Question #1: How transparent is the agency?
As noted above, paid search is unique in terms of the visibility you should be able to get into the ROI of your campaign. However, when an agency manages your campaign, it also controls access to some of that visibility. Any agency worth its salt will want to provide you with logins to your accounts so you can monitor how different keywords or keyword groups are performing, keep tabs on your media spend and track the overall performance of the campaign. The reporting the agency provides should be both transparent and robust. Not being able to see what you're getting for your money is a major red flag.
Question #2: Is the agency ethical in its billing and account management practices?
Some agencies use ownership over your account as a bargaining chip when negotiating a new or the renewal of an existing contract. In addition to unprofessional, this approach can have adverse effects on the performance of your paid search campaign. If there are shared intellectual property innovations to be considered, let that be something both parties get to enjoy. Your agency is working for you, and the greater the success and innovations, the better everyone comes out looking. Similarly, be wary of agencies that charge either by the click or for one-off projects. Likewise, make sure an agency isn't profiting outside the agreed-upon fee structure. While passing through costs is perfectly acceptable, marking them up is not. Your agency should regard adding value to your business as its primary mission.
Question #3: Does the agency rely too heavily on black box technologies?
Search in general, and paid search in particular, started life as more of a technological discipline than a marketing one. Although it has shifted decidedly in favor of marketing, a technological vein continues to run throughout the industry. Agencies still rely heavily on bid management and campaign automation systems, and many try to sell clients on using their particular technology. Sometimes a platform developed in-house will be competitive, but rarely will be it best-of-breed. Agencies are primarily in the business of providing marketing services; technology development requires an entirely different skill set. Consider agencies that are technology-neutral and that can advise you on the most appropriate tools to manage, track and measure your campaign. Either way, make sure a) you get a thorough explanation of how the technology works and specifically how it will benefit your campaign, and b) that your agency does not rely too heavily on it. The best agencies use technology to facilitate their skills as marketers, not as a substitute for expertise relative to your business.
Question #4: Is the agency working hard and smart?
Watch out for agencies that claim they change bids every hour. Any decent bid management system can do this, but the reality is that 90 percent of keywords don't require bid changes more than once per week. Thus, an agency that claims to be making hourly changes is either relying too heavily on technology or exaggerating or misplacing its efforts on your behalf. Your campaign is best served by an agency that complements its use of technology with extensive manual analysis of your keyword sets and their performance.
Question #5: Does the agency rely too much on Google?
We all know that Google enjoys disproportionate weight in the search marketplace, making Google an obvious target for the lion's share of your search budget. However, relying solely on Google is a sign of laziness. Any agency looking after its clients' best interests always should be seeking out opportunities to further their campaigns on other engines as well.
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