There are two types of Adwords management fees: transparent, and opaque. A transparent Adwords management fee is billed separately from your Google budget cost. This Adwords management fee will arrive in a separate invoice at a separate time on a monthly basis. In this arrangement you will most commonly pay Adwords directly via credit card, though in rare cases with large accounts you may have an invoice. An opaque management fee means you will only get one bill monthly for your Adwords account, combining both your ad spend and the associated service charges. An opaque management fee varies wildly, and can be somewhat arbitrary. Opaque management fees need to be itemized on an invoice, so you can distinguish between what is going to your Adwords management and what is going to Google. Below we discuss a couple ways of structuring transparent management fees.
- Flat Rate: A flat rate Adwords management fee is a fixed cost to manage your campaign, and is usually billed on a monthly basis. This setup is often tiered to match your spending level. An example would be a $500 a month Adwords budget incurring a $200 flat monthly Adwords management fee. The pros of this are simplicity in projecting and estimating what you’ll be billed. The cons are lack of flexibility, and usually no coverage on additional changes that need to be made in Adwords.
- Percentage Based Model: This is far and above the most common. This Adwords management fee is billed at a percentage of your ad spend. So if you are spending $500, you may have a 25% management fee, which would be $125 billed to you. Adwords management fees are often tiered, so that the more you spend the lower your management fee percentage. For example, large budgets of $5-10,000 a month will typically carry a lower management fee.
- Hourly: Hourly Adwords management fees are usually referred to as consulting. The consulting arrangement may be per diem as needed with an estimated number of hours per month allocated, or it may be on a per diem basis. It is important to note that Adwords consulting is typically not the same as management.
- CPA Based: Adwords management fees based on performance will usually mean that a fixed amount is charged for every lead that is generated from the campaign. So if you generate 10 leads, they may charge $25 per lead to operate the campaign, costing you $250. The pros are this are that it is more directly high performance, but the cons are that there is an unusual emphasis on the amount of conversions, and not necessarily the quality.
- Performance Based: This is a very diverse option. In certain situations an agency may decide to tie their management fee directly to the ROI of the client, for example by taking a percentage of sales generated through Adwords. This option has the least amount of risk to the client, but the highest amount of risk to the agency as they do not have tracking or reporting mechanism. It often requires a contract structured by attorneys.
It’s important to note that Adwords management fees are costs associated with managing the Adwords account on a day-to-day basis. It is not well known that there are constant upkeep and maintenance requirements for an Adwords account to continue functioning optimally. These types of changes include:
- Ad copy split-testing to improve clickthrough rate
- Keyword-level optimization
- Search Query report review
- Negative keyword additions
- And a host of other incremental changes to targeting, performance, and more.
Additionally, with on average a new Adwords feature being released every month, there are additional maintenance tasks that come from adapting the account to new rules or features. Without constant input into these items, the Adwords account may not suffer immediate performance issues, but over time it will certainly get off track without constant supervision. Adwords management fees are the price you pay for peace of mind, knowing that your agency or consultants are continually in your account and keeping it well pruned and functioning well. If you do not have either an agency or consultant on retainer to provide maintenance, it is something that you will need to do yourself or resign yourself to the fact that your account performance will suffer as working conditions change.
