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...
A Quicklist of PPC Agency Pricing Models
PPC Agencies have different ways to charge their clients for paid ad campaigns. They can charge a fixed amount every month or ask for a percentage depending on your ad spend. Some other PPC agencies prefer to base fees on the actual performance of an ad campaign.
Each PPC agency model has its advantages and disadvantages and fits a particular business situation.
Here is a quick list of PPC agency pricing models that you can check out to weigh which one will work for your company.
1. Per Hour
Credo reports that an average PPC agency in the United States charges around $151.88 per hour. Those in other countries charge around $136.85 per hour. The fee depends on the complexity of the PPC ad campaign and the project duration.
Most companies that require essential monitoring of PPC ads will choose a per-hour pricing model as they deem it the easiest way to charge clients. Clients will only compute the number of hours the PPC agency rendered for the project.
A per-hour charge works for simple PPC tasks such as monitoring the progress of an existing PPC ad campaign. However, charging a client per hour can be impractical for in-depth research projects.
- The tasks are well-defined, and the required output is specific.
- There is a regular update on the PPC ad campaign.
- Monitoring the PPC ad campaign is easier because it is simple and precise to the client's demands.
- There is a breakdown of assignments that are doable per hour.
- There is little motivation to grow the campaign further.
- The tasks can be monotonous.
- The client requires tangible output per hour, which PPC agents may find stressful.
2. Percentage of Ad Spend
Word Stream reports that a client spends an average of $1,000 to $10,000 on Google Ads, thus reflecting how much PPC agencies charge their clients.
The percentage of ad spend is the most popular PPC pricing model. A PPC agency charges a company depending on its ad spend. The charge typically goes from 10% to 20% of the ad spend. The amount becomes negotiable as the ad spend goes over $30,000. For example, the agency charges $1500 for ad spending of up to $10,000.
- Price increases with the volume of work; charges rise as your ad spend increases.
- Establishes a better relationship with clients because charges depend on ad spend rather than ad performance.
- This model triggers growing the PPC monthly budget rather than the client's return on investment (ROI).
- Some PPC agencies require a minimum ad spend for this model.
3. Management Fee + Percentage of Ad Spend
According to CallRail, monthly management fees range from $500 to $5000 per month. This rate is on top of the percentage of ad spend.
Clients and PPC agencies will benefit from this model if the ad projects are tedious and the nature of the business requires repeated A/B testing and regular market research. The management fee covers data analytics reporting and strategizing expenses.
Companies that require actual sales figures and conversion rates find this model better because they can request a thorough work output.
- This model helps clients and agencies focus on increasing the ROI.
- The client receives the same PPC ad management services regardless of changes in ad spend.
- The management fee can go toward conversion tracking instead.
- Clients can demand more progress monitoring reports.
- Goals and expectations for the success of the PPC ad are higher.
- The client can reiterate the need to increase return on ad spend (ROAS).
- Some agencies do not grant access to audiences, which limits clients from verifying accounts and PPC results.
- The management fee could go to purchasing the PPC software tracking tool instead.
4. Fixed Price
This model works best for companies with long-term contracts with a PPC agency. Clients pay the same monthly fee for services rendered regardless of the volume of tasks or the ad campaign's performance.
This model works best when hiring an agency with a team of PPC experts. The fixed monthly payment covers team members working on different facets of the ad campaigns.
This model is also easy to implement through the months of business partnership. Some clients transition from the hourly to the fixed price model as they retain a PPC agency for another year.
- Both parties can focus on creating and fulfilling long-term plans for the PPC project.
- Both parties can emphasize value on tasks.
- The focus is on delivering quality in all deliverables.
- Both parties can invest in software tools to aid in automated tracking.
- The goals are clear, and so are the deadlines.
- There’s a high expectation for a monthly delivery of outcomes.
- The client can demand a time commitment per day and month.
- Most PPC agencies using this model require a setup fee.
- The contract is usually long-term.
- The PPC agency needs to clarify the monthly ad spend.
- This model can drain the client's budget without stable ROI and ROAS.
- This model is not ideal for clients with seasonal businesses, which requires a more flexible model.
5. Performance-Based Pricing
Performance-based pricing model focuses on generating leads for clients. The agency usually sets a monthly lead target and charges the clients for the results.
The PPC agencies have to research modern lead generation techniques to gather more prospects.
- Drives the PPC agency to produce superb performance;
- Easy to measure results;
- Clients can adjust the lead quota per month or week with ease.
- The focus is on quantity, so the client needs to clarify the criteria for lead generation.
- No highlight on the aspects of the PPC ad campaign, thus affecting the ROI.
- Low quality of lead harms the conversion rate.
6. Milestone-Based Pricing
This PPC pricing model focuses more on quality results. The client pays for excellent metrics in high click-through rates, improved ROI and ROAS, and lower acquisition costs.
The PPC agency and the client must agree on goals and time frames to achieve higher results. The agency must also perfectly manage a PPC campaign and employ best practices to maximize the client’s investment.
- Better cooperation and sharing of data for excellent performance;
- Parties align strategies to meet clear, common goals.
- The focus is on accurate conversions that count as actual sales.
- A reduction in cost per click does not necessarily reduce the amount that the agency receives.
- Transparency in progress reporting.
- Strategies focus on delivering tangible results.
- Requires much time to accomplish goals.
- The agency must conduct in-depth research to gather sufficient data for analysis.
- Requires clear criteria for measuring quality output.
- The client must clarify expectations for ad campaigns.
- The agency must purchase software to analyze conversion rate, ROI, and ROAS.
- Both parties must agree on compensation for reaching the milestones.
The suitable PPC agency pricing model depends on the goals of the client and the complexity of the project. The duration of the campaign also influences the pricing for the PPC ad. Small and medium enterprises usually prefer the percentage of ad spend model because they can adjust their budget according to their sales projection.
However, companies retaining their PPC agencies find it practical to use the fixed price model because they plan to expand the business partnership.
Choose the model that fits your business situation and your PPC goals.