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Normal Agency PPC costs
Hey friends. Been part of PPC for a while reading posts and learning a ton from you all. It has been incredibly rewarding to be part of this thread.
Background: I worked for a nonprofit for a few years and ran Google, FB, and Insta ads, with some very basic training. Unfortunately our training I have been realizing though reading this sub was very limited, and not enough to give a good idea of how to run great campaigns.
I have a question about costs in working with an agency. I have had limited opportunity to interact with one.
I am looking to see the average costs of an agency running ads on FB and Google. I’m looking for an average cost, and how they charge a business, not an NPO.
Would someone help me out with explaining this to me? Or point me to a thread that would allow me to get a handle on this?
Thank you!
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5 Replies
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What’s “normal”? $500 for 10 minutes to run some crap through a KW tool as a deliverable may be considered “normal” by some. Charging clients thousands of dollars a month to “own” the clients accounts, and never provide them with any information as to how much of that money is actually going to advertising may be considered “normal” by others.
As a point of comparison to fees vs. adbuy, percentage of ad spend is the most apples to apples comparison. So do the math on your previous experience. How much were you getting paid (gross) vs. how much was being spent as a percentage?
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12+ year agency PPC director. There are a variety of ways to charge for PPC services, but most agencies will either charge (a) percentage of spend, either inclusive to the search budget or (more often) aside from the budget as “commission” (it’s not really a commission, since that creates perverse incentives against optimizing for CPC) or (b) a fee that typically revolves around staff required to administer the PPC spend in a manner appropriate to the needs of the client, with a margin of profit layer over the top. There can be blended models that include elements of either of these, or layers of bonusing for hitting KPIs or prearranged targets, but those two methods are the most typical.
That said, there are problems with each. I mentioned the perverse incentives of charging flat commission on search budget – basically, it creates an incentive for the agency to avoid optimizing for cost efficiency and, further, it incentivizes the agency to seek continually increasing search budgets, regardless of whether or not those budgets are strategically sound for the keyword set and targeting. Also there’s the element of charging commission on gross media budgets that include PPC but are not solely PPC, or even solely digital. Large agencies (and t his was the rule rather than the exception for the agencies I work for) will avoid pitching accounts in which they agency would only be buying one or few media channels, especially if that channel is just search. Good search tends to be labor intensive, far more than many CPM-bought channels. TV is a good example – budgets tend to be large, and placements are pre-negotiated, but once that’s in place, other than monitoring it’s mostly set it and forget it, so commission rates are among the negotiated elements and they tend to be relatively low, 4-6%, often less. There’s not way a commission rate like that can pay for the resources required to administer PPC – 15% is usually a minimum, and 20-22% are more likely, which advertisers used to paying lower commission rates tend to balk at. SO, a big agency will pitch all media, then subsume the cost requirements for PPC into the greater commission rate. basically, PPC would lose money as an individual channel, but as one among many, the profit margins from the other channels were usually enough to ensure adequate profit margin for the entire account.
Charging fee for service, on the other hand, has it’s own problems, and those problems usually strike right at the start, during scope negotiation. In order to determine an appropriate amount of people to staff an account, you first have to figure out what those people are going to do, and that’s in the scope doc, which is usually built off a standard (and often poorly written) template. Search scopes are almost never comprehensive enough to deal with evolving client needs, which means that often as not, the initial staffing requirements (and the fees associated with it) are insufficient to the actual work. Plus, in PPC a lot of the resources are often needed before a single dollar is spent – sometimes as much as 25 to 33% of total scoped man-hours, which means that an agency has to try and underserve a client to recoup those hours over time. That is rarely convenient for the client, who expects constant attention to the accounts. Which mean that the PPC team will usually put more hours into the account than they are scoped for, which means that the agency’s margins are (again) squeezed.
Now, that’s for big agencies. Smaller agencies are going to run up against the same problems, albeit on a small scale. But often you will find that smaller advertisers, with smaller budgets, tend to be more watchful of those budgets and more demanding from a client service standpoint than large advertisers. Large advertisers have a lot going on in media, tend to be more conservative regarding new ideas or radical strategic departures, and tolerant of less interaction with the search team. That is not the case with smaller advertisers, for which their PPC budgets often comprise a larger portion of their gross media budget and therefore are more top of mind from a KPI and goals standpoint.
TLDR: pricing search isn’t easy. Be as comprehensive with your scopes as you can, try not to overwork your people, and be realistic about your commission rates and upfront about optimizing for cost.
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So it seems like you only need some guidance and not the complete work done by the agency that will already slash the cost.
In my agency it works on a planned time basis as a recurring fee + additional performance based fees. So for example we estimate that we will need to work 5 hours per week on your account that would be a flat fee of $3000 + 1% of revenue above your baseline performance.
Now since you only need a “sparring partner” or someone to talk to about your work who can give you additional insights you can completely skip the performance part. Also operative work is often longer than “consulting” so that slashes cost even further.
So assuming it all comes down to a 1 hour talk every week I’d call anything around $600 a fair price. Of course it’s more complex as that since you both need to be in sync and finding a good sparring partner is hard these days since people often prefer feedback loop to being questioned on every move, but looking at the price alone I hope I could help.
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For ppc and digital media buys we charge 20% management fee that scales down as budget scales up. Example 10% for $1.2M yearly ad spend.
We also run lead generation programs where we take on the costs and change flat rates – ebook/whitepaper/case study $40 per download, $90 for a demo request.
Don’t run any hourly programs, or take on any creative work.
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Small agency owner here, in it for over 7+ years. There are many different pricing models and a wide range of price points.
As a rule of thumb, using % of ad spend, prices generally range from 10-25%. And most agencies using a % ad spend model have a minimum such as $300. Some agencies have tiered pricing too, lower % when you spend more… we do this.
Some agencies also have a one time set up fee for new clients. It can be a few hundred to a few thousand dollars.
Prices are based on what the market with bear, industry, effort required, and services provided.
I wrote a blog post about the pricing models here: [https://www.tenthousandfootview.com/which-ppc-management-fee-structure-is-right-for-you/](https://www.tenthousandfootview.com/which-ppc-management-fee-structure-is-right-for-you/)
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