• by Laurie Sullivan , Staff Writer @lauriesullivan, October 6, 2023

Advertising and marketing agencies are split on how to price paid ad and organic services, and many participants in a survey say they still prioritize optimizing keyword research despite all the technology available to do tasks like this this for them. 

Some 33% of agencies price paid services as a flat fee, and another 33% price it as a flat fee and percentage of spend. Some 16% price PPC services as a percentage of spend, while 15% price it as billable hours, and 3% as other.

Moving away from the percentage of spend models seems preferable, because it can result in fluctuating revenue for the agency.

WordStream, which supports LocalIQ, released its State of the Digital Marketing Agency report, surveying 300 agencies in the U.S. and Canada to determine how companies structure price, size and services, as well as learn more about the biggest business challenges brands and companies face.

About 59% of those participating in the survey are based in the United States, while 7% are in Canada, and the rest are in South Africa, Australia, New Zealand, Ireland, and other regions. Nearly half of those participating in the survey are the owner of their agency, while some 26% have 50 or more clients, and 25% have between 11 and 25 clients.

Agencies are charging additional fees for "add-on" services. Some 52% of participants cited landing-page creation, followed by 41% who cited image ad creation and display creative, and 28% who cited custom reporting dashboards.

This makes sense because these are time-consuming marketing activities that require expertise and creativity.

Effective landing pages and strong creative are crucial to the success of digital marketing campaigns. Aside from creative services, reporting and tracking were valuable services and agencies charged additional fees.

A majority of agencies manage new campaigns for clients on platforms such as Google, Facebook, Instagram, LinkedIn, YouTube, Microsoft Bing, Twitter, Pinterest, Amazon, Yahoo, Snapchat, Quora and others.

It's no surprise that Google takes the lion's share at 94%, with Facebook close behind at 91%. Some 91% of agencies said they plan to increase advertising spend this year, with 80% increasing that spend on Google, 66% on Facebook, 54% on Instagram, 41% on YouTube, 38% on LinkedIn, and 17% on Microsoft Bing. Only 13% said they would increase spend on Amazon.

When optimizing client accounts, 45% of agencies still prioritize keyword research, followed by 17% focus on ad copy, 15% on query analysis, 12% on bidding, 7% on landing pages, and 4% other.

The primary success metric is conversions at 49%, followed by return on ad spend at 39%, conversion rate at 23%, cost per action at 19%, clickthrough rates at 12%, and other at 4%.

Keeping up with network changes at 38% is the biggest challenge that agencies face. Some 30% of participants cite lack of knowledge and training in paid search, while 27% cite identifying at-risk clients and 27% cite prioritizing accounts.

Agencies face some major challenges this year, but some that were predicted earlier in the year include gaining and retaining new clients, managing time, and hiring and keeping new employees.

Given the popularity of pay-per-click advertising offered by agencies, standing out from the competition has become more difficult. Some 63% said getting new clients is the most challenging, followed by 42% who cite managing time.

Hiring and training new employees in this year’s survey jumped from 7% to 31%. Most agencies aid they do not outsource services, at 41%.

Web development at 29% was the highest service in demand, according to the survey results, followed by SEO at 20%, content at 17%, creative services at 19%, and PPC at 10%. Others on the list include social, reputation management, display marketing, and ecommerce.

About 45% of survey participants said they have between 2 and 5 employees dedicated to paid search and social, while 33% have 1 employee and 15% have more than 5.

New education resources have become important as the number of agencies supporting paid search and social. When asked to cite the resources used to learn more about the industry, survey participants cited Google, Wordstream, Moz, Hubspot, Semrush, among others.

This week, Reddit -- which has jumped with both feet into advertising -- made updates to its education hub. On Thursday, Reddit launched the Boost 2.0 Certification Program as part of the Reddit Ads Formula program, an on-demand industry learning hub.

The new program follows its Fundamentals program, which launched in June 2022 and has since supported more than 5,800 participants.