Agency pitched a 'performance marketing' package — should I pay a flat fee or a cut of ad spend?

Working with an agency that takes a commission on ad spend is like a taxi driver taking the scenic route to run up the meter. No setup whose profit relies on the size of your budget will ever care about your net margins. A serious performance agency charges a flat base fee and earns a bonus once pre-agreed ROAS thresholds are met.

We worked with a percentage-based agency while running a similar budget of 100.000 TL a month. Within two months, they ramped our spend up to 180.000 TL; order volume went up by only 20%, but the agency's invoice nearly doubled. We immediately switched to a team on a 25.000 TL flat fee; they trimmed the junk keywords from the account and matched the same sales on around 90.000 TL spend.

performance marketing sounds like magic in agency pitches but at the end of the day it just comes down to watching conversion rates on your dashboard then when ROAS drops to 2 tomorrow the team takig a cut of spend will say "the market is slow lets bump the budget so the algorithm can learn." Been there done that.

What are your gross profit margins? When you spend 100.000 TL on ads and bring in 400.000 TL in revenue how much is actually left in your pocket after product costs and returns? Without knowing those numbers cold, it's impossible to tell whether the agency's 30.000 TL flat fee is cheap or expensive.

Taking a cut of ad spend isn't sharing in a business's performance; it's just taking a cut of Google's and Meta's invoice.

tell the agency asking for 15% that you want to lower your ad spend and watch all that performance enthusiasm vanish into thin air but a flat fee gives you way more peace of mind.

note: I wrote this based on my own experience, it might not apply to everyone.

Ask the agency these three questions at the contract table: 1) Do you discount your invoice if the target ROAS isn't met? 2) Do we retain full ownership of the ad accounts and pixels? 3) How often will you report on negative keywords and audience optimizations?

Good call starting this thread. Just because everyone does it doesn't mean it's right.

Just leaving this note, it might be useful.

You're right. People defend habits, not processes. Resistance comes from there.

Just leaving this note, it might be useful.

Three different views emerged, they all complement each other. People defend habits not processes. Resistance comes from there.

I think differently. Mistakes made on the what is performance marketing side are usually reversible but expensive.

Everything goes well for the first three months; problems arise in the fourth. Of course it varies if your situation is different.

How did you solve this? If code ownership isn't in the contract, you have no bargaining power when leaving.

The harder it is to reverse a decision, the slower you should make it. Correct me if I'm wrong.

i felt relieved reeading this answer, so its not just me. processes without records never improve, because you dont know what to fix.

trying to do this alone is the most expensive way. i mean of course, it varies if your situation is different.

Same here. Hasty decisions become decisions you have to fix six months later.

This is my opinion, I'm not claiming it's absolute truth.

I disagree with you on this point. Most time waste accumulates in tasks waiting for approval.

Correct me if I'm wrong.

Same here.

I completely agree. If acceptance criteria aren't written, when the work is done is open to debate.

I'm also curious if anyone does it differently.

Quick summary for newcomers: Hasty decisions become decisions you have to fix six months later.

That's all, sorry if I went on too long.