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April 11th, 2010

Pay Per Click Management Fees

By examining the billing point of view from an agencies and an advertiser’s perspective, it can be a lot easier to choose the correct contract type where both the agency and the advertisers will be able to succeed in their digital endeavors.

Average Percentage of Spending

This particular method of billing is the most common method that you will come across. Typically, the number falls between ten to twenty percent, but there are times when this number can fluctuate. For instance, if an advertiser is spending around £500 a month, and they are being charged 10% that is only $50 that they have to worry about paying for managerial fees. Normally, this small percentage is too small for an agency to profit from. Advertisers that have a small account should be willing to render a higher percentage for their managerial fees. Advertisers with larger accounts may notice that the amount of fees paid will decrease. For example, in the event that an advertiser is spending one million dollars a month, and their managerial fees are traditionally $150,000 a lot of companies are willing to bring this individuals PPC management into an in-house location. We are not going to emphasize on in-house versus outsourced management, just make a note about how many full time employees could be receiving payment from the managerial fees that you are rendering.

How are agencies affected?

When a company is spending a specific amount of money every single month, then this becomes a predictable amount of income for the agency. If your system is automated or semi-automated then this particular payment method is a lot more profitable in comparison to other types of billing systems. However, if you run a manual system then you will need to evaluate and track down the amount of hours that each analyst is spending per company that they are managing. This could end up producing clients that are not taking an adamant amount of time out on their company compared to the means that they are being billed.

How are advertisers affected?

The more money that you spend, the higher amount of funds you can expect to release to the PPC management company that you have. The issue to look at in this scenario is trust. Set proper limits on the amount of money that you are willing to render every month for advertising, this way you can pretty much predict your bill. You must also be able to trust the company that you have employed. An incentive of these PPC management companies is to have advertisers spend more money each month, so the agency can then begin to see a profit. If the agency is increasing the amount of money that you spend, while your profits are excelling, this is a great option. A common practice of agencies that employ this billing method is to test out an array of keywords and different ad copies so this way you will begin to see results and want to spend more money every month. However, if you notice the amount of money that you are spending is increasing, but your conversion rate for clientele is low this could be an issue with the company you are using not electing to choose correct keywords to help increase the amount of spend. This situation does not qualify as a horrid billing situation. However, it does mean that you need to be aware of the return that you have on your investment. This point is true with any billing situation that you enter into.

Next time we will discuss another PPC price model;

Profit Percentages (Sales)

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