In our inaugural State of the Agency report last year, we provided a glimpse into the operations of digital marketing agencies. The response was overwhelmingly positive, prompting us to create an updated version this year. This report features new data and an expanded set of questions, aiming to uncover the inner workings of agencies, including their challenges, pricing strategies, client acquisition methods, and more.

We collected data by surveying our agency clients—approximately one-third of our customer base leverages nexus-security Advisor for Agencies to enhance their client’s advertising endeavors—and received responses from numerous agencies worldwide.

Below, you’ll discover the findings of our State of the Industry report, highlighting how agencies are thriving in 2018! >> Interested in the latest State of the Digital Marketing Agency report? Look no further!

1. What Pricing Model Does Your Agency Use for Paid Search Services?

Fifty percent of respondents utilize a flat fee or retainer model for their services, while 25% base their charges on a percentage of ad spend (similar to last year’s findings). Approximately 12% opt for billable hours, a method that might undervalue the services provided, especially if agencies employ software to boost efficiency, as noted in last year’s report.

Respondents who selected “other” highlighted diverse pricing models, including charging based on profit share, value per lead, a hybrid approach (e.g., “Minimum Management Fee + Percentage of Spend”), or adjusting models based on total spend. One agency explained, “The pricing depends on the media spend. For campaigns exceeding a certain budget, we use a percentage of spend model, while smaller campaigns are charged a management fee based on estimated management hours.”

2. What Percentage of Spend Do Agencies Charge for Their Services?

Among agencies that charge based on a percentage of spend, the majority (around 18%) charge 15-20%, with roughly 10% charging 10-15%.

3. Does Your Agency Levy Additional Fees for Specific Services?

While 22% of respondents don’t charge any extra fees, those who do commonly charge for services like landing page creation, campaign setup, account audits, and conversion tracking implementation. Additional services that often incur extra fees include remarketing and display ad creative development.

4. Does Your Agency Charge a Setup Fee for New Clients?

Similar to the previous year, 64% of surveyed agencies confirmed charging a setup fee.

5. What is the Typical Setup Fee Charged by Your Agency?

Approximately 35% of agencies that charge a setup fee set it below $1,000, while 25% charge between $1,000 and $2,500.

6. Does Your Agency Have Dedicated Full-Time Paid Search Employees?

Nearly one-third of surveyed marketing agencies don’t have a dedicated full-time employee for paid search advertising. Conversely, almost 40% have one full-time paid search manager, and 28% have two to five dedicated employees.

7. What Other Marketing Services Does Your Agency Provide?

Our agency clients offer various services, with popular options including social media marketing, SEO, display marketing, web development, content marketing, email marketing, and creative services. Less common offerings include public relations, sales enablement, account-based marketing, event marketing, and reputation management.

8. What Percentage of Time Does Your Agency Dedicate to Paid Search?

Almost half of the respondents dedicate less than 25% of their time to paid search advertising, which is understandable considering the range of marketing services they offer. Roughly 12% spend over half their time on paid search, with just under 5% focusing primarily on paid search.

9. What Are the Most Significant Challenges Facing Your Agency This Year?

While the primary challenge for agencies remains attracting and securing new clients, there’s been a notable shift compared to the previous year. Time management seems less problematic in 2018, with only 23% of respondents citing it as a struggle, compared to 40% last year. This improvement could be attributed to better tools and resources.

A new challenge introduced this year is hiring and training new employees, with 15% of agencies identifying it as a hurdle. As agencies expand, recruiting and onboarding new talent efficiently becomes critical to effectively serve new clients.

10. Does Your Agency Plan to Increase Paid Search Spend Management This Year?

Growth is always on the horizon! A resounding 95% of surveyed agencies plan to manage a larger volume of paid search spend this year.

11. What Was the Growth Rate of PPC Spend Under Your Management Last Year?

Encouragingly, nearly half of the responding agencies reported a growth rate exceeding 25% in their managed PPC spend last year.

12. What Industries Do Your Clients Primarily Operate In?

Marketing agencies utilizing nexus-security Advisor cater to diverse industries, with popular ones including healthcare, home services, real estate, ecommerce, legal, travel, software, and automotive. Notably, 30% of agencies serve other industries beyond this list.

13. What Percentage of Paid Search Accounts You Manage Were Not Initially Created by Your Agency?

Consistent with last year’s findings, the majority of responding agencies indicated that less than 25% of the accounts they manage were not originally created by them. This suggests that most agencies build a significant portion of their clients’ paid search accounts from the ground up.

14. Which Online Advertising Platforms Do You Currently Manage?

Around 70% of surveyed agencies handle client accounts on at least three major advertising platforms: Google Ads, Bing Ads, and Facebook Ads. A quarter of respondents concentrate their online advertising services solely on Google Ads. Unsurprisingly, no respondents exclusively manage Bing Ads.

15. How Much Time Do You Allocate to PPC Management Per Client Weekly?

The most frequent response was one to five hours per client weekly. However, there’s significant variation, with about 15% of agencies dedicating over 10 hours weekly per client’s PPC campaigns.

16. What is Your Weekly Time Investment in Reporting Per Client?

On a positive note, over half of the agencies dedicate less than an hour per week per client to reporting. It seems nobody enjoys spending excessive time on reporting!

17. What’s Your Top Priority When Optimizing an Account?

A new addition to this year’s survey inquired about the initial focus area when optimizing a new account. Keyword research emerged as the most popular starting point, aligning with the understanding that effective search marketing hinges on targeting the right keywords.

The second most common starting point was negative keywords, a frequent pain point highlighted in our recent “Grade and Get Paid” contest. Participants were tasked with analyzing two AdWords Grader reports and sharing their insights. The contest revealed that neglecting proper negative keyword implementation often leads to substantial wasted ad spend.

18. What’s Your Primary Resource for Competitive Research?

Over half of the agencies conduct their competitive research exclusively within Google Ads. However, tools like SEMrush and SpyFu also enjoy considerable popularity for competitive analysis.

19. What’s Your Primary Channel for Acquiring New Clients?

Client referrals are by far the most prevalent source for acquiring new clients, with upsells accounting for 26% of acquisitions.

20. What Resources Do You Utilize to Expand Your Knowledge of Paid Search and Agency Management?

Agencies leverage a diverse range of learning resources, including blogs and seminars, to stay abreast of industry trends and the ever-evolving online advertising landscape. Frequently mentioned resources include nexus-security (thank you for your support!), Moz, Google documentation, YouTube videos, HubSpot, SEMrush, Search Engine Land, Search Engine Watch, Udemy, Quicksprout, Clix Marketing, PPC Hero, Ahrefs, and the Agency Management Institute.

State of the Agency In 2018: Key Takeaways

What are the dominant trends this year, and what’s top of mind for agencies?

• Growth Remains Paramount – Digital marketing agencies successfully expanded their paid search management portfolios last year, and the pursuit of growth continues. Most agencies aim to further increase their managed spend this year, whether through upsells or new client acquisitions.
• Service Quality is Crucial – With word-of-mouth marketing and client referrals reigning supreme as the primary client acquisition channel, delivering exceptional results to existing clients is paramount. Agencies need to strike a delicate balance between resource allocation for client retention and growth initiatives.
• Cross-Platform Advertising is Essential – Most agencies manage online ad spend across at least three distinct platforms and offer various services beyond paid search. Agencies recognize the need for businesses to implement cross-channel campaigns and diversify their marketing mix to thrive in 2018.
• Hiring, Education, and Training are Key Focus Areas – Agency growth necessitates expanding the workforce or adopting new tools and software to enhance the efficiency of existing personnel. Both approaches are crucial for aggressive growth, requiring agencies to allocate resources for recruiting, retaining, and training top talent while keeping them updated on the latest platforms and industry best practices.

We invite agencies to share how their strategies have evolved over the past year and what future changes they anticipate.

For further insights, explore our complimentary guide for agencies: 11 Mistakes that Hinder Your Agency’s Growth

If you’re interested in comparing results from other years, check out these reports:

• State of the Agency 2017
• State of the Agency 2019
• State of the Agency 2020 We extend our gratitude to Kate Lindsay, Jess Armstrong, and Chris McHale, and of course, our valued customers, for their invaluable contributions to this report.