Does the PPC budget determine the agency fees?

This is a question that I often get from direct clients, smaller agencies or larger agencies who are just starting to offer search marketing services. In all three cases, my client (e.g., the agency or the advertiser) is looking to me to help them price out search services.

For agencies, I actually favor a hybrid model of media percentage and flat fees for larger and more complex PPC campaigns. I personally base my fee structure on hours worked, something I provide prospective clients in the form of a 2-3 page estimate after we’ve hammered out the overall scope of work.

Estimating a PPC Job - A Consultant’s Viewpoint

To answer the main question here - I rarely base my estimate on the size of the budget because there’s not much difference between putting together a campaign with a $1000/month budget and a $10,000/month budget (for example). In my opinion, budget should only influence fees when it’s very large – over six figures a month, and that’s mainly because it’s generally indicative of a more complex campaign.

Here are the factors that I think should affect the estimate:

• The number of vendors (engines) in the plan – it’s a lot more work to launch campaigns on three engines, monitor, report and optimize them than it is to focus on just one (*cough* Google *cough*) engine
• The number of keywords/categories in the campaign– An e-commerce site with 12 categories and thousands of products has many keyword variables to test, while a company that just sells one product or service (e.g., online tax filing) has a limited number of keywords. Keyword expansion and refinement directly impacts the number of hours spent optimizing a campaign, and should be a factor when estimating hours.
• The potential for campaign growth. Many campaigns I launch start small and then grow into great monstrous beasts that require a lot more time to manage then when they initially launched. As such, I find it’s important to do three-month trials so the scope of work can be re-evaluated to see if 1) an agency is even needed at all and 2) if the campaign has grown/changed significantly where the number of hours needs to be revisted
• The amount of reporting involved. I provide weekly summary reports to most small clients as well as monthly keyword reports. If a client requires more reporting than this (e.g., CPA reports by keyword by week) than I would likely increase the amount of the estimate. Very large campaigns (of the type I manage with the large agencies) often are very complex and have teams of PPC specialists working on them, which justifies the higher cost of retaining these companies to manage a campaign. Well, that and the higher ROI the campaign achieves.

Many of the projects I work on with small agencies or directly with the client amount to about 25-40 hours to launch, and 20-30 hours/month to manage. This doesn’t seem to deviate much for budgets of $50,000 or less, and I’ve begun moving to a flat monthly retainer fee for these types of campaigns.

I’m certainly not sayng that the way I do things is the best way, but so far my clients feel it’s fair and I’m happy with the compensation. I have begun exploring the idea of getting paid for performance with e-commerce or lead-generation campaigns, but I haven’t yet taken that plunge. Still, it’s got some exciting potential.