The Dirty Secret Most Pay-Per-Click Agencies Hope You Never Find Out

It’s common practice that Digital Agencies make the bulk of their profit from hidden fees. Charging as much as $0.57 cents from every dollar!

Jake Meah
Founder – Click Profits

Learn The Truth About Management Fees And How To Uncover These Deceptive Price Tactics…

Over the years Pay-Per-Click advertising has been a source of cheap traffic and leads.

Today things have changed. Now everybody wants to be at the top of Google and it’s now one of the most competitive channels online.

If you want to buy traffic, generate leads, and make a profit online…

… then you need to focus on two key areas:

Advertising Strategy
Costs

With the right strategy, you can get 10 times more leads and make a lot more sales. However…

If costs are too high even the best strategy will fail

In this article I’ll explain:

How costs impact your advertising results…

And…

The dirty secret most pay-per-click agencies hope you never find out!

But first, let me explain why I’m sharing this information…

Hi my name is Jake Meah, I’m the founder of Click Profits.

I’ve been advertising and helping clients make money online since 2007.

Over the years I’ve seen and heard about all kinds of dodgy advertising SCAMs!

And the one that’s most common are hidden fees. In fact, it’s so common that a friend of mine, a sales director for an established agency once said:

“Everybody does it (charges hidden fees)… if they knew what we really charged then nobody would buy!”

So in this article I’m going to share my knowledge about deceptive price tactics in Pay-Per-Click advertising.

So you can use this information to make an informed decision, and protect your business.

You see,

It’s common practice that Digital Agencies make 75% of their profit from hidden fees

So when I started my business in 2012, I vowed to never use deceptive tactics to win clients.

And I have to say it’s been tough.

I mean, there are so many agencies that lead with low prices… then charge the bulk of their profit as hidden fees.

And that’s a big problem for us. I mean, on face value our fees appear more expensive. When in fact the opposite is true.

And this problem is getting worse…

You see… online advertising is only going to get more competitive.

And as competition heats up, all these businesses paying hidden fees are going to struggle to make a profit.

Believe me, this is already happening.

And since few people know about hidden fees, those that can’t make it work will think that online advertising doesn’t work for their business.

And that is not only bad for them, it’s also damaging the industry.

So after running up against these false claims more and more… I decided that it’s time to share this message. So business owners know what’s really going on.

How Costs Breakdown

When you advertise online there are three types of costs you need to know:

1. Media / Click Budget

Media Budget is the total monthly budget allocated for buying traffic.

Now, this article is mainly about keeping costs low. However, with media budget “low cost” is not necessarily the goal.

You see, Google advertising is Pay-Per-Click. So the higher your budget, the more traffic you get to your website.

You’ve probably heard the saying:

It takes money to make money

Well, there’s some truth in that.

In my experience the difference between a business that makes a lot of money, and a business that just gets by… is their attitude towards spending.

The small business mindset aims to spend as little as possibly. They might spend $200 and expect to make $10,000 in profit.

And to be honest, if that’s your goal, then I’m sorry but advertising is not going to work for you.

On the other hand…

The savvy advertiser starts small… then carefully measures their return on investment

Once they know that their advertising is profitable, they spend more money and make more profit.

So let’s say I invest $1,000 dollars, and make $4,000 dollars profit. (That’s profit after fulfilment and advertising costs).

$4,000 dollars isn’t enough to grow a business. Yet, this initial investment is proof that the campaign is working.

So instead of stop there, I might look to spend more money to see if I can get the same return on investment.

If $1,000 dollars investment generates $4,000 in profit…

Then perhaps…

$ 2,000 will generate $8,000 dollars profit…
$ 3,000 will generate $12,000 dollars profit…
And $ 5,000 will generate $ 20,000 dollars profit…

… I think you get the point.

With Pay-Per-Click advertising, how much profit you make is directly proportional to your spend.

Now, you maybe thinking… I don’t have that kind of money.

And that’s ok. The key thing here is…

Scalability!

Savvy advertisers test small. And they don’t over commit funds on something that they don’t know is working. That’s how we minimise the risk.

With our clients, we make a budget recommendation based on their industry. And in the end how much they invest is up to them.

So the point is;

“Low budget” does not mean you’re getting a better deal

Some agencies use “low price” as a hook to win clients. Yet they deliver a terrible advertising strategy.

I’ll explain more about advertising strategy and what to look out for in just a moment.

2. Cost-Per-Click

Cost-Per-Click (CPC) is the price you pay to generate a single visit to your website.

If you pay an average of $1 dollar per click, then $1,000 dollars spent on advertising will buy you 1,000 clicks.

Cost-Per-Click is one of the key advertising metrics

A good advertising strategy will help you get a discount on Cost-Per-Click. Which in turn helps to boost traffic, leads and sales.

However, it’s important to recognise the difference between “cheap traffic” and “discounted traffic”.

Cheap traffic refers to traffic that was already cheap. Whereas discounted traffic refers to any traffic that you acquire at a discount.

This is an important distinction. Sometimes the best converting keywords are more expensive. And conversely, cheap keywords are sometimes cheap because they are poor quality.

How much you pay-per-click is determined by Google’s click auction. When a keyword triggers your ad, Google’s cost algorithm instantly calculates your ads position and Cost-Per-Click.

Yet unlike a typical auction where the highest bid price wins, Google also factors in Ad and Landing Page quality.

Google’s “Quality Score” is your secret weapon

A high Quality Score will get you discounted traffic and higher ad positions.

3. Management Fee’s

When you hire a Pay-Per-Click company they charge you a management fee.

Management fees cover the cost of service and for delivering their advertising strategy.

If the agency does a good job, then their fee should pay for itself with increased campaign performance.

However, the higher the fees, the harder it is to make it work. Some agencies charge fees so high, and do such little, that the campaign never really stands a chance.

Now, most management fees are charged as a percentage of spend.

WARNING!

The fees you’re quoted may only represent a small fraction of the total management fee.

Part of the management fee may be itemised on your invoice. This will be the smaller portion, and used to distract your attention away from price.

The second, and largest portion is a hidden fee that is disguised as additional cost-per-click. This can make up 75% of their total management fee.

Since Google does not publish their exact cost-per-click algorithm, it’s impossible to know if cost-per-click has been inflated. Which makes it the ideal hiding place for hidden fees.

How Hidden Fees Impact Return On Investment…

Some agencies charge as much as $0.57 cents of every dollar in management fees. This is how cost breaks down.

Agency #1 (hidden fees):

Now let’s compare that to a 20% management fee price structure.

Agency #2 (no hidden fees):

In some cases it’s worth paying more to get a better ad strategy.

However, in the example above, Agency #1 would have almost half the click budget as Agency #2.

That’s a lot of ground to make up!

So continuing with these examples, let’s assume both agencies are equal in their advertising strategy. Like I mentioned earlier, a lot of agencies charge high fees without offering anything extra in their strategy.

This is how results would look from a $1,000 dollar budget, and an average cost-per-click of $1 dollar.

The same $1000 dollars advertising budget would get you almost twice as many leads with Agency #2.

Now let’s assume that one in five leads convert to a sale. With an average profit per sale of $500, here’s how it will look:

That’s 3x more net profit from your advertising!

Now, as I explained, the only difference between both these examples is management fees.

By finding a quality Pay-Per-Click Agency, who charge a fair price, you could double traffic and triple the profits from your advertising.

There are other factors of course. Yet, in my experience companies that charge hidden fees are not the kind of company that go the extra mile to deliver a quality service.

In other words, they do very little to earn the extra fees they charge!

OK, now that I’ve explained how costs breakdown… I’m going to give…

4 Ways To Uncover Hidden Pay-Per-Click Fees

1. Google Partner Policy

It’s a requirement of all Google partners to provide cost and performance transparency. This means any business providing Pay-Per-Click services must provide cost data to customers, then report the exact amount charged by Google excluding any fees.

In my experience most agencies will not make this data freely available. And if it is available in your report, then it will likely be concealed or disguised as something that appears unimportant.

You can reference Google’s Partner Policy here.

You will see that agencies must provide Google cost and performance statistics before fees. This means you will need to do some additional calculations before you get to the actual cost of service.

Start by asking for:

Total spend on Google excluding fees
Total traffic on the Google network

Once you have this, you will need to calculate the average Google Cost-Per-Click (excluding fees). Then subtract this amount from the average cost-per-click reported to you by the Pay-Per-Click Agency.

2. Link the Google AdWords to Google Analytics account

Google Analytics is a free software tool by Google. It helps you track, measure, and analyse how users interact with your website.

Google also make it possible to link the Google AdWords account to Google Analytics. Which allows you to see all keywords, ads and cost data inside the Google Analytics dashboard.

There is no good reason why an agency shouldn’t link these two accounts. In fact, I believe it’s a crucial step to improving the return on investment of your website and advertising.

If you don’t already use Google Analytics, you’ll first need to register for a free account. Once you have an account you’ll need the agency to complete the link by following these instructions.

https://support.google.com/adwords/answer/1704341

Finally, once the two accounts are linked you’ll be able to see Google spend data within your Google Analytics dashboard. And from that you can calculate approximate margin in the same way as described in #1 above.

3. Gain user access to the Google AdWords Account

If for some reason the agency will not comply with #1 or #2 above, then an alternative option is to grant you access to the Google AdWords account.

Every Google AdWords campaign has a unique customer ID. And the agency can grant you access to that account with either standard or read only access.

Here are instructions on how to add a user to Google AdWords:

https://support.google.com/adwords/answer/1704346

4. Contact Google With Your Customer ID

Finally, if you’re not getting any answers from your Pay-Per-Click Agency, you can contact Google directly who will answer your questions for you.

It will help if you have your Google Customer ID. You can request this from your Pay-Per-Click Agency. However, if you can’t get this, or your agency is uncooperative, then contact Google and they will be able to help. Here’s their contact details.

https://support.google.com/adwords/answer/8206

Conclusion:

The profit in Pay-Per-Click Advertising can made or lost based on management fees.

The Click Budget for an Agency who charge 20% management fee is twice as high as an Agency who charge 60% management fees. If both Agencies are equal in their pay-per-click strategy, then the lower fee agency will get you twice as much traffic for your budget.

“Quality Score” and “Website Landing Page” are two other important components of your Pay-Per-Click advertising. You should gain some understanding of how these components impact results, and take them into consideration when hiring a Pay-Per-Click Agency.

I hope you have found this information useful. If you have questions please feel free to contact us. You can call us on Tel:1300 238 891 or submit a question through our contact form.

Thanks again for reading this report. And I hope we can work with you to help you grow your business.

Kind regards,