I really don't know who I'm going to offend on this one. We've been researching so many vendors over the last couple of months that work with chat, lead-gen widgets, and website platforms themselves that we haven't taken the time to explore PPC vendors. Maybe that's why I was blindsided to find out that there are at least two vendors out there charging 20% and one that we found who is charging 25%.
Is it me or is this insane? We'll put aside the 25% vendor for now. I'm hopeful that it's some sort of accounting mistake or something. Focusing on the 20% charge, it really bugs me that this may be more common than I ever knew. I've always hung around the organic side of search, so PPC hasn't been a focus. With that said, I've managed dozens of PPC campaigns over the years and I could never imagine charging anything other than a flat fee.
To me (and again, I might be on the wrong side of this argument and would be very open to some education on this one), if a dealership is spending $10,000 per month on their PPC, $2,000 of it going to management seems high. If the software is driving the bidding and the feeds are generating the dynamic ads, wouldn't it seem that very little manual effort and development costs are going into the service on a monthly basis?
I've always been a fan of flat fee PPC management because of transparency. I want to be able to recommend to a dealer that they raise their budget without them wondering if I'm just trying to make more money and I want to be able to recommend that they reduce their budget without reducing my service fee. To me, adjusting a budget is a matter of changing a number or two in the backend and I cannot justify charging hundreds of dollars more per month for clicking a few buttons.
Here's the math:
- 20% service fee
- $10,000 per month initial budget
- Dealer wants to raise to a $12,000 per month budget
- Vendor clicks a few buttons, adjust some daily budgets
- Additional monthly cost for clicking those buttons: $400/month
- Yes, that's $4,800 a year for 5-10 minutes of effort
I'll say it again. I'm willing to hear why I'm wrong. I'd love to see the additional monthly effort that goes into a bigger budget. If that's not the case, I'm open to hearing why the cost is justified. If there are vendors out there charging a lower percentage or a flat fee that dealers (or vendors) are willing to recommend, I'd love to hear about those as well.
Someone, please set me straight on this issue. It's bugging me.
Comments
Bill: There are some great SEM companies out there. I would contact AdSmart (adsmartonline.com) and see what type of deal they can make you. They do a fantastic job and you own your own AdWords account (which is a big deal). Many companies that manage your PPC campaigns also own the AdWords account. When you leave them you also leave your account. Starting a new AdWords account is a pain and usually cost you money since you have no history to base future campaigns on.
The fact that PPC companies charge a percentage of your budget should alarm everyone. Why? Because now they have a reason to suggest you spend more money each month. The more you spend the more they make. At that point who is the beneficiary. What is the motive for their suggestions of an increased budget.
Many of your PPC accounts managed through your OEM's "partner" and paid through your Co-op accounts don't have a clue as to what they charge you as a percentage. Call up any one of them and ask how much of your budget is going to them and how much is actually going towards purchasing AdWords. I had this conversation with my account advocates for Cobalt and Dealer.com and they could not tell me exactly what they charged. Needless to say I canceled both. My question to all that use companies like this is do you know how much of your budget is really going towards purchasing AdWords? You never really know do you?
We went with a small company by the name of AdSmart. They charge a flat fee regardless of what you spend. For those with very small budgets it may not be an effective alternative but for those with larger budgets your fee is the same if you spend $10,000 per month or $40,000 per month.
Most companies will charge you a percentage and just tell you to set up a budget. ASK THEM HOW MUCH OF YOUR BUDGET THEY WILL BE KEEPING TO MANAGE YOUR ACCOUNT. You will be shocked!
JD, great job bringing this to light for a lot of folks out there.
JD,
I'm spending $5000 per month on PPC with a $1995 fee. Are there any PPC companies out there that charge less and do a great job? I would welcome any input from members.
Thanks
Bill Finocchiaro
President
Peruzzi Toyota
bfino@peruzzi.com
I agree, the amount of work it takes to successfully run a PPC campaign actually goes down the longer a campaign runs (aka, the more someone is going to spend on the campaign, the longer it may run depending on the amount someone is paying per bid...) A longer campaign gets easier to maintain because eventually you're done trimming out the negative keywords, you're done determining the most successful keywords and now it's just ad tweaking. So I also would rather see an increase in money spent on the campaign, over an increase given to the people managing the campaigns. Something you didn't mention that I feel is important is the size of a start-up fee. In the past I've had clients that were turned off by my start up fee. What they need to understand is that starting a PPC campaign is much harder and more time consuming than maintaining a PPC campaign, so start up compensation is an essential.
I'll give you an answer from the perspective of someone who works in online marketing with a focus on SEO and PPC. Short answer, 20-15% is pretty high, and more than the market will generally bear. If you go to a lot of agencies you'll be in the 10-15% fee range on a sliding scale that will cap at a certain point.
That said, in your example you say that a vendor will make $4,800 a year for 5-10 minutes of effort - that's where I'd like to give some more insight. Any PPC agency/vendor worth their salt spends much more time on their campaigns than this. Just client reporting alone eats up a lot of time, as well as reviewing results. On top of that there should be eyeballs looking at campaigns and making adjustments over time to bidding, keyword match types, ad text, etc.
Now, over time someone who has spent a lot of time managing PPC can do this very fast, and there is an upside for vendors/agencies to be able to do this; however, the same can be said of any trade. There's a saying that you pay a contractor $1 for a nail and $99 to know where to put it. Same goes for your dentist, your doctor, welders, mechanics, etc.
For a regional/local dealer who is looking to run PPC ads it would be possible to have someone set things up for you and then turn over control, but the question is whether you have the time to manage it. If you're spending $10,000 a month with a 15% fee, that's $18,000 per year for peace of mind management. You can't hire a PPC expert for that much, and even if you could you'd then have to worry about overhead from taxes, benefits, management, etc.
Hope that helps give some perspective.