How much should working with a Google ads or PPC agency cost?

Meet Dan Baum, one of IMPACT's rockstar paid media specialists:

You may remember him from such timeless classics as What are Google display ads?, Google Analytics checklist: Is your website reporting data 'clean' and accurate?, and the ultimate Google ads getting started guide.

Recently, I asked him to sit down with me to talk about how much it costs to hire an agency to do your Google ads and PCC management. Because the answers you find online will vary wildly — from $250 per month to $5,000+ per month — without much rhyme or reason as to why.

If I were a business owner or digital marketing leader faced with such a wide range of pricing, I'd have a lot of questions, including:

• "Can I really get anything good out of any agency for $250 per month, or is that too good to be true?"
• "On the other hand, why would I pay an agency almost as much as I'm spending on the ad spend budget itself?"

Sound familiar? If so, you've come to the right place.

In this interview with Dan, we'll be answering those questions (and many others), so you can make the best (and most profitable) decision possible about engaging with a Google ads or PPC management agency partner.

What's wrong with most of the answers that people find online to the question of PPC management agency cost?

Dan: Often, the answers seem too good to be true, if that makes sense. There are a lot of companies that are saying they'll do Google ads management for $300 a month (or something like that) after setup costs.

Honestly, I don't know what you're getting out of that agency for $300 a month.

In fact, the #1 search result that's coming up for me during this interview says "$250 a month" for Google ads management.

How much work are you actually getting for $250 a month? That's, at most, two hours (on average) a month for any agency, based on typical billing practices. So, when you see those numbers, ask yourself:

"How much work can they actually put into my account for that amount? Am I actually going to be getting the best results possible when someone's looking into the account for 15 minutes a week or a half hour a week at most?"

🔎 Related: The ultimate Google ads getting started guide for businesses

So, if those numbers are completely off-base, what's a more realistic pricing expectation for Google ads management with an agency?

Dan: Realistically, if you're looking for an agency that can really drive revenue for you, you're going to see that your ad spend costs and your agency management costs are much closer together. 

For example, you need to be spending around $3,000 in ad spend alone if you want to see any sort of real success with Google ads, generally speaking. At that baseline, you can expect to spend $1,500 to $2,000 on top of that ad spend amount to an agency.

So, really, you should be budgeting around $4,500 to $5,000 in total, if your ad spend is at that $3,000 mark.

I know that may shock some people, but that's what you need to be looking for when you're pricing out agencies. If you want an agency partner that's really diving in, spending time with your account, always optimizing and looking for ways to improve, your ad spend and agency spend numbers are going to be closer together.

As your ad spend number shifts upward, where you're spending more money across more campaigns, that agency spend number should go up along with it.

Can you explain why I have to spend more with an agency when my ad spend budget goes up? Why can't the management costs stay the same?

Dan: Look, you could spend less. You could go with cheaper agencies. And yes, you might see a little uptick month over month. 

But if you really want to scale the results — where Google ads are a really consistent source of revenue for you — you need an agency who can spend more time in your account, to the tune of at least one to two hours a week... if not more.

Bottom line, the more money you're spending, the more the management is going to cost. There are more keywords to keep track of, more campaigns to run. Often, there's a tiered system where you hit a certain number in ad spend and your management costs are going to go up.

That's how we do it at IMPACT, actually.

What about agencies that charge on a per-lead basis? Is that a good or a bad thing?

Dan: Frankly, it's risky. Even if you're pushing back that the leads you're getting aren't qualified enough, the agency will still say they're delivering on what they promised you. They're going to say like, "Well, these are meeting your requirements of a qualified lead."

Of course, you still can go this route. But you need to be really upfront when you're encountering bad leads at the outset. Otherwise, you'll continue to pay for them. 

What about performance-based fees?

Dan: These usually come into play with really established brands. And, to be transparent, we do this at IMPACT. Usually these are very big brands with massive budgets — tens of thousands of dollars, if not more. 

In those cases, with so much money in play (which also means more keywords, campaigns, and so on), performance-based fees help because bigger budgets mean more time needing to be spent on the account.

To be clear, it's not a money grab on the part of your agency partner. Or it shouldn't be, at least. Really, what it boils down to is that it becomes too costly for your agency to manage such complex and far-reaching campaigns with a flat fee. 

Yeah, but are the returns really worth that kind of investment in a Google ads agency partner? That still sounds... it sounds like a lot.

Dan: With the right strategy and agency partner in place, absolutely. 

For example, we have a paid media client where they spend, between ad spend and our management fee, a little over $4,500 a month. And in a single month recently, they saw close to a $40,000 return on that investment. 

But that kind of return is only possible when you invest in an agency partner, which empowers them to spend much more time digging into your audiences, the performances of your campaigns, and so on. 

If you were only paying us to spend 15 minutes a week on your account, there's absolutely no way we could produce that level of return.

OK, so let's say I'm with you. I get that I need to invest in an agency partner. But how do I make sure I'm getting the best bang for my buck in the agency partner department, if I'm going to fork over that kind of cash?

Dan: Communication. You've got to be in constant communication with your agency partner about what is and isn't working. If you're in the e-commerce or B2C space, it will probably be a little bit easier to track how many dollars you're making off of your campaigns.

But if you're in the B2B space, it's a bit tricker, since the goal (typically) is to drive qualified leads for your sales team to close. 

And if you're not communicating often and clearly with your PPC management agency partner about (a) what a qualified lead looks like, and (b) whether or not the Google ads campaigns they're running are actually delivering qualified leads, you're going to have a big problem.

For example, your agency partner might be going along, thinking they're driving a ton of leads for you, only to find out way too late from you that, "Oh, these leads are garbage. They're spam. We can't work them."

Those are the kinds of issues that need to be surfaced and addressed as soon as possible. Otherwise, you're not giving your agency a chance to fix the problem.

When you tell your agency early that there are issues, we can go back and ask ourselves:

"OK, we've generated 10 leads this month, but only two are qualified. What's wrong with our messaging? What's wrong with our targeting? Are the audiences off? What changes do we need to make?"

The earlier we can ask those questions, the earlier we can solve problems and, ultimately, save our clients a lot of money.

So, it sounds like there's a learning curve when you're first starting out with a PPC management agency, right?

Dan: Yes. Especially in that first month, it's really critical to be very well aligned. To be vocal about what you're seeing about what you're not seeing, if that makes sense. So, that way you're just constantly working toward better results together.

Is there such a thing as spending too much money on a PPC management or Google ads agency?

Dan: Absolutely. Again, at the beginning of a relationship with your PPC agency, you want to start small. Don't blow your entire budget right out of the gate.

The name of the game is to prove your concept. Do testing. Refine your audiences and campaigns. Then you can start investing more heavily, once you've done that leg work and gathered the data to make better decisions.

🔎 Want to learn more? Here's what you can expect (results-wise) from your first Google ads campaigns.