As an agency owner, you’ve probably encountered this scenario before: you just delivered $250,000 in revenue for a client through PPC campaigns. Your client is thrilled, they renew their retainer, and even refer two new businesses to you. Yet, despite these outstanding results, your PPC service barely breaks even.

Welcome to the profitability paradox that many agencies face today: while PPC campaigns create substantial wealth for clients, they often leave agencies grappling with slim profit margins. These agency PPC profitability challenges lie in a combination of hidden costs, inefficient pricing models, and underestimated complexity that silently erodes margins.

So, why is PPC not profitable for agencies, and how can white-label PPC fulfillment solve this problem? 

Why is PPC not profitable for agencies?

The uncomfortable truth is that many agencies charge PPC based on market rates rather than the real value and complexity involved in delivering these services. This leads to a major mispricing problem, one that hinders profitability.

1. Pricing based on market rates instead of actual costs:
   Agencies often match competitor pricing strategies without considering their own cost structures. What works for one agency might be a losing proposition for another.
2. Hidden hours never factored into pricing:
   Client calls, strategy sessions, reporting meetings, approval cycles, and countless email threads consume significant time, yet are rarely included in your initial campaign management estimates. 
3. Underestimating platform complexity:
   Platforms like Google’s Performance Max or Facebook Ads require more effort and expertise than what may be accounted for in your pricing model. Managing multi-channel campaigns takes time, especially as AI tools, new platform features, and evolving best practices add complexity.
4. Scope creep as “relationship building”:
   Many agencies don’t set clear boundaries with clients. A “quick favour,” such as adding another campaign or making minor creative changes, can eat away at profitability without being reflected in your pricing.
5. Client communication overhead:
   The endless back-and-forth, whether through emails, Slack messages, or ad-hoc calls, is essential, but often goes unaccounted for. This communication overhead adds up and should be factored into your pricing.
6. Utilisation rate fantasy:
   You may be paying specialists for 40 hours a week but only billing clients for 22 of those hours. The gap is filled with necessary but unbillable tasks such as admin, learning, troubleshooting, and client communication.

How should agencies price PPC management?

The best solution for profitability is moving away from hourly or flat-fee models and shifting towards value-based pricing. Structure your PPC services in tiers that reflect the time and effort involved: 

1. Tier 1: Strategic:

1. 1. • Complex business goals: Multiple channels, custom reporting, frequent strategy adjustments.
      • Premium Pricing: Reflects the high touch and management complexity.

2. Tier 2: Growth:

1. 1. • Moderate complexity: Established conversion funnels, stable campaign structures, standard reporting.
      • Mid-tier pricing: Based on proven processes with moderate management needs.

3. Tier 3: Maintenance:

1. • Simple campaigns: Low-touch management, clear success metrics, automated reporting.
   • Base pricing: For simple and low-maintenance campaigns.

You should price each tier to cover all costs, plus a healthy margin (aim for 30-40%, not 6.7%). This pricing model better reflects the value you’re delivering and helps clients understand they are paying for the level of service and expertise they need.

The true cost of PPC services

The reality is that many agencies don’t track true delivery costs. They look at the retainer revenue and assume profitability, but don’t account for the hidden costs. A $3,000 monthly retainer may seem profitable, but once you factor in unbilled communication, meetings, and reporting, the true delivery cost could be $2,800, leaving you with just $200 in profit. That’s only 6.7%, which is a far cry from the digital agency profit margins needed for sustainable growth.

The flawed PPC pricing model

Let’s explore why traditional pricing models don’t align with actual service delivery.

1. Percentage of ad spend:

At first glance, this model seems logical. But it doesn’t account for complexity. Managing a $10,000 ad spend across 15 campaigns with dynamic creatives demands much more effort than a simpler $10,000 campaign. Yet, both would earn the same fee.

2. Flat retainer:

Flat retainers work when scope is strictly controlled, but they fall apart when clients push for more. These “quick favours” become expensive, and agencies are left absorbing the cost of extra work.

3. Hourly pricing:

Hourly pricing punishes efficiency. As your team becomes more skilled, the hours required to manage campaigns reduce. Clients often resist paying for the hours they can’t see, which can lead to lower revenue despite better results.

The hidden hours killing PPC profitability

You think your PPC campaigns take your team only 10-15 hours per month. The reality? It’s likely closer to 25-35 hours per month. Here’s why:

• Client communication: 5-8 hours monthly
• Meetings: 4-6 hours monthly
• Reporting: 3-5 hours monthly
• Strategy development: 4-6 hours monthly
• Creative coordination: 2-4 hours monthly
• Crisis management: 2-6 hours monthly
• Platform learning: 2-3 hours monthly
• Hands-on campaign work: 10-12 hours monthly

These “unbillable” hours add up, and if you’re only billing for campaign management, you’re leaving a large chunk of work out of your pricing model.

Try this exercise: Track all PPC-related hours for one month, including emails, meetings, reporting, and strategy. You’ll be shocked by the gap between billed and actual hours. 

The utilisation rate trap 

Utilisation rate is one of the most misunderstood metrics. Most agencies assume their PPC specialists are working at 75-80% utilisation. In reality, most achieve only 50-60% utilisation, and sometimes even less. 

Backlinko reports that among the surveyed specialists globally, 49% say it’s harder managing PPC campaigns today than two years ago. 

Why is this?

1. Learning curve: Constant platform updates, new features, and algorithm changes take time and effort but aren’t billable.
2. High communication overhead: Clients demand more one-on-one expertise, eating into time that could be spent on building the campaign 
3. Admin and reporting: Many hours go to creating reports, documentation, and troubleshooting – none of which are billable.
4. Troubleshooting: When campaigns underperform or when clients reject ads, your team spends hours resolving these issues often without compensation.

Solution: Either adjust pricing to reflect realistic utilisation (55-60%) or find ways to increase billable work. This could include making routine tasks easier with AI, charging for extra reporting, or knuckling down on stricter scope management. Feedback shows that 75% of PPC professionals use AI sometimes to assist with ad creation, with 71% reporting satisfaction with the results. 

These numbers suggest a positive correlation between using AI as a supporting tool to improve PPC profitability for agencies. 

Why PPC scope creep destroys margins

PPC is especially vulnerable to scope creep. A quick favour request often leads to unbilled work, eroding profitability. Let’s break down some common scope creep scenarios:

• Extra campaign setup: 3 hours of work
• Creative tweaks: 1.5 hours
• Additional reporting for client presentation: 2 hours

Five of these requests a month could add up to 5-15 unbilled hours, resulting in sacrificed profit. Over a year, that amounts to thousands in lost revenue per client. The solution? Set boundaries and use change orders for extra work to protect your margins.

The Performance Max profitability problem

Google’s Performance Max campaigns promised simplicity, but many agencies have found that they require even more oversight. The pricing mistake many make when switching clients to Performance Max was keeping pricing the same.

Here’s why Performance Max is harder to price:

• Less granular control: Requires more trust-building and client communication
• AI testing fluctuates: Results can be volatile, making client reassurance and adjustments more necessary
• Cross-channel complexity: Involves multiple platforms, demanding more expertise.

When switching strategies, your agency should raise its prices for Performance Max campaigns to reflect the increased expertise required. 

How white-label PPC solves profitability

One way to address the profitability squeeze is with white-label PPC services. Let’s compare the economics of in-house versus white-label:

• In-house: An underutilised PPC specialist with 8 clients might cost you tens of thousands annually but generate only a small fraction more in revenue, leaving you barely breaking even.
• White-label: You pay for the actual work delivered with no fixed overhead. The variable cost model allows you to scale without worrying about underutilisation or employee benefits.

Case study: An agency had a portfolio of over 20 Google Ads clients but was struggling to find a cost-effective way to manage them. After exploring several white-label providers offering per-project models, they realised the operational costs would be too high and the model lacked flexibility.

Around 12 months ago, they approached Globital for a better solution. We offered them a full-time dedicated Google Ads resource, tailored to their specific processes and client expectations. This gave them full control and visibility, without the burden of in-house management or inflated costs.

Since then, they’ve seen a significant improvement in client retention and are now able to onboard new clients with ease. The white-label PPC management pricing model has given them consistency, efficiency, and the freedom to grow confidently – all while maintaining high service standards.

Fixing PPC profitability: The three-step framework

1. Calculate your true costs: Track every hour spent on PPC services, including unbillable tasks.
2. Audit your pricing: Review whether your current pricing covers your true delivery costs and provides a healthy margin.
3. Restructure delivery or pricing: Consider increasing prices, improving efficiency through automation, or using white-label PPC partners.

PPC can absolutely be profitable for agencies. But, in order to make it work, your agency should prioritise smarter pricing and outsourcing extra hands to handle more client work. 

Ready to understand and optimise your agency’s PPC service model? Explore how white-label PPC can improve your margins without sacrificing quality or client relationships. Schedule a free discovery call with our team and discover how wholesale PPC services can support your agency’s profitability.