How Do Facebook Ad Agencies Price Themselves?
Many companies hire an agency to oversee their Facebook advertising, Snapchat advertising, or Instagram advertising. Hiring a FB ads agency allows companies to outsource a team of experts at a fraction of the cost of hiring a full-time digital marketing expert. Also, agencies can start and stop on a moment’s notice, where hiring or replacing an employee can be a longer process. Since 2013, the Facebook ad platform has continually evolved, meaning that companies that fail to stay on top of the latest ad platform changes are often overpaying for their results without knowing. The advantages are numerous for hiring an Facebook agency, but the most common question we often hear is “how do Facebook ad agencies price themselves?” Here is a quick overview of the most popular social advertising agency price structures.
1. Agency Rate
This is the most common of all digital advertising pricing models. It provides a set rate based on the total advertising spend managed by the agency. The agency rate often ranges between 10% – 50% based on the media being placed and the amount of work being completed. Typically, all work provided is covered under this agency rate, making it an all-inclusive type approach. There may be expenses that fall outside of the agency rate, so make sure to clarify that before starting. The upside to the agency rate is that it provides a clear pricing model for the advertiser. This can be used to easily understand expenses and work out return on investment and average cost per conversions. The downside is businesses often feel that the agencies are incentivized to spend more money, not necessarily to get better results. AdvertiseMint tackled this objection by offering all employees an internal bonus structure that directly revolves around the success of your campaign. When you’re campaign is successful, our team is rewarded financially which ensures we’re 100% aligned with your goals. We also have no long-term contracts which means we have to earn your business every month.
2. Flat Monthly Rate
In this pricing model, an agency will charge a set monthly flat rate for their services, regardless of the spend. Many small businesses like this approach because it provides a consistent monthly fee, which, regardless of the work being done, will be the same every month. However, this model has some costly downsides. Businesses are paying a flat rate, which means the agency is generating revenue by dividing the number of hours worked on the project by the monthly fee. If that project requires extra work, the agency is now in a position where profit is being reduced for every additional hour worked. This can often cause the agency to give excuses for not completing their tasks and/or producing a sloppy or rushed work. The other downside is that the flat monthly rate can actually be much higher than if you went with a traditional agency rate.
3. Flat Rate + Agency Rate
The Flat Rate + Agency Rate combines the two models above. Advertisers pay a lower flat monthly rate and a lower agency rate that either of the standalone agency pricing models above. The upside here is that businesses get what looks like a lower pricing model. However, this can often be misleading because businesses see two low numbers but the overall pricing can often be higher than the standalone agency rate or flat monthly rate. Make sure to double check what your fees would be with your overall ad budget both now and where you expect it to grow. This can help you find a true cost of this pricing model.
4. Monthly Retainer
This approach is popular in the creative world or for “we do everything” agencies that also do branding, graphic design, video production, web development, etc. The monthly retainer model requires a business to pay a flat hourly rate for services, and they pay for a block of hours in advance every month. This approach works well because businesses have hired a part-time expert at a set hourly rate. This means the work is flexible and can adapt to the needs of the business. It’s in the agency’s favor to try and sign a contract for a minimum number of hours each month. This ensures their monthly revenue stays consistent and allows businesses to have access to skilled experts when needed. The downsides of the monthly retainer is you have to pre-pay for the hours, which gives the agency cash in advance, instead of making a payment at the end of the month. Also, pre-paid hours are often lost if not used, thus increasing the average hourly rate if hours go unused. If you exceed the set amount of hours for a project, the average hourly rate can dramatically increase, so make sure to pay close attention to your contract.
5. Revenue Share or CPA Model
Some agencies may work on a revenue share or CPA model. In this approach, a business agrees to generating results (for example: leads) at a set cost with the agency who then produces results below that amount. If the agency is skilled and able to generate results at a lower rate, they keep the difference, and it becomes profitable for the agency. It also gives the advertiser a consistent cost per result and little risk if price per result fluctuates or become more expensive. While this approach looks great from the surface, it falls apart on many levels. First, the agency is no longer incentivized to find you the best leads, they are now incentivized to find you the cheapest leads, which may not convert as well. If the agency is unable to meet the CPA goals, which often can happen due to the changing ad landscape, instead of adjusting along with the company, they will simply quit because it’s not profitable, leaving the advertiser scrambling to find someone else willing to take on these terms. Finally, some businesses have run into problems with agencies submitting fake leads to ensure their numbers are being met and are profitable.
Bonus: Freelancer
While this isn’t really an agency model, it’s something that should be mentioned. Freelancers are individuals you hire for a specific project or task. On average, they charge a hourly rate and can be hired through freelancer sites like Upwork, Freelancer, or Thumbtack. This seems like the most cost effective rate and provides flexibility for the advertiser. When it comes to Facebook advertising, however, this approach can cost your business much more than what you save by going the budget route. You have to remember that the freelancer is managing your money in the form of your ad spend. Spending an extra $1 per result can quickly ad up to hundreds or thousands of dollars in hidden fees that would have been saved working with a Facebook advertising expert. Many freelancers claim to do “everything” when it comes to digital marketing and advertising, which sounds good on the surface. However, this typically means the freelancer is still learning and figuring things out with your money. Freelancers can often be individuals with personal lives and are not as disciplined as ad agencies, who operate during business hours and can be reached on a consistent basis.
Those are the most common ways that a Facebook advertising agency will charge for their services. Please leave any comments or questions below. If you’d like to know more about hiring our agency to help manage your Facebook ads, please contact AdvertiseMint today. We’d love to help ensure your Facebook advertising, Instagram advertising, and Snapchat advertising campaigns are a huge success.
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Source: https://www.advertisemint.com/how-do-facebook-ad-agencies-price/