Our State of the Agency report has become an annual tradition—a report full of data-backed insights into how internet marketing agencies manage and grow their businesses (and advertise their clients’ businesses).
We’re back for a third year. This time, we asked more questions than ever before. If you’d like to know more about the services agencies offer, the fees they charge for those services, the biggest challenges they face, and more, you’ve come to the right place.
We collected the data you’ll find below by surveying our agency customers (who represent roughly a third of the companies who use WordStream Advisor). We heard back from hundreds of agencies, many located outside the US.
Ready to learn more about how internet marketing agencies run in 2019? Let’s get started!
1. How does your agency price your paid search services?
Whereas roughly half of our agency customers use a flat fee model to charge clients for their paid search services—we observed nearly the exact same thing in 2018—34% charge according to percentage of ad spend. This marks a sizeable jump; only 25% of respondents reported using a percentage of spend model last year.
In step with last year, 11% of agencies charge for paid search with billable hours. The percentage using an alternative model has fallen from 12% to 5% year-over-year. Ostensibly, many of those who used an alternative model in 2018 have made the switch to percentage of spend.
The chief advantage of the percentage of ad spend model is that your revenue automatically jumps as soon as your client boosts their monthly budget. The big downside, though, is that some clients will change their budget every month—thus forcing you to deal with some volatility in your revenue.
2. What percentage of ad spend do you charge?
Nearly 70% of our agency customers who use the percentage of ad spend model for their paid search services charge somewhere between 10 and 20%. 6% charge less than 10%, and 14% charge over 20%.
3. Does your agency charge additional fees for any of the following?
Last year, we found that one out of every five agencies charges no additional fees. This year, that figure is down to one out of every seven.
As was the case last year, nearly two-thirds of agencies charge their clients extra for landing page creation. This makes sense, given the creative resources required to build visually appealing landing pages.
Email marketing, display creative, and campaign creation are also commonly offered for additional fees.
4. Does your agency charge a setup fee for new clients?
Nothing new here. Just like last year, we find that roughly two-thirds of agencies charge setup fees when onboarding new clients. We recommend doing so, as bringing on a new client requires learning more about their business, their goals, and their industry.
5. How much does your agency charge for a setup fee?
Among those agencies that do charge a setup fee, 58% charge less than $1,000. 25% charge between $1,000 and $2,499, and 9% charge over $2,500.
6. Does your agency offer any of the following services?
As far as offering services outside of paid search goes, we observe similar results for SEO, content creation, social marketing, email marketing, and creative services.
But we find some substantial changes, too. Last year, 77% of agencies reported offering website development to their clients; this year, that figure is 85%. Plus, the percentage of agencies offering display marketing has fallen from 78% to 68% year-over-year.
Considering the importance of site optimization and user experience, it’s not surprising that more and more agencies are offering to take care of this for their clients. At the same time, as Google continues to improve Responsive Display Ads, display advertising becomes more accessible to small business owners.
7. Does your agency have employees dedicated to paid search full-time?
The responses to this question are some of the most telling so far. Last year, 38% of agencies reported having one full-time paid search employee, and 28% reported having between two and five full-time paid search employees.
This year, only 29% report a full-timer, and only 22% report between two and five full-timers. Correspondingly, whereas 31% reported having no full-time paid search employees in 2018, that figure is now 45%.
This doesn’t mean that paid search is any less important than it used to be, of course. We can attribute the decline in full-time paid search specialists to the demand for agency employees who can wear multiple marketing hats.
8. Approximately what percentage of time does your agency spend on paid search?
Compared to 48% last year, 57% of agencies say they spend less than 25% of their time on paid search—presumably because they’re busy with all the other stuff they do for their clients.
It appears that, over the past year, a good number of agencies have moved from the 25-50% bucket to the less than 25% bucket.
9. How much time do you spend every week on PPC management? (per client)
Just about half of our agency customers dedicate between one and five hours per week to managing each client’s PPC accounts. 38% spend an hour or less per week, and 14% spend at least five hours per week.
That 86% of agencies spend less than five hours per week on each client’s PPC accounts is great news. Evidently, efficiency is commonplace among our customers.
10. How much time do you spend every week on reporting? (per client)
Happily, 91% of agencies spend five hours or less per week on reporting for each client (up from 85% in 2018). This tells us that our customers are finding more and more time to focus on growing their clients’—and their own—businesses.
11. What tools do you use for reporting?
Over two-thirds of our agency customers leverage the reporting functionality within WordStream Advisor for Agencies to keep their clients up to date on performance. Google Data Studio and Microsoft Excel are also fairly popular.
12. In the last year, by how much has your PPC spend under management grown?
The good news: 64% of our agency customers are managing more PPC spend now than they were a year ago. That’s a lot of strong growth!
The not-so-good news: Those figures don’t quite match the expectations our agency customers reported a year ago. In 2018, 58% of agencies said they expected to grow PPC spend under management by more than 25% (only 37% did this). Only 5% of agencies predicted their PPC spend under management would decrease, but this ended up being the case for 11%.
13. Does your agency anticipate growing the amount of spend you manage this year?
Our agency customers remain optimistic nonetheless! 45% expect to grow their spend under management by more than 25%, and 44% expect to do so by less than 25%. Only 11% of agencies report no expectations for growth in spend under management.
14. What is your main source of acquiring new clients?
As was the case in 2018, half of our agency customers list client referrals as their main source of new clients. On a more interesting note, it appears that agencies have become less dependent on upsells and more dependent on content and digital marketing. Upsells are still slightly more common, but the gap between the two sources has closed considerably in the past year.
Content isn’t just a tool for client acquisition, though; it’s a tool for client education as well. This is another tactic we recommend to agencies. The more educated your clients are, the less time you can spend walking them through the basics and the more time you can spend discussing high-level strategy.
15. What percentage of the paid search accounts you manage were not created by your agency?
In step with last year, the majority of our agency customers say they’ve created over 75% of the paid search accounts under their management. However, this is less common than it used to be: Whereas 75% of agencies said they had created more than 75% of the paid search accounts under their management in 2018, this figure has fallen to 64%.
Now, nearly one-fourth of agencies say they’ve created between 50 and 75% of the paid search accounts they manage. 14% say they’ve created less than 50% of the accounts they manage.
16. What is your average customer lifespan? (in months)
On average, our agency customers retain each client for roughly 28 months (or two years and four months). We shared some of our most effective client retention strategies here.
17. What industries do your clients work in?
Just like last year, we find that our agency customers most commonly represent clients in healthcare, home services, and ecommerce. Real estate, travel & hospitality, and automotive are frequently represented as well. In comparison to the 2018 report, we do not observe any major changes in regards to the industries our agency customers represent.
18. What online advertising platforms are you currently managing?
Unsurprisingly, the vast majority of agencies manage Google Ads and Facebook Ads on behalf of their clients. Instagram, LinkedIn, YouTube, and Bing are also popular advertising platforms, and we expect to find them becoming even more popular in the coming year.
Because Quora Ads is still in its infancy and Amazon advertising is limited to ecommerce businesses, their low representation among agencies isn’t too surprising. If you’re willing to give either of these platforms a try, you may reap the benefits of getting their before the vast majority of your competitors.
19. What are the biggest challenges your agency will face this year?
Last year, the most common challenge reported among our agency customers was getting new clients. This year, that’s no different. Consistently, the hardship at the core of running an agency is balancing the need to drive results for current clients with the need to identify and pitch prospective clients.
As was the case last year, the only other major concern among agencies is time management. In fact, whereas only 23% of agencies reported this as their biggest challenge in 2018, 31% have reported it this year. Evidently, striking that retention/growth balance is getting more difficult.
20. When optimizing an account, what do you prioritize first?
Not much has changed among the responses to this question in the past year. Overwhelmingly, conducting keyword research and identifying negative keywords are the most popular account optimization practices. While copywriting has become slightly less prioritized, landing page optimization become slightly more so.
21. Where do you do most of your competitive research?
Although Google Ads’ popularity as a competitive research tool hasn’t changed, SEMrush has become considerably more popular among our agency customers. Correspondingly, SpyFu has become considerably less popular.
22. What resources do you use to learn more about paid search & running an agency?
As we observed last year, agencies turn to a wide variety of online resources to learn more about digital marketing and agency strategy. According to this year’s responses, among the most popular resources are:
- WordStream
- Google (e.g., support pages, Academy for Ads, etc.)
- Moz
- HubSpot
- SEMrush
- PPC Hero
- Search Engine Land
- Neil Patel
State of the Agency in 2019: Key Takeaways
So—what insights can you take with you from this year’s State of the Agency report?
- Scaling is key. Although nearly two-thirds of our agency customers have grown the amount of PPC spend they manage, we see that many are spending less time on account management and reporting. Plus, it’s becoming less and less common to have full-time employees dedicated solely to paid search. Clearly, agencies are making efficiency gains.
- Content drives leads. Client referrals will remain the most common way agencies win new business—that much is clear. However, our data suggest that content creation is an increasingly popular lead generation strategy. Whether it’s with blog posts or YouTube videos, your agency should have a content strategy.
- Opportunities are out there. Hardly any of our agency customers manage accounts on Quora or Amazon—two platforms that hundreds of millions of consumers use every month. With the contextual relevance of Quora ads and the immense amount of consumer data living in Amazon’s databases, giving one (or both) a try in 2019 could prove highly profitable.
All right, internet marketing agencies—over to you. How have you evolved? How do you plan to continue evolving? Let us know in the comments!
A huge thank you to Kate Lindsay, Jess Armstrong, Chris McHale, Elisa Gabbert, Ceillie Clark-Keane, and our wonderful customers for their help in collecting these data and creating this report.