The Times of London has revealed that of the £60 million commission paid by London Capital & Finance to its marketing agent Surge, £26 million was spent on marketing, of which £20 million went to Google.
Google was paid more than £20 million to promote high-risk mini-bonds for London Capital & Finance, the collapsed investment firm at the centre of a fraud investigation.
The Times has learnt that Surge Group, a digital marketing firm that was contracted by LCF to raise capital from investors, used the bulk of the money it spent on marketing to buy advertising via the search engine giant.
A person close to the matter said Surge spent about £26 million on marketing for LCF between 2015 and last year, with about 90 per cent of that sum going to Google.
To put that figure into context, a half-time advert at the NFL Superbowl costs about £4 million. Superbowl adverts are traditionally the biggest advertising opportunity on the planet, with £4 million buying you 30 seconds on front of 100 million people, or 800,000 human-hours of exposure.
But obviously London Capital & Finance wouldn’t have advertised at the Superbowl. The United States of America has meaningful securities legislation.
The fact that almost 10% of LCF investors’ money went to Google is fairly staggering. We already knew that Surge was an extremely expensive marketing channel for LCF, but didn’t know until now that the same was true of Google.
Until the ban on commission in 2012, regulated investments in the UK most commonly paid 3% initial commission to agents plus 0.5% each year or up to 7% without recurring commission. Even in the modern era, a marketing channel for an investment that costs £1 for every £10 you raise is a very expensive one.
The LCF administrators have already asked Surge to repay the profit element of the commission it received. Surge has so far not responded in public. Whether the administrators will make the same request of Google is yet to be seen, but the chances of Google repaying its £20 million seem slim to none.
It is worth bearing that £20 million figure in mind the next time Google claims it would be impractical to vet all of its ads to ensure it did not facilitate and receive stolen money from fraudulent investments or other scams by carrying their adverts.
Not that this applies to LCF. Thanks to the FCA giving it authorisation, even a prudent advertiser would have no qualms about allowing its Section-21-approved adverts onto the platform.
A spokesman for Google refused to comment. A spokesman for Surge says that LCF signed off all marketing materials and promotions.