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Jared Hamilton
From: Jared Hamilton
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JD Rucker

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Is a PPC Service Really Worth 20%? The Math Doesn't Add Up.

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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.

Gino Cipperoni
Absolutely agree. When you charge a percentage of spend as a management fee, it's hard to recommend to a dealer that they should increase their budget--when it's beneficial to do so--without them wondering if you're just trying to hustle them for more money. This uncertainty on the dealer side of things just adds unwanted strain to the relationship.
Craig Waikem
Great post JD. Our entire SEM is done in-house. A vendor maybe more effective, but at the current budget we are at, I think our savings outweigh the vendor's software tools. And I think my guys are GREAT :-D. You also get more transparent reports, and manage keywaords much better in my opinion. With a % fee, you have a conflict of interest. A higher budget is better for them. However, I don't think most vendors charge 20%. I have seen as low as 10%, and I think some will lower their fees based on an increase in budget. You do need to be careful for the other fees they charge, those add up quickly. And let's not get started on co-op SEM vendor/programs! I still believe most dealers need SEM vendors because most do not employ a qualifed Digital Marketing Manager who can manage an Adwords account effectively.
JD Rucker
Absolutely Craig - in-house rocks at lower budgets, particularly when there are no dynamic ads involved. Gino - it's all about motive. If they're motivations are not aligned with the dealer's, there's a problem.

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