Posts Tagged efficiency
Economics of PPC Pricing: Why Profit Sharing is the Future
Posted by Alan Mitchell in Techniques on February 23rd, 2010
In this third post in the Economics of PPC Pricing series, we consider the profit sharing model (you might also like to refer back to the previous Economics of PPC pricing posts on the markup model and the cost-per-sale model). By looking at the cost and revenue structures for both client and PPC agency, we discover that under the profit sharing model client and agency motivations are perfectly aligned, making profit sharing a highly efficient method of PPC compensation.
Although we infer that profit sharing is sound from an economic sense, we find it does have problems of its own in terms of implementation and conversion attribution, and conclude that profit sharing should only be considered once a strong and tested relationship has already been established between client and agency.
So let’s get started.
Economics of PPC Pricing: Why the Markup Model is Flawed
Posted by Alan Mitchell in Techniques on November 26th, 2009
Choosing a Pay-Per-Click (PPC) pricing model which works efficiently for both client and agency is a difficult process. A good pricing model should be simple, should create incentives for the agency to perform and should be a fair measure of the work and expertise involved.
One common model that many agencies use is the ‘markup’ model (also commonly known as the ‘percentage of spend’ model). If the agreed markup is 10%, and the client spends $30,000 on clicks, the client pays $33,000, of which the agency receives $3,000.
Nice and simple.
But does it create incentives for the agency to maximise profit for the client? Does it fairly reflect the work and expertise involved at all spend levels?
No.
Budget Time for Budget Checks
Posted by Alan Mitchell in Techniques on July 30th, 2009
Daily campaign budgets in Google AdWords are great. You simply enter the maximum you want to spend per campaign per day, then sit back and relax, safe in the knowledge that your monthly Google bill will not cause any nasty surprises.
But despite the reassuring nature of campaign budgets and the ease at which they can control your spending, they should not be used to control your spending. Instead, cost per click (CPC) bids should be your tool of choice for spend management.