Problem With SEM Client / Retainer Model

Making the most of your paid search engine marketing campaign can be quite a daunting task if you don't have a huge budget or a dedicated team of pay per click professionals in your corner.

FACT: The majority of search engine marketing agencies are paid based on how much money their client's spend in pay per click search engine advertising every month.

That's right, most sem's get a percentage of their client's ad spend every month. So it's in their best interest to spend as much of their client's money on pay per click ads every month because their fee will be larger. Some agencies add a few other metrics in the mix like click thru ratios or prominence of ad to make their fees more bareable but those are few and far between.

FACT: In addition to the monthly fee an sem will charge you to manage your paid search budget, there is also a setup fee.

SEM Flaws
Setup Fee: $2,500
Ad Spend: $5,000
Mgmt. Fee: $500
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Total Cost: $8,000

Can you afford to pay $8,000 when you only budgeted $5,000 on ppc spend?

So let's say you're a small business owner who's decided to jump head first into the ppc game and you're going to spend $5,000 a month on a Google & Yahoo! ppc campaign. Because you don't know the first thing about managing ad spend you sign up with a top tier SEM Agency because they have a bunch of Fortune 500 clients and you figure they must be doing something right. Then they tell you that in addition to your $5,000 monthly budget there will be a $2,500 setup fee and they're going to give you a super deal on their retainer if you'll sign a 12 month contract and they're only going to charge you 10% of your monthly ad spend.

That means you're going to pay $8,000 dollars in the first month of your ppc campaign, even though you're only spending $5,000 on actual search engine traffic to your site. How many clients do you have to earn in 30 days just to make up that $3,000 you paid the Agency to "manage" your ad spend?

Now if you think that's nuts, just wait, it gets much worse.

FACT: Hiring a top level SEM firm isn't a guarantee you'll make a return on your ad spend (ROAS).

It's only a guarantee you're going to have to work that much harder just to break even on the money you're spending. Often times a business owner is led to believe their ppc account manager is going to be their advocate in the search engine world and an ambassador between them and Google or Yahoo or MSN. The truth is that most account managers only respond to the clients that are complaining the loudest and have more accounts than they can actually handle and the only time you're going to talk to them is when you're calling to ask why you're not making any money from your search engine advertising campaigns.

Nobody knows your business better than you and nobody is going to work harder to make sure you are making money than you.

There are two key differences between you (small to medium sized business owner) and the ppc account manager that will manage your ppc accounts for you.

  1. They know how to set up and track your ppc ad spend properly.
  2. They have more experience managing ppc accounts than you.

That's it. There is no secret formula to making money with ppc. You just need to know how to set up your account properly and be able to track your ad spend to ensure you're generating a return on your investment, that's it.