• Skip to primary navigation
  • Skip to main content
  • Services
    • SEO
    • PPC Management
    • Digital Marketing
    • Digital Strategy
    • Fractional CMO
    • Analytics
  • Industries
    • Healthcare
    • Government
    • Education
    • Fintech & Financial Services
    • Ecommerce
    • Manufacturing
    • Legal
    • Professional Services
  • Case Studies
  • Insights
  • Resources
    • White Papers
    • Webinars
  • About
  • Contact Us
fees and charges_Money, credit bank cards and coins on the home wood table with selective focus and soft sun light
Marketing & SEO
June 18, 2022

3 Reasons Profit-based PPC Agency Fees Are a Mistake

Avatar for Peter Devereaux
Peter Devereaux
When searching for a PPC agency, you’ll receive different PPC management prices. Usually, you can split these into two categories – fixed-fee and profit-based. Of course, there are...
Get in touch with Peter
PPC
110 views

Subscribe to our weekly newsletter

Stay up to date with the latest digital trends.

When searching for a PPC agency, you’ll receive different PPC management prices. Usually, you can split these into two categories – fixed-fee and profit-based. Of course, there are pros and cons to both of these, but in this article, we will discuss why profit-based fees are often a mistake – for both agencies and clients. 

How Much Do PPC Agencies Charge?

ppc ad cost_Pay per click, ppc or cost per click. Mouse pad connected with bitcoin symbol. 3d icon isolated on blue background. 3d rendering

45% of small businesses do some form of PPC, so the average cost for PPC management varies drastically based on the pricing model and contract type you choose.

a. Fixed Fee

Firstly, you may agree to a fixed monthly figure, no matter the size of your budget or the number of campaigns. With this type of contract, you’ll agree on the required tasks each month, and there are no additional bonus incentives for the agency.

Another option is a percentage of ad spend. As another fixed fee type, you’ll pay the agency more if you have a higher budget. For example, if your ad budget is $50,000 and the agency changes a 10% fee, you’ll pay $5,000 per month for their services. Based on the assumptions that PPC fees, the fees on a larger budget take more time to manage.

b. Profit-Based

There are a few variations of profit-based PPC agency costs. For example, if your business is an eCommerce store, you can implement a revenue-generated contract percentage. However, some may use a price-per-lead for those who don’t sell directly online, calculated by the expected value of every lead generated through your website.

There are many variables to consider with profit-based contracts – we’ll talk through three of the most important ones below and how they can be detrimental to all parties.

     1. Who Takes Credit for Sales?

Assuming who was responsible for a sale can be challenging unless you have a completely eCommerce business. While many people view PPC as a sales-focused advertising method, it’s supposed to target people at every level of the sales funnel.

Unless someone is a new user, visits your site for the first time from a PPC ad, and converts immediately, there is no way of knowing if your agency or someone else within your sales funnel generated that sale. The problem with introducing fees for sales into a PPC contract is that it assumes an agency had a hand in the entire sales process – which, for established businesses, is highly unlikely.

When a returning customer lands on your website via a PPC ad and purchases a product similar to or the same as something they’ve already purchased – should you give a fee to your PPC agency then? Probably not. However, no PPC management contracts are that sophisticated, meaning you may lose out on revenue.

On the flip side, what happens if your website goes down and users aren’t able to purchase for a specified period? Your PPC campaigns are still running and receiving clicks, meaning your ad spend hasn’t stopped. In this instance, your agency will be missing out. It’s not their fault your site is down, and their hard work is going to waste – if people can’t order, they don’t get paid.

     2. What Attribution Model Works Best?

Following on from the first point, you need to agree on an attribution model that works for you and your agency. As we’ve discovered, a first click or last-click attribution model completely negates the entire sales process. In addition, all attribution models require guesswork. There isn’t an exact science to deciding the most important factor, channel, or touch-point within a conversion.

Additionally, it will vary for every user. Yes, tools have advanced, you can easily compare models, and creating a more accurate representation of who’s responsible for sales has improved, but it will never be crystal clear.

It would be best if you found a finely-tuned attribution model that benefits both client and agency for profit-based digital ad pricing to work. We know this can be challenging. As a client, you don’t want to give 100% credit to an agency for your entire sales process.

On the other hand, your agency wants to take as much responsibility as possible, meaning paying more. Too often, PPC companies will use the last click model, piggyback off the hard work of all other channels, and implement remarketing, which skyrockets sales.

     3. Whose Data Tracking Do You Believe?

In a world where data is king, you’d think all platforms, tools, and models would give the same data output and analysis. They don’t. Unfortunately, some agencies have given the industry a bad rep by manipulating data and analyzing it in a way that always makes them look good.

They’ll gloss over their poor numbers and highlight their wins. Clients need to be wary of this when agreeing on what constitutes a sale. Allowing a PPC agency to take credit for a deal they didn’t contribute to is a slippery slope to paying an agency a lot of money for little work.

Also, you need to factor in the potential for third-party data tracking tools to malfunction, go down, or lose data. For example, many people use Google Analytics, so let’s assume you and your agency have agreed to use the tracking data from here. As a result, you could get a random injection of spam traffic, there could be an update that causes data loss, or another interruption could occur. All of these things impact your complex and fragile attribution model.

In Summary

Google estimates that businesses make $8 from every $1 spent on Google Ads, meaning an expert PPC agency can drastically improve your revenue. However, a profit-based contract is not the way to go. While you may think it motivates your agency to generate sales – sometimes it does – more often than not, they’ll infiltrate your existing sales funnel and claim those customers as their own.

If you opt for this model, your PPC ad costs can go through the roof, resulting in your business missing out on a considerable portion of your profits. Finally, it’s incredibly confusing, difficult to monitor, and strains relationships. Simply put, profit-based fees are not worth it.

Like what you just read? Share this article with your network and friends.
Email Facebook Linkedin Twitter
Related News
3 Reasons Profit-based PPC Agency Fees Are a Mistake
Peter Devereaux
June 18, 2022
Read more
Related Marketing & SEO Stories
remarketing_Magnifying glass is looking at leader explains employee tactics of advertising targeting. Training, briefing. Search strategies for effective advertising campaigns, customer reach. Business processes
Marketing & SEO
Jul 4, 2022
5 min read
How PPC Remarketing Works & Why You Should Use It

PPC (Pay Per Click) advertising is a form of online advertising where advertisers pay a fee each time one of their ads is clicked. It’s a for...

Avatar for Peter Devereaux
Author: Peter Devereaux
agency_Multiracial business team working together on new design. Design professional working around a tablet and looking at digital tablet.
Marketing & SEO
Jul 4, 2022
6 min read
Beginner’s Guide to PPC Management

PPC, or pay-per-click advertising, is a form of digital marketing where businesses can display ads on search engines and social media platforms and...

Avatar for Peter Devereaux
Author: Peter Devereaux
ROI_ROI, Return on investment business and technology concept. Virtual screen background.
Healthcare
Jul 4, 2022
6 min read
Analyzing ROI for Medical SEO

Digital marketing is the single best way to invest in your firm’s growth and expansion. With facets like social media, email campaigns, blogs, and ...

Avatar for Marina Turea
Author: Marina Turea
See all articles →
Digital Authority Partners
The next-gen digital partner for today’s makers & doers.

Digital Authority Partners
222 W Merchandise Mart Plaza #1212
Chicago, IL 60654
312-820-9893
[email protected]

Resources
Services
Case Studies
Insights
About
Industries
Locations

One newsletter, once a week Today's top digital insights delivered straight to your inbox.

Thank you, you're all signed up! We'll be delivering you valuable newsbites to your inbox soon!

FacebookTwitterLinkedinYoutube
Digital Authority Partners | Copyright © 202s2 All Rights Reserved.
X

Contact our team

This field is required.
This field is required.
The email address you entered is invalid.
The phone number you entered is invalid.
X

Thank you!

One of our consultants will get back to you within 24 hours.