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Adwords Management Costs: A Guide To How Much You Should Pay

As a business owner it’s easy to become incredibly time poor; you’re too busy trying to run your own business to have any time to learn Google Adwords let alone manage your spend effectively. From the outside Adwords can appear simple, but it amazes me just how much money I see wasted on simple mistakes that could be easily avoided.

Simple things like:

  • hundreds of keywords in a single ad group
  • every advert pointing to the home page
  • targeting highly irrelevant keywords
  • not tracking conversions & blindly wasting your money
  • using Google Adwords Express instead of Google Adwords
  • I could go on…

In fact, a whopping 61% of Google Adwords campaigns fail to generate a single conversion.

It’s true, going it alone can be risky and so much so that the industry has come up with a term called the ‘Google Idiot Tax’. It’s a term applied to those who have setup up their own account and don’t know what they are doing. Unsurprisingly, Google doesn’t tell you when it’s set up poorly and it ends up costing your business a lot of money.

I’m not just talking about a few hundred dollars either, I’ve seen some prospects spend over $10,000 dollars in a month without anything to show for it in return.

Trust me, that’s a mistake you can live without.

But here’s where it gets worse: agency campaigns aren’t excluded from that statistic either. 8 out of 10 agency campaigns I review are often configured just as badly as those where you’ve tried to do it yourself; sloppy and simple mistakes being made that are costing your business money.

So while the price you pay is obviously important, and we’ll discuss it below, you should be just as concerned with the level of quality and the experience of those you hire if you want to build a thriving and profitable campaign.

Hourly rates for Adwords specialists

Whether you’re charged a percentage of your ad spend or a fixed cost to manage it (see below), essentially what you’re paying for is time. No matter who you work with, you’ll find that the most common approach is to charge using an hourly rate.

SEM / PPC professionals will most likely charge within the $75 – $250 per hour range unless you’re working with a top gun who could charge as high as $500 – $1000 per hour, simply because of their level of experience and past results (hint: you’d know if you were working with one).

But what about overseas you ask? Can’t you get it cheaper over there?

Sure, professionals in third world countries will charge much less, and the hourly rate can be as low as $10 – $25. I’m not going to discuss it in detail but what you should know is that outsourcing your account overseas is very risky. Finding good quality services is like finding a needle in a haystack – it’s near impossible, and if you’re serious about your spend, and want high returns, then I recommend you look locally.

What you need to know is that experienced experts, with proven results, are worth their weight in gold and they will charge you accordingly because they know how to get your business game-changing results.

The risk of cheap management packages

If you’re a small business owner in Australia you can expect to pay anywhere from $350 – $3000 per month to have your spend managed, and it can be even higher if you’re spending the big bucks (i.e. 20K+).

What’s more important is that you understand what your fees include. Cheap PPC packages typically mean you’re receiving less time on your campaign and when there is less time, agencies begin to look for shortcuts to keep their customers happy.

Take the $350 package as an example of what you’re getting:

  1. $350 with 30% agency margins leaves $245 for your campaign.
  2. $245 dollars is divided by $75 (the average hourly rate).
  3. At best your campaign will receive 3.2 hours of time.

That’s less than an hour of time per week to manage your account. The question you should ask is – “What am I actually paying for?” and the answer is simple – not much at all. 

These kind of agencies try to mask their lack of work or under-performance with an unlimited number of excuses, often trying to bamboozle you with fancy lingo or pretty reports in the hope of confusing you so you keep paying more.

Any service at this price point is potentially:

  • outsourcing overseas
  • cares more about their volume of sales than they do about yours
  • due to less experienced freelancers without any results to show

When you work with lower priced packages, you increase your chance of inclusion in the 61% of accounts that never generate a conversion, and that’s not a fun place to be.

Remember that the cheapest management fee should never be your goal, instead it should be to make your campaign highly profitable by turning one dollar into two or more.

The more you spend the more you pay

If you’re confused about how much you want to spend on Google Ads, the best thing to do to get an estimate is to read my article on how much Adwords will cost.

The general rule is that higher spends require a greater amount of time to manage them effectively. It’s unrealistic to expect that someone spending $500 on Google Adwords needs to pay the same price to have their spend managed as a business spending $20,000.

In most cases, agencies or freelancers are going to charge in one of two ways:

1. Fixed Cost Tiers

Fixed cost packages are typically inclusive of an upfront setup cost and a fee for ongoing management. Sometimes the setup fee is waived which means you’ll either be locked into a contract, have early exit fees or pay more for your ongoing management.

The benefit of a fixed cost package to you is that you know exactly how much you’re going to pay up to a certain level of ad spend.

For example, you might pay $900 to have a spend between $1000 to $4000 managed – every agency is a little bit different in what they will charge you.

For small businesses, fixed costs are important because you will know exactly how much you’ll be paying and that amount won’t change as long as you remain within your ad spend range.

In fact, once your campaign is profitable it’s actually more beneficial for you to spend closer to your ad spend cap because it means you’ll be maximising the number of conversions for the exact same management fee.

2. Percentage of Your Spend

Another popular method of charging is based on a percentage of ad spend. In general, companies will charge anything from fifteen to thirty percent of your total ad spend.

For example, if you spend $1000 dollars you’ll only pay $150 dollars for management, but if your spend increases to say $4000, then you might pay $600 to have it managed.

The benefit to you is that you’ll pay less to have your campaign managed at lower ad spends and your fees will only increase when your ad spend does. This type of payment model can be beneficial for both you and your agency because it provides incentive to make your campaign profitable.

I know that if I make your campaign profitable then there’s a very good chance you’ll want to spend more, so it’s a win-win for both parties.

The issues with this model:

  • Firstly, it encourages agencies to make you spend more and while I’m all for spending more, it’s important that it’s actually profitable. Don’t be fooled into amplifying mediocre performance.
  • Secondly, at smaller spends 15% is a very small amount, and for $150 dollars you’d have to consider whether you’re actually getting any work on your account at all.

Most agencies would want either a minimum spend to take on your account or will work at a fixed cost for lower amounts before transitioning you to a percentage package.

Level of experience

I have a big issue with freelancers or “PPC experts” that have never spent a dollar of their own money. It’s only once you spend your own money, and have wasted it, that you can begin to learn the responsibility of spending the money of others.

What separates average PPC “experts” with the best of the best is experience. An experienced pay-per-click expert is worth their weight in gold and you want to know if you’re playing with a rookie or you’re playing with Michael Jordan – the difference to your campaign could be huge.

To give you an example, just recently we received a new client who was generating $31,800 for a spend of $5500, sounds OK right? But within 30 days of managing that campaign we were able to generate $52,447 with the exact same spend – that’s a huge difference.

 

You should pay more for:

  • Experience: You don’t want to be the guinea pig. You want to know whether you’re working with a newbie and if they are doing this for the first time. Have they spent their own money before or are they numb to the idea of spending your hard earned money?
  • Reputation: You want to be working with someone who has a reputation of success. Do they have reviews, case studies or referrals or existing clients that can discuss the performance of their campaign with you?
  • Education: Are they certified or can they prove their knowledge? While certification only goes so far, it does show a certain level of due diligence. Better yet, can they walk you through their process or audit your existing campaign to show you those key areas that they can immediately improve and show value.

For more about choosing a quality PPC expert, read our guide here.

PPC is more time consuming than you think

I always recommend Adwords; it’s a great entry point for small businesses because from the moment it’s switched on, you have the potential to start generating more leads and sales. It doesn’t suffer from the same latency that SEO does and can become profitable very quickly.

But that doesn’t mean that Adwords is an overnight solution for your business – the performance will improve significantly the longer your campaign runs.

Let’s use another example: one of our clients had a cost per lead of $93 in the first month. This was a great result considering the cost per click averaged $20+. However, in 7 months we’ve managed to reduce the cost per lead to $61 which means the campaign was exponentially more profitable.

For a profitable Adwords campaign you might need to:

  • create or design a high converting website or landing page
  • research your target customer and create an appealing offer
  • configure and troubleshoot a Google shopping feed for over 9000+ products
  • create suburb groups for every suburb in a region
  • deploy dynamic landing pages that change the copy depending on the search term
  • conduct ad or landing page split testing
  • profile your website visitors and serve different banner adverts for different customer needs

All of the above can take a significant chunk of time, just a high converting landing page alone could be anywhere from 15 – 20 hours of work, and I’m not talking about cookie cutter templates either. When you combine several of the above strategies, the work can be significant.

Even if that all sounds like gibberish to you, and doesn’t make any sense, what you should be aware of is that different businesses have different requirements and your unique goals and level of competition will determine the amount of work required to get results; more time is more money.

You get what you pay for

The reason I wrote this article is because I’m tired of having the same old conversations with business owners

  • Adwords sucks, it doesn’t work for our business…
  • Our agency took our money and did nothing…
  • We spent $10,000 trying to do it ourselves and it didn’t work…
  • I’m sending clicks to our website, it’s not mobile responsive yet…
  • Adwords is too expensive, we’re changing to Facebook…

Yet 8 out of 10 campaigns I review are unlikely to ever be profitable, which means the problem isn’t with Adwords itself, it’s with how it’s being setup.

If you want to be a part of the 39% that are actually generating a conversion in their campaign, then the key takeaway from this article is that you get what you pay for, just like any other industry.

What you need to understand, and my whole point is, that you need to invest an appropriate amount relevant to your ad spend, your goals, the level of experience you choose to work with and the amount of work required to get results. If you have a shopping campaign, need re-marketing, want banner adverts or need a new landing page then you can expect to pay a lot more.

To maximise your return potential you need to employ a quality PPC professional, someone who has proven experience getting real results for real businesses and can show that to you. To work with someone that fits this criteria means they will likely charge in the $75 – $250 per hour range to do so.

If you’re tired of the stress of under performing campaigns and want to do more than waste your money, why not get in touch with me today. I’ll happily provide you with a personalised video review of your campaign highlighting exactly where you’re currently wasting money. I’ll also provide you with an estimate of what you need to spend as well as guide you on your potential returns.

I’m not here to hard sell you, I’m here to put you in the 39% of profitable paid campaigns and get your business results in order for you to grow your business.

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