Google Accused of Plotting Against Advertising Resellers

Issue 490, October 18, 2010
Translated by Rose Scobie
Original article: [Chinese]

“Don’t be evil” Google has met with a host of frustrations in China. The most recent came from its decision to terminate the contracts of seven advertising resellers in eastern China.

On September 27, seven advertising reseller agencies, hereon referred to as “seven agencies”, in eastern China received an email from Google’s Northern China Marketing Department General Manager Xue Yu which stated, “Google would like to inform you that our agreement will be terminated on October 27.”

The seven agencies immediately tried to get in contact with Google through various channels, but were unable to do so.

On September 29, Aliza Knox, Head of Online Sales and Operations for Google Asia Pacific received a letter joint-signed by the seven agencies, titled, "Google China on the Verge of a Great Scandal." The letter accused Google's domestic staff of involvement in a plot to obtain 20 percent of project shares.

The letter informed Aliza Knox of a “cover up” in “the team you manage” and that the seven agencies hope they can negotiate the terms of contract termination. Aliza Knox has yet to respond to the letter.

On October 12, Fan Meiyong, general manager of eCentral, a Google ad reseller in Hangzhou, Zhejiang province and one of the seven agencies, stated, "The head of one of the major departments of Google China actually holds a 55 percent stake in a Beijing-based ad resale agency and has already secured 3 million yuan in financing. Through Google’s new call for bids, they will take over our agency rights and steal our advertising business.”

On October 13, President of Google China Liu Yun contacted the seven agencies and stated that he would actively talk things over with them.

In reality, since the beginning of the year when Google withdrew from mainland China, the sales of Google's agents have been declining. Under pressure from Google China's headquarters, they have proposed a channel readjustment plan.

Terminating Contracts

The seven agencies whose contracts have been terminated are, Hangzhou eCentral Co., Jiangsu Fu Network IT Co., Wenzhou Zhongzi Futou Technology Co., Yangzhou Dingjie Technology Co., Jinhua GoTo Network Advertising Co., Ningbo 5ENET Technology Co., and Xiamen Yizi Network Services Co.

The seven agencies in eastern China were successively granted awards by Google such as “Best Agency” and were commended for making up 41 percent of advertising sales nationwide. They were known as Google China’s “pioneers”, “planters” and “publicity team”.

In 2010, Google China renewed their contract with the seven agencies for the next two years. Up until September 26, Google continued to send them emails notifying them about new products and conferences.

”Google has been very inconsiderate in handling the agency problem.” The representatives said, “Till this day we still do not know which department or level made the decision; we were not given any warning, nor were we given a damage control plan.”

“Previously, Google insiders said that if sales do not improve, general headquarters would get rid of people responsible!” Fan Meigang believes, “This is a matter that concerns both public and private interests; publicly, Google headquarters wants to boost the performance of sales agents, but privately, they want to directly distribute profits, and put things in order before their departure.”

A Beijing company called Zoom Interactive (Beijing) Co., hereon referred to as Zoom Interactive, offered to purchase eCentral and other agents prior to the Google contract termination. Zoom is one of Google’s Beijing area ad resellers.

The seven agencies also revealed that Google China has four people in charge of its network channels, one of whom recently received a Mercedes worth several hundred thousand yuan from an ad reseller. The seven agencies also claim that previously a head of a network channel encouraged them to give bribes. 

Zoom Interactive

An insider has revealed, Zoom Interactive became Google China’s ninth ad reseller beginning in 2006, but its contract was later cancelled. Zoom Interactive's website states that the company was established in 2006, but its business materials state that it was established on February 25, 2008. According to its company website, Zoom Interactive offers marketing services to nearly 10,000 companies.

Google began operations in China in 2005 and presently has 26 advertising resellers. An industry insider said being a Google ad reseller is a lucrative post sought after by many technology companies.

As a Google ad reseller you receive 600 yuan a year from every client that opens an account, along with 700 yuan per year in technology service fees, and approximately 20 percent of ads sold.

The General Manager of Zoom Interactive, Cheng Yu, informed the EO that if the agency rights of the seven agencies are auctioned, from his own business point of view, he would consider participating in bidding for them.

Interests

According to what Google told the clients of the seven agencies, they would open up the tendering process for new ad reseller agencies.

The seven agencies have been working with Google for four years and they have several tens of thousands of clients. “Google waited until we had a profit model and had invested over 100 million yuan in tens of thousands of clients,” said an agent, “They waited until they could benefit from our commission before terminating our contract as Google ad resellers.”

The seven agencies believe that the reason their contracts were cancelled was that some people saw their generous profits and thought that they could profit by tendering bids again. According to the seven agencies, they make 300 million yuan annually and their business model is inherently profitable, so profits will continue to rise. 

 “Next, Google will tender bids for six ad resellers, but actually they will let Zoom Interactive and Beijing Zibolan Technology Development Co. win the bidding,” Fan Meiyong said.

The agencies’ suspicions of Google’s tendering process originated from an event that took place April this year. In Jiangsu province, Google called for bids and Yangzhou Dingjie Technology Co. was the highest bidder with a bid of 3 million yuan, but Google went with another company who only bid 400,000 yuan. According to Meiyong, as of now, the company still has not paid.

At 4pm on September 26, the seven agencies still had not had a reply form Aliza Knox and they held a protest at Google’s Shanghai office. That day at 6:30 pm, Google promised to suspend the tendering process for bids and promised to talk with the agents on October 8th.

On October 8, Google stated that the decision to suspend the contracts of the seven agencies was a world-wide, unanimous decision.

On October 11, the agencies staged a sit-in at Google’s Shanghai office. On the same day, praise for Google’s "extremely professional management" by other ad resellers appeared on the internet.

On October 12, the seven agencies publicly revealed that Google China has not always “complied with strict management standards.”

On October 13, Google China President Liu Yun contacted the seven agencies and stated that he would actively talk things over with them.

The agencies hope that Google will figure out an appropriate plan before their contracts expire and will be able to find a common ground for negotiations. On October 14 the agencies stated, “We want to reiterate our hope that Google China will investigate the truth, and use it to give the public a fair explanation.” What happens next? With “Google” how can anyone know?

This article was edited by Ruoji Tang