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

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.

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Comment by Brian Bennington on May 1, 2014 at 1:28pm: Of course you're not wrong, J.D.... But, I think you're just too close to the issue to see it clearly. You know, like in "can't see the forest for the trees." Delivering less for more is gaining in acceptability as a "guiding principle" in business today. With IT, what dramatically compounds this is the increasing number of dealerships spending an increasing amount of money on marketing they know absolutely nothing about, easily succumbing to the latest, greatest promise. This "structuring of fees" is really small potatoes in the overall scheme of things. So, charge anyway you want, as long as you can create a somewhat reasonable explanation of how you arrived at it. Believe me, getting your fees has a lot more to do with how you ask for them than what you're actually doing for them.

Unfortunately, for you and a lot of others who could be described as "smaller companies," when dealers' heads begin to clear, they won't know anymore about IT, but they'll be much more inclined to trust the "big boys," (Cobalt, etc.) which will give them much better cover if questions are asked. (That's what the OEMs want them to do, anyway.) One result of this will be a real "thinning of the herd" of smaller IT concerns. A practical solution might be to join 'em now, as in "throw in the towel," and hire on to who you think will be a successful survivor. With your experience, you could probably make great money with a lot less headaches.

Reading Matthew's comment, this whole PPC thing, to an IT novice like me, sounds like some form of stock broker pitch, guaranteed to intimidate and confuse. You got to have someone knowledgeable monitoring your portfolio or you'll "miss the boom," and the more you allocate, the better you'll do. (Forgive me Matt, but I was only using your comment as an illustration, although asking J.D. to "back channel" you has a surprisingly bizarre sexual overtone.) And Candice, who states they have a "pretty small SEM budget" and would love someone to confirm a company she's considering, is the business equivalent of "limping on the Serengeti."

All in all though, Mr. Rucker, this was an interesting read, which I've learned is "the norm" for you.

Comment by Candace Lawley on April 29, 2014 at 1:41pm: I just saw a demo on Showroom Logic, who charge a flat fee for what appears to be a pretty impressive platform. We currently are with someone who charges a 20% fee, but because we have a pretty small SEM budget, the flat fee would end up being a bit more than what our 20% works out to be. I'd love to hear from anyone using Showroom Logic how that's been going.

Comment by Matthew Mader on April 29, 2014 at 1:41pm: There is actually more than just clicking and sticking when it comes to a PPC campaign. In my experience, you are not only paying for the setup of a campaign but the maintenance to ensure your bids are getting the exposure you can achieve based on budget. The campaigns need to be monitored and adjusted daily since keyword costs are changing each day based on how many people are bidding. For example, what was costing you $2.00 to be within the top three yesterday may now cost $2.75 today. Without someone reviewing and analyzing daily the bid adjustments, you could end up stagnate with your PPC marketing, thus not seeing results for the service. The higher a budget proceeds the more keywords can be taken on and need monitoring. If you would like to discuss further, please feel free to back channel me.