The awkward fact about paid advertising is that the agency's effort and your spend are only loosely related, and most fee structures pretend otherwise. A percentage of spend pays more when your budget goes up, whether or not the account needed more work. A flat retainer pays the same whether the account is being actively managed or checked once a fortnight. Neither is dishonest, but you should know which incentive you are signing up to before the first campaign goes live.
The three fee shapes, and what each one rewards
Percentage of spend is simple and rewards growing the budget. A flat retainer is predictable and rewards efficiency but can leave a small account under-serviced when the agency is busy. Performance fees on leads or revenue align interests best and are the hardest to define, because everything then turns on what counts as a lead and who adjudicates it. Ask for the same scope priced all three ways; the comparison is informative on its own.
Own the ad accounts, always
The account, the conversion tracking, the audience lists and the historical performance data should live in your own advertising and analytics accounts, with the agency granted access. Agencies that run clients inside their own manager account can hand the data back in theory and frequently cannot in practice, and years of learning is genuinely difficult to rebuild. Settle this in the contract, not at the point of leaving.
Ask what is automated and who checks it
Modern campaign types hand bidding, placement and often creative selection to the platform. That is not a reason to avoid them, but it changes what you are paying a person to do: budget allocation between campaigns, feeding the system good conversion signals, excluding what should not be bought, and testing creative. A proposal that talks about manual bid management is either out of date or describing a different account structure than the one you will get.
The conversion the platform optimises to is the whole engagement
If the tracked conversion is a form submission, the system will find people who fill in forms. If it is a qualified opportunity fed back from your CRM, it will find something closer to customers. Getting offline conversion data back into the ad platform is usually the single highest-value piece of work in the first quarter, and it is the piece most often left out of a proposal because it needs your systems, not the agency's.
Read the reporting terms with the same care as the fee
Agree the cadence, the metrics and who the report is written for. A useful report reconciles platform-reported conversions with what your own systems recorded, explains the gap rather than hiding it, and says what changed in the account and why. A dashboard link is not a report. Ask to see a real one from another client with the identifying details removed before you sign.
Questions people ask about paid ads agency
Is percentage of spend ever the right fee?
It is reasonable where the workload genuinely scales with budget, such as large retail accounts with many products and constant creative refresh. It is least suitable for a small, stable account where the work is roughly constant, because your fee rises with seasonal spend that needed no extra attention at all.
What minimum monthly ad budget makes an agency worth it?
The test is whether the fee plus the spend can produce enough conversions to learn from. If the management fee is a large fraction of the media budget, most of your money is buying analysis of a dataset too small to analyze, and running the account in-house with a monthly review from a consultant is usually the better structure.
Should the agency also make the creative?
On the social and video platforms creative is the main performance lever, so an agency with no creative capability is managing settings around someone else's assets. Either buy creative from them and judge it, or agree explicitly who produces it and at what cadence, because starved creative pipelines are the usual cause of a good account decaying.
How long before paid ads should be judged?
Long enough for the platform to exit its learning behavior on each campaign and for your sales cycle to complete at least once. For short-cycle ecommerce that can be weeks; for considered B2B purchases it is a quarter or more, and judging it earlier than that mostly measures how quickly the account was set up.