Common Rates and Payment Models of PPC Agencies

Most search engines and social media platforms are now pay-to-play spaces, with businesses only seeing large amounts of impressions and traffic when opting to use PPC advertising. The battle for organic positions can be a difficult and time-consuming endeavor. However, PPC can show results more quickly and with greater tangible evidence. The debate of SEO vs. PPC has been fought for too long; businesses need both.

Often, when employing a PPC agency, many businesses are blind to the cost factors involved and are not prepared for the different options available to them or the payment models that a PPC management agency might offer. We’re going to talk through the most popular and frequently used rates, contracts, and models, and we’ll get into the pros and cons of each, with the aim of making your PPC advertising cost as appealing as possible.

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1. Flat Fee Pricing

As the name suggests, flat-fee pricing means you’ll pay either a one-time or monthly fee, depending on the contract agreed to with your selected PPC management agency. You must clarify what is included in this fixed cost, enabling you to ensure that each element of the contract is fulfilled and the work is completed to a high standard.

     Pros of flat-fee pricing

Flat fee pricing is the most simplified pricing model. If you prefer consistent and easily measurable expenditures, then this pricing model is perfect for you. In addition, businesses that have inflexible budgets and only require static PPC ads management, with little change throughout the year, should opt for a flat fee structure.

     Cons of flat-fee pricing

There’s little room for flexibility within flat fee pricing models. Your PPC agency won’t have the powers to get as creative as possible with dynamic ads, landing pages, and more complex work. If your business is seasonal, we highly recommend steering clear of flat-fee pricing – unless you can agree to a contract priced differently for your quieter months.

In addition, when compared with other pricing models, PPC advertising companies may be less motivated to generate the most revenue possible for your business as they are not going to see any additional reward for their hard work – more on this later.

2. Percentage of Ad Spend

Any well-organized business will have a marketing budget, and within that budget, you define the amount you will spend on PPC advertising. On a percentage of ad spend contract, you need to factor in the amount you’re going to pay your agency for their services. For example, if you’ve set aside $10,000 per month and you agreed to a 20% ad spend contract, it will cost you $2,000 per month for the agency to manage your accounts. 

     Pros of percentage ad spend

Similar to the flat fee rate, if you’ve specified an amount per month you’d like to limit your PPC advertising spend to, then your monthly outgoing will be fixed at a specific dollar amount. This could motivate an agency to work harder for you. If you’re reaping great financial rewards from their work, you’ll likely put more budget towards PPC ads, meaning they get paid more.

This pricing model is likely more suited to those businesses with higher budgets, as the percentage often decreases depending on how high the ad spend is. 

     Cons of percentage ad spend

Smaller businesses will likely struggle with this method. Often these PPC advertising services come with a minimum value attached, meaning if your monthly budget falls below the threshold, you’ll still get charged their minimum amount. For example, if your monthly ad spend is $5,000 at a 20% fee, you should be paying $1000 to your agency. However, if their minimum ad budget is $10,000, you’ll still have to pay $2,000 for their services.

3. Flat Fee and Percentage of Ad Spend

An amalgamation of the two types we’ve mentioned above, this contract type gives agencies a little more security in their work and a bonus on top. Like any business, a PPC marketing agency has overheads and liabilities it has to pay. Charging a flat fee ensures they will be able to consistently cover these costs.

     Pros of flat fee and percentage of ad spend

The minimum monthly spend is often lower than a traditional percentage of spend contract, meaning smaller businesses could consider this option, though it may still not be the most cost-effective and fruitful.

Larger businesses would see the most benefit from this pricing model. It enables flexibility and makes the management of more complex campaigns easier.

     Cons of flat fee and percentage of ad spend

While this provides the agency with more security, it can work out to be more costly than using each of these pricing models individually. However, the minimum monthly spend will be lower, so costs could level out.

Realistically, smaller businesses will stay away from this option. Businesses with a larger budget would get their money’s worth of work, whereas those with a smaller budget would be spending a lot for little return.

4. Performance-Based Advertising

A business pays the PPC agency a specified amount for the revenue it generates or leads they qualify, meaning this model can be applied to both B2C and B2B businesses. 

     Pros of performance-based advertising

The agency gets paid based on the results they generate, so they’ll be motivated to perform at their best. In addition, if they underperform, your business isn’t impacted by a hefty fixed cost, protecting you against any underperforming months.

     Cons of performance-based advertising

This model can be challenging for B2B companies, especially if you’re not an eCommerce store. If you decide to use pay-per-lead as your metric, you need to ensure you’re paying for high-quality, conversion-ready leads, rather than every person who completes a form on your website. Otherwise, you could fall into the trap of paying for a high volume of poorly qualified leads that actually bring no revenue to your business.

In Summary

Finding a pricing structure that suits your business comes down to a few simple questions: what is your budget? How flexible is that budget? Is your business seasonal? Answer these and follow the guidelines above, and you’ll discover what works best for you.

It is difficult to decide on a pricing structure without clarity on your marketing budget. However, with a fixed fee package, you should expect pricing to start at $500 per month, and percentage-based contracts will be charged anywhere between 15% - 25% of ad spend of revenue generated.

If you’re still looking for more information and can't decide what’s right for you, our Las Vegas PPC agency can give your further guidance and offer packages and services to suit your needs.