From a forum discussion on Agency fees with wrt to SEM Companies and SEs
Transparency of the cost of working with an agency is very, very critical to the way I do business and is, I believe, one of the reasons clients work with me instead of their large internet marketing agencies. Search Marketing is a different beast and agency fees do not fit the model. Clients have the ability to log into any of their accounts on Google, Yahoo, etc to see what the cost per click and spending levels are. Many clients are working at that granular level. Granted clients have always been able to log into doubleclick, etc but the information is not as straight forward as the reports we have access to - and the clients were not as interested as the metrics were taken more for granted. Transparency of costs to the client is critical as we are the ones who have established that model.
Right now the battle with Search Engines (SEs) taking clients from agencies is won by them often as they can 'save' the client our fees. If we cost 15% then SEs, specifically Google in the US, will offer management services for 'free' thus allowing the client to spend more on media buys. If we lobbyied google to provide agency kick-backs it would undermine us; we are the 'overhead' in the equation.
I pass all discounts, kick-backs (ie overture in the UK) and credits back to the client. Maybe as the industry and SE direct sales organizations grow up and the value of agencies in the PPC world is recognized, then we can look to be rewarded for the time we save the SEs by managing the client accounts for them.