focus on rebates in recent years, agencies may now be more transparent about any rebate deals and rebates they receive. In some cases, the agency may agree to pass on at least a portion of the rebate to you. In this case, you may want the right to audit rebates to ensure that the agency has been upfront.

Key Takeaways

Digital marketing is not as complicated as it may sound. An agency is usually best placed to help you set up and manage your digital marketing, including purchasing media from third parties. You should discuss the best method for making these payments with the agency. If the agency is ultimately responsible for paying the third party, you should consider how to handle any rebates. If you need help with drafting and reviewing digital marketing services contracts, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.
Jacqueline Gibson

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