Caught in the middle: Agencies struggle to pay FB and Google for client work

The COVID-19 pandemic has impacted all businesses, and agencies too have not escaped unscathed. Many marketers have shifted a chunk of their ad budget to digital to capture more eyeballs. As advertising budgets take a hit for many, agencies have told A+M that clients are requesting for reviewing of payment terms. 

As the dependency on digital media continues to grow during this period, agencies have been turning to Facebook and Google for help - not only for business resources but also help for the extension of payment terms. While some might view the issue of clients extending payment terms and agencies seeking help from the duopoly as mutually exclusive, others might feel the noose around their necks tighten, getting caught in the middle of clients' request for payment extension while having to meet payment deadlines for Facebook and Google. 

But this is not to say the two tech giants haven't also reached out to help the ad and business communities at all. Currently, Facebook is offering US$100 million cash grants and ad credits to about 30,000 small businesses worldwide, while Google is giving US$340 million ad credits. Facebook's announcement was made on 17 March and a quick check by A+M found that the company is still working on eligibility details for all countries except the US, where the cash grant initiative has already come into effect. Likewise, Google's ad credits was announced on 27 March and it said that active advertisers since the beginning of 2019 will be informed of notifications through Google Ads about the ad credits. 

Agency heads A+M spoke to in Singapore and Malaysia on the condition of anonymity had mixed responses about this issue. While some agencies, mainly the independents, were struggling, others on the other hand have not found this to be a serious issue.

One Malaysian digital agency head said it is currently carrying out ad spend on a monthly basis on Facebook but so far, there is no existing support for agencies in terms of payment. He added that while Facebook has a business resource hub to help brands and agencies navigate this challenging times, the actual issue of the extension of payment terms for agencies has not been addressed and he has also yet to hear back from Facebook and Google about the ad grants and credits.

The actual issue of the extension of payment terms for agencies has not been addressed.

"It would be good if the likes of Facebook and Google could extend some form of credit in terms of the days to make payment. That would be a huge reward compared to the fluff that they have been sending out, which doesn't value add [to the situation]," the executive explained. 

Meanwhile, another digital agency leader with offices in Singapore and Malaysia, with approximately 20 members of the staff, applauded Facebook and Google for sharing insights on how businesses can tide through this period, and what trends they should look out for, saying that the team finds it helpful. However, the agency has also yet to hear from the duopoly when it comes to extending payment terms for their digital ad buys. 

We are buying on behalf of clients and if they fail to pay us, we are caught in the middle.

"We want the business but we also want to manage cash flow. Even clients pay us late, and we still have to pay Facebook and Google by a certain time. So deferment [of payment for agencies] would be the main thing to address. Facebook and Google have been sharing updates on what brands are doing during this period and how businesses can empower themselves, but the main issue now is the monetary espect," the executive said. The executive explained that what could be made easier on agencies, is if Facebook and Google enabled direct billing from clients so as to not burden the independent agencies.

Meanwhile, an independent agency lead in Singapore said companies such as Facebook and Google have not been fast in terms of supporting smaller businesses but he is not yet in a tough position as the government in Singapore been pretty prompt in its schemes to support SMEs. However, the bigger issue will arise when the lockdown gets extended and budget cuts start being implemented, the executive explained, adding that more severe cuts might come in the second and third quarter.

"Currently, we are constantly speaking to clients to understand at what point are they doing the cuts. Instead of doing monthly financials, we are doing it on a weekly basis. We are also regularly monitoring the resource and job flow to understand whether we are able to support the agency with the current resources we have. We are also actively initiating relevant ideas for clients and looking for pitches," the executive said when asked how the agency is trying to stay afloat during this period. 

Network agencies

Likewise, a network agency executive based in Malaysia said its headquarters has checked in with Google and Facebook for payment extension but both publishers have refused to do so.

A top executive in Malaysia said it is important to maintain open and transparent communication between clients, agencies and media companies such as Facebook, Google, and publishers during this period. He added that special packages should be created for clients during this period.

Also, media companies can also create special packages for clients just for this period. "With the media company, especially those with a multi-market presence, there is a lot of opportunity for them to cross pollinate ideas from other markets. If something has worked in Indonesia or other Southeast Asian countries, for example, I get them to quickly share it with us so there is a potential to reapply it on our clients. We keep the learning very open and fluid," the executive said.

"Companies are facing a hard time and are wondering if they should advertise just because they are getting cheap ad inventory. They might spend lesser money but it is on communications that is irrelevant. We are alerting clients about this. Instead of cutting budget or projects with media vendors, clients can change their ad copies [to make it more relevant].If your brand is relevant, tailor your communications in the way that matters. That is the type of communications are we are going back to clients with," the executive explained.

Meanwhile another network agency's top executive said Facebook and Google have been collaborative not only in managing cashflow but also creating content for both parties to work together.  "It has been meaningful, including getting insights on which sectors are coping. To me, it is working well, I don't want anything more or less," the executive said. "Globally, we are having group-level conversations with them to help navigate the situation," the executive said, adding that global network agencies do have better leverage when it comes having conversations with the duopoly.

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Google and Facebook respond

In a statement to A+M, Joanna Flint, director - Google Partners and Partner Innovation. Google Asia Pacific, said the ad credits for small businesses will be applicable across all countries Google Ads is available. "Credits are rolling out now and businesses will have until the end of 2020 to use them," she said. 

Flint, however, declined to comment on A+M's queries on whether Google is offering agency partners extended payment terms during this period, how many have requested for this, and the type of agreements it is striking with agency partners. "The payment terms with our customers and partners are confidential and we are not able to disclose details," Flint said. 

That said, Flint explained that the first thing Google did was to ensure that it could connect easily with its partners, especially with them working from home, and also ensuring that Google teams were available to them. Its second priority, Flint said, was to enable agency partners with a range of skill and enablement programmes so they could rapidly adapt to the changing situation. 

"Over the past few weeks, we have moved several trainings online and in some cases, also expanded the focus of these trainings towards newer areas that have come to the forefront," Flint said. According to her, some of these included providing training resources via online training programme Skillshop, which has seen global visits double since January 2020 and partners in Asia Pacific are becoming "some of the heaviest users of the programme".

Google is also sharing remote working tips, as well as insights and resources on consumer behaviour to help marketers tide through this challenging period. "Like everybody else, agencies need a personal connection to help them think through these challenges, as well as respond quickly. Through these platforms, programmes and tools, we aim to build on our strong partnership with advertising agencies and enable them to stay connected and productive," Flint explained.

Meanwhile, Facebook has heard loud and clear that a little financial support goes a long way and plans to share more details about its US$100 million cash grant and ad credits scheme soon. The company believes that this is "a critical injection" to help small businesses that need it most so they can keep the lights on and help pay employees. Facebook did not comment on Marketing's queries about extended payment terms, when the cash grant and ad credit scheme will roll out in Southeast Asia, and whether agency partners have requested for deferment of payment terms. 

Separately, the company is also continually updating its free eLearning courses and virtual training programmes and materials to reflect the current state of the world. Some of its resources include the business resource hub, which comprises resources developed by the marketing team and is live in 14 Asia Pacific countries including Singapore, Malaysia, the Philippines, Thailand, Vietnam and Indonesia. It also has playbooks to help businesses respond to customers in the face of COVID-19, which has been launched in eight languages - English, Simplified Chinese, Japanese, Bahasa Indonesia and Thai.

Additionally, businesses can also refer to the WhatsApp hub to learn how they can remain connected with consumers during the pandemic, as well as participate in webinars via its blueprint webinar training. In Southeast Asia, Facebook has a Facebook Live series on blueprint courses with the Malaysia Digital Economy Corporation while the team in Thailand has a webinar for local small businesses. 

Separately, Facebook has said in a blog post in March that its business is being adversely affected like many others worldwide. "We don't monetise many of the services where we’re seeing increased engagement, and we’ve seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19," the post said.

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