What should I expect to pay for SEM services?

Every ad strategy is different, which is why search engine marketing prices range widely. Industry research and studies, however, show that most SMBs invest $9000 to $10,000 per month on SEM services and campaigns.

What your company will spend depends on several factors, including:

1. Your ad spend budget
2. Your SEM agency
3. Your advertising strategy
4. Your campaign’s scale
5. And more

Depending on your approach, agency, and ad budget, you may invest more or less than $9000 each month. Understanding the factors that determine SEM pricing, however, can help your company make smart decisions when it comes to choosing a plan, agency, and strategy.

Keep reading to learn everything about SEM pricing, from the different pricing models used by agencies to the unique factors that shape SEM agency pricing. If you’re looking for custom SEM pricing information, contact us online or call us at 888-601-5359 for a free quote!

SEO vs. SEM: What is the difference?

Search engine optimization (SEO) describes an umbrella of strategies for improving your visibility in search engine result pages (SERPs). This digital marketing tactic focuses on your organic (rather than paid) ranking or position in searches related to your industry, business, or products and services.

SEM refers to paid strategies for improving your visibility in the SERPs via paid ads. Previously, marketers used SEM to discuss organic and paid techniques. In recent years, however, SEM has become synonymous with paid-only tactics, versus paid and organic ones.

Overall, the difference between SEM and SEO is that one uses paid strategies and the other organic.

4 SEM agency pricing models you need to know

As you research SEM pricing, you’ll come across several different pricing models, including these four:

1. Percent of ad revenue

With the percent of ad revenue pricing model, your business pays for results.

Instead of paying your agency a monthly flat fee, for example, you pay based on your ad strategy’s results. This SEM agency pricing model can seem attractive to many businesses, especially SMBs, but it does come with some drawbacks.

Learn more about the perks and downsides to the percent of ad revenue pricing model:

Advantages of this SEM agency pricing model

The benefits of the percent of ad revenue pricing model include:

1. You pay based on results or revenue generated
2. You minimize advertising costs during slow seasons

Overall, this approach to SEM pricing offers minimal value for the short- and long-term.

Disadvantages of this SEM agency pricing model

The downsides of the percent of ad revenue pricing model include:

1. Zero predictability for monthly SEM costs
2. Pricing spikes during busy seasons
3. Low-value, low-return targeting to generate revenue
4. Payment debates for assisted conversions

While the percent of ad revenue model generates immediate interest among businesses, it often delivers little value in the long-term. The lack of predictably that comes with this SEM pricing model makes it a risky choice for companies.

2. Percent of ad spend

With the percent of ad spend pricing model, your SEM pricing depends on your monthly ad spend.

This pricing model introduces some predictability because your company determines your ad spend. Depending on your ad spend, you may pay your agency five to 20% of it.

For example, if you invest $5000 and your agency takes 14% of that, you would pay them $700 each month.

Learn more about the advantages and disadvantages of this SEM pricing model:

Advantages of this SEM agency pricing model

Benefits of the percent of ad spend pricing model include:

1. You receive a predictable monthly invoice
2. You set a management fee that aligns with your budget
3. You decrease the likelihood of agencies targeting low-value opportunities to generate revenue

From a cost perspective, this SEM agency pricing model offers several advantages to businesses like yours. You can budget for SEM costs each month, which can protect your advertising budget. Plus, you remove the motivation for agencies to go after low-value opportunities to deliver bare-minimum results.

Disadvantages of this SEM agency pricing model

Drawbacks of the percent of ad spend pricing model include:

1. Agency focus on increasing your ad spend to boost its revenue
2. Raises to your ad spend also raise your SEM pricing
3. Payment remains consistent, even if ad campaigns underperform

Overall, the percent of ad spend model offers more advantages than disadvantages. You can predict your costs each month, as well as remove low-return strategies. Not to mention, your agency focuses on providing your business with the best results versus any results.

3. Flat rate management

With the flat rate management pricing model, you pay a flat monthly rate.

Like the percent of ad spend model, flat rate management offers predictability.

Your business can anticipate your SEM costs, which helps your team optimize your online advertising budget. Not to mention, in busy seasons, you know your SEM agency’s pricing won’t change, even if you increase your monthly ad spend.

Learn more about the upsides and downsides of flat rate management for SEM services:

Advantages of this SEM agency pricing model

Perks of the flat rate management model include:

1. You can keep ad management costs predictable
2. You can modify ad spends without increasing ad management expenses

If you’re looking for consistency, flat rate management may work well for your business.

Disadvantages of this SEM agency pricing model

Drawbacks of this pricing model from SEM agencies include:

1. Paying a higher upfront cost
2. Receiving fewer deliverables due to a flat-rate fee
3. Experiencing add-on fees for extra services or requests

While flat-rate pricing models offer convenience and predictability, it can impact service quality. If you feature an elaborate campaign and strategy, for example, your agency may charge extra, which cancels any potential savings the flat-rate fee offered initially.

4. Capped management based on percent of ad spend

With the capped management pricing model, you pay a flat-rate fee or a percentage of your ad spend.

As an example, an agency may require 14% of your ad spend or $500 per month.

How you pay depends on whichever amount is higher.

If your company spends $5000 each month on ads, you will pay by percentage, or $700 per month, because it’s higher than $500. In comparison, if you spend $2500 on ads each month, you would pay the monthly flat-rate fee of $500. That’s because $350 (or 14% of $2500) is less than $500 per month.

Learn more about the positives and negatives of capped management:

Advantages of this SEM agency pricing model

Benefits of this SEM agency pricing model include:

1. You get predictable pricing each month
2. You set a custom monthly ad spend
3. You scale SEM pricing to your ad spending

For many businesses, capped management pricing offers a compromise between other pricing models.

Disadvantages of this SEM agency pricing model

Downsides of capped management pricing include:

1. Pay a higher price than for in-house management
2. Settle for a lower ad spend due to capped management price
3. Find zero agencies within your price range

While more complex than other SEM agency pricing models, capped management is popular. Unlike other SEM pricing models, it takes advantage of both flat rate management and percent of ad spend models, which offers your business options when it comes to SEM services.