There is no single way to charge for Adwords management, and therefore every agency seems to do differently.

This can make it difficult for clients to compare different offers, and understand what they’re getting for their money, and can make the process of selecting the right agency confusing. The fees that agencies charge for Adwords account management, and other forms of pay-per-click media can typically be broken down into five categories.

To make things a bit simpler, these five categories have been compared below, with the pros and cons given for each:
 

Comparison of Adwords Management Fee Methods

1. Percentage of Ad Spend

One of the more popular methods amongst agencies for calculating Adwords management fees is to charge a certain percentage of the client’s ad spend.

For example, if the client is spending £20,000 on Adword for ad clicks, the agency will then charge an additional £4000 (20% of £20,000) for managing their account.

Charging 20% of ad spend is typically regarded as being on the high side, with 10% usually being the lowest that agencies will quote.

This fee is charged irrespective of the time, or work involved.
 

Does a Higher Ad Spend Mean More Work?

Some agencies will argue that an account with a higher ad spend will require more time and effort to manage than account with a lower ad spend, however in practice this is not the case. There are many other factors that dictate how much time it will take to manage an account, such as:

• the complexity
• the volume of traffic
• the average CPCs (lower cost per clicks means a higher volume of traffic)
• no. of campaigns
• no. of keywords
• no. of ads

An account spending more can take less time to manage than one spending less, and therefore in many cases it won’t be fair to arbitrarily charge a client more just because their ad spend is higher.
 
 

3. Time Based

Charging according to the time being spent on your account, either at an hourly rate (e.g. £100), or day rate (e.g. £800), is another popular method for agencies to charge for account management.

This structure makes it very easy for agencies to put together quotes for clients, and to calculate their margins internally. For you the client, it makes it very transparent what you’ll be receiving for the monthly fee.

It also makes it very easy for you to compare the costs of different agencies that charge different day rates.

One possible downside to this model, is that it can incentivise agencies to take more time to carry out the building of new campaigns, or optimisations on the account than is necessary.
 
 

3. Commission

Commission based pricing models are linked closely to the client’s objectives.

If you want new leads for your business at a price of £100 per lead, an agency may offer to generate leads from your Adwords campaigns at this price, receiving only a commission that is calculated based on the difference between your campaign’s cost per conversion, and the £100 that you are willing pay per lead.

For example, if your account generated 100 leads at a cost of £9000, you would then pay them a commission of £1000.

There are many creative ways of formulating commission structures, with some agencies offering to pay for the Adwords ad spend instead of the client, with the expectation that they will be able to make this back with a sizeable profit from the commissions alone.
 

Low Risk for The Client

The advantage of these pricing models, is that they can reduce some of the risk for you the client, allowing you to dictate the price you are willing to pay for a particular conversion.

The agency is only paid a fee if they generate the results that you’ve agreed, and ensures that they are incentivised to do so.
 

Competing Objectives

Commission based models, depending on how they’re structured, can result in competing objectives. Agencies will naturally look to make decisions within your account that will maximise the commission that they receive, rather than maximising the profit that you the client will receive.

To avoid this outcome, it is important that the deal is structured to ensure that both interests are completely aligned.
 
 

4. Packages

Packages are most often used by smaller agencies. They offer several options, each with a selection of service features and a different fixed fee.

This can make it easy for clients to compare the different solutions on offer, and select the option that best suits their budget and requirements.

One downside to this type of pricing model is that using a cookie-cutter approach neglects to take into account the specific needs of each individual client.

Every client is unique, and therefore every management strategy should be unique.
 
 

5. Bespoke

Bespoke quotes are catered towards a client’s specific requirements, and objectives. For example, if the client is seeking to expand their services into additional territories and will require additional campaigns to be created each month, this will involve additional time and resources and therefore management fees can be adjusted in-line with this.
 

More Time Consuming

Creating a bespoke quote can require more time, in order to review the client’s accounts, and to ascertain the extent to which their Adwords account will need to be developed in order to reach their goals.

The advantage here however, is that it ensures that the client’s specific needs are taken into consideration and the fees are consistent with the level of work involved.
 

Bespoke Quotes Can Be Flexible

Fees can be lowered if the client wants to cut back on their pay-per-click activity in order to invest this into another channel, and vice versa, giving more flexibility.
 
 

Considerations

Thinking critically about the way in which each agency offers to charge for the management of your Adwords account can help you to save on fees, avoid a win-lose relationship, and get better results in the long run.

Armed with the knowledge of which pricing models best reflect the level of time and resources involved for an agency, you should be able to more effectively compare offers you’re receiving, helping you to select the agency that is the best fit for your requirements.
 

Ask for Clarification

Be sure to ask how they have calculated the fee that they are quoting to you.

Get clarification on what type of work will be carried out on your account, and what you can expect for the fee that you will be paying. If the response you get is vague and lacks clarity, then it’s possible that either the sales person you’re speaking to doesn’t know the answer, or the management team haven’t put a solid plan in place to meet your objectives.

We hope this overview has been informative and will help you to compare any quotes that you are receiving, and aid you in selecting the agency that’s right for you. For any assistance or clarification please don’t hesitate to get in contact, and we’ll be happy to help.