Since the birth of pay-per-click (PPC) advertising, it’s been the norm for agencies to charge a percentage of the PPC spend. The rationale is really only historical and actually makes no sense, except to budgetary models when it offers the benefit to clients of estimating campaign costs. This, however, is a poor reason to use an outdated billing method which suffers due to:
- Front-loading the costs for the agency as there is no setup fee, as a result the percentage charge has to take this into account and the client can easily end up over-paying.
- Directly motivating the agency to spend more on PPC, perhaps needlessly. It’s certainly a poor approach if a client is looking to reduce, or better optimise, PPC spend.
- Isolate clients with small budgets. A 10% PPC fee is not likely to yield much in the way of skill or experience on a £3k per month budget.
The better solution is to pay for what you get. That includes setup fees, monthly and/or quarterly review costs, creative and testing bills. In addition, the client will need to pay for the administration and reporting functions. This closely ties the work done with the revenue yielded to the agency and decouples the PPC spend from the bill.
The added transparency that can exist should create a closer, more collaborative relationship where the shared goal is to squeeze more from the existing PPC budget by using brains and creativity rather than the brawn approach of “just spend more”.
To get the most from a flat-fee model you’d need to agree the vision, aims and tasks required and create a robust reporting structure so that everyone can see what is going on. The final, and critical element, is being honest – if either party are playing with a straight bat then the whole agreement will come tumbling down.
