The most common way to pay an Amazon PPC agency is a percentage of ad spend. A typical deal might be 10% to 15% of monthly spend with a minimum fee. It’s easy to understand and easy to invoice. It also sets up a conflict of interest that most sellers never think about.
How the conflict works
Your goal is profit. If your agency could cut spend by 30% and keep sales the same, you’d be delighted.
Under a spend-based fee, that same change cuts the agency’s fee by 30%. The better job it does of cutting waste, the less it earns. And when it recommends a bigger budget, it’s recommending a bigger invoice for itself.
That doesn’t mean spend-based agencies act in bad faith. Many do honest, careful work. But when the incentive points one way and the right decision points another, it takes a lot of discipline to keep choosing the right decision, month after month.
A simple example
Imagine three ways to run a product’s ads for a month:
| Low ACOS | Balanced | Aggressive | |
|---|---|---|---|
| Ad spend | $1,000 | $2,800 | $5,250 |
| Your profit after ad spend | $1,000 | $1,200 | $750 |
| Agency fee at 10% of spend | $100 | $280 | $525 |
The aggressive month makes you the least money and pays the agency the most. The incentive and the result point in opposite directions.
What about fixed fees?
A flat monthly retainer removes the push to spend more. But it also removes any link to results. The agency is paid the same whether your profit doubles or halves. That’s better than a bad incentive, but it’s not a good one.
What about a share of sales?
Some agencies charge a percentage of ad sales or total sales. That’s closer, but sales aren’t profit. It’s easy to grow sales by spending heavily at a loss, and a sales-based fee still rewards that.
Paying on profit
The model that lines up best with what a seller wants is a share of profit. That’s how we work:
- Advertising profit share: a small base fee plus a share of the profit from ad sales, after product cost, Amazon fees and ad spend.
- Account profit share: a small base fee plus a share of the growth in total account profit, paid and organic, above an agreed baseline.
The second model goes further, because it counts the organic sales your ads help create and it removes any reason to buy sales you’d have got anyway.
Profit-based fees need more set-up. You have to share product costs, agree what counts as profit and agree a baseline. We think that work is worth it, because afterwards both sides are trying to move the same number.
See our pricing page for how it works in detail.