Choosing an Ad Agency: Settlement Model First

Put three advertising agency quotes side by side and the same scope can differ by a factor of three. Most buyers attribute this to capability. In practice the difference comes mostly from how the agency gets paid: a monthly retainer, a commission on ad spend, or a share of outcomes. The model determines whether the agency wants you to spend more or less.

1. Three Kinds of Agency, Three Kinds of Work

Media and execution shops hold accounts and optimisation staff, charge commission on spend, and are good at deploying budget. Creative shops produce assets and scripts, charge per project, and are not accountable for results. Integrated shops cover strategy through execution on an annual retainer.

To tell which one you are talking to, ask three questions: who owns the ad account, who owns the creative, and what assets remain after the contract ends. The third question is the one that separates suppliers from partners. If the answer is nothing, you start from zero at every switch.

2. Settlement Models Compared

Most contracts are hybrids: base fee plus commission plus project fees. Fix the boundary of each part before signing, especially the project component, which is where later additions usually appear.

3. Three Hidden Cost Lines

Account and tooling fees: some agencies bill monitoring tools and asset storage separately. Creative refresh: performance media needs new assets weekly; a contract that only specifies monthly output will run short. Staff turnover: when your contact leaves, the ramp-up time is not credited to the service period.

For e-commerce advertisers, creative refresh usually outweighs brand-side costs because platform assets decay quickly. Specify weekly output in the contract.

4. Designing a Pilot

Do not sign an annual retainer first. Run a one-month pilot with one verifiable goal: a category keyword reaching page one, or cost per form falling into a stated band.

Watch three things during the pilot: response speed, creative cadence, and data transparency. Opaque data is the signal that matters. Account admin rights belong with the client.

5. Four Management Routines

A weekly data call on spend, conversion and creative performance — not a slide deck of adjectives. A monthly permission audit confirming admin rights remain with you. A quarterly goal review, because markets move. A half-yearly asset inventory pulling creative, landing pages and content into your own library.

These routines look administrative. They decide whether you are buying a service or building a capability.

6. FAQ

Why do quotes differ so much?

Mainly staffing, account resources and settlement model. Ask for hours and deliverables to be itemised; totals alone are not comparable.

Should we work with an agency that has no case studies?

Possible, but control risk with a pilot. Even with cases, check industry relevance — cross-industry examples carry limited signal.

How do we stop a commission agency from overspending?

Set a spend cap and a cost-per-acquisition ceiling that require written approval to exceed, and keep admin access.

In-house team or agency?

Below a certain monthly spend, an agency is cheaper per unit of labour. Above it, with several categories, in-house is more controllable. Most firms compromise: one internal owner, execution outsourced.

See also

• Account permission checklist: what never to hand over
• Creative refresh cadence: how many assets per week
• Setting acceptance criteria for performance media

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