How Much Do PPC Agencies Cost? PPC Management Fees Explained
How much should you pay a PPC agency for managing your accounts?
The cost of hiring a PPC Agency to manage your ad accounts varies based on the pricing model used and the ranges of rates within each pricing model.
There is currently a lack of transparency on average PPC management rates. However, we have sold hundreds of PPC engagements and taken over dozens of accounts from various agencies since 2012, giving us a unique perspective into how PPC management fees and retainers are structured.
Some of the major factors that may influence agency pricing include:
- Monthly advertising spend
- Geographical region
- Experience and case studies
- The reputation of key team members
- Agency capacity to take on work
- Niche specialization
- Platform specialization
Read on to learn about the most common pricing models that you will encounter when trying to determine how much a PPC agency costs.
Flat Rate Pricing
There are two basic formats for flat rate PPC agency pricing. In the first format, which is more prevalent, the flat rate is tiered based on combined advertising spend. As the spend goes up, you reach break points where the flat rate also increases. In a sense, this is not dissimilar to a percentage of ad spend pricing model, but it can sometimes be a better value by comparison and has the added benefit of being a fixed rather than a variable cost.
In the second format, the flat rate is determined by some variable like the number of platforms or campaigns managed. For example, the agency might charge $2,500 per platform managed:
- Google Ads: $2,500
- Meta Ads: $2,500
- Amazon Ads: $2,500
Total agency flat rate: $7,500 per month
In both cases, it’s common to have a minimum flat rate, with prices ranging from $1,000 to $5,000 or more per month. Sometimes PPC agencies set a high floor to attract clients with larger monthly PPC budgets.
Sometimes known as “milestone” or “value-based pricing”, performance-based pricing models for PPC agencies depend on achieving some agreed-upon marker of performance. If you are an eCommerce brand, it could mean hitting a particular return-on-ad-spend (“ROAS”) target or gross profit milestone. If you’re a lead generator, it might mean achieving a target cost-per-acquisition or cost-per-lead.
These engagements are not always possible due to alignment on attribution, quality of measurement, and ability to agree upon a reasonable and beneficial target. However, when they work, they can really work well, because the incentives of the PPC agency and the client are aligned to a business outcome.
On occasion, you may come across a “hybrid” model where there is a flat base retainer in addition to a performance-based upside for the agency when they hit an agreed upon performance target.
The biggest upside to paying a PPC professional by the hour is flexibility. If you determine in advance how many hours you are wiling to stake in order to attempt to achieve some goal in your PPC account, you usually have some optionality to end the engagement if it isn’t working out.
The biggest drawback to the hourly pricing model is that not all hours are created equally. While some experienced and talented individuals can achieve remarkable ROI on an hour with their recommendations or optimizations, it’s hard to know what to expect as the result of an hours-based engagement, and it requires more overhead in managing the relationship.
If you go the freelancer route, you can expect to pay $100 – $250 per hour for top PPC talent. It will depend on whether they were a referral, you found them in a group, from their own thought leadership content, or through a freelancer agency or website.
Of course, you can always find someone who is willing to do it less, whether that is your neighbor’s cousin or a global contractor on fiverr. Do so at your own discretion, and do your due diligence to determine what will be done, how it will be done, how much it will really cost, and what types of results this person has achieved before. References help!
When you hire a PPC agency by the hour, which is not typical, it’s common to expect that you will pay a multiple (which might be 1.5x – 3x on the employee’s cost to the agency) if they are scaled beyond a small team size. This is also true if you go to a boutique talent firm like Marketer Hire to contract out with a vetted PPC professional. In those cases, it’s assumed that some of the risk is taken off of the table because of the due diligence process of the recruiting company, but you’re usually paying a premium because of “middle man” fees.
Percentage of Spend
The agency fee as a percentage of ad spend model remains popular despite being a carry over from the traditional media world. At it’s best, it’s intended to be a rough approximation of effort required by the agency to manage the account. However, one of the drawbacks is that it adds risk to the client because incentives are misaligned.
For example, the agency may try to win a larger budget over time regardless of improvements in bottom line performance. Because the fee is tied to spend rather than a business outcome, it’s possible for the agency to command a higher fee while the client sees no improvement in results.
If measurement isn’t pure, this is even messier. It’s possible to have a higher return on ad spend (“ROAS”) or more conversions reported in the Google Ads platform, for instance, while gross profit doesn’t pencil out, or payback period isn’t taken into account, which can lead to cash flow issues.
Typical percentage of spend fees start between 15 – 30% and scale downward as the budget increases. Here’s an example:
|Monthly Ad Spend||% of Spend||PPC Agency Fee||Total Cost to Client|
Additionally, it’s not uncommon for top PPC agencies to charge 10% – 12% of spend, regardless of monthly ad spend budget in today’s current environment. This means that if you reach six figures in monthly advertising spend, you are paying a significant retainer that may or may not be justified based on the level of work and results achieved.
What’s the best way to pay for PPC management services?
Ultimately, we feel that aligning the incentives of the agency and the advertiser and pursuing a business outcome goal is the best path forward. For brands thinking about outsourcing this critical digital marketing function, consider the total cost of the relationship, the potential benefits, and have clear goals and expectations for what you’d like to accomplish together in the partnership.