Advertising agency cost varies by several factors, such as industry, project scale, expertise, and type of marketing.
Despite this, we determined an average range for different types of marketing agencies based on in-depth research conducted by Growth-onomics itself.
Small and mid-sized agencies typically cost around $2000 a month, while enterprise agencies charge $20,000 monthly. Your industry and project scope will determine your project’s actual cost.
While top agencies may have been a mystery in the heyday of the advertising industry, creative campaigns and billing structures were simple.
Those days are long gone. More channels, more content, and more opportunities translate into more complex advertising agency costs.
Businesses in nearly every industry rely on advertising tactics to promote their goods or services, generate leads, and attract new customers either through digital or even traditional means.
Whether you are small to medium-sized business (SMB) or a large enterprise, you will need an advertising agency sooner or later.
Since your marketing budget makes up a significant part of your revenue generation, a business must have a clear understanding of advertising agency costs to maximize its advertising effectiveness.
Advertising agency cost is the total cost of the services you receive from an advertising agency. A lump sum or a monthly fee may be charged depending on the service.
In this article, we will explore advertising agency costs and the following topics:
- What is an advertising agency?
- What does an advertising agency do?
- Types of an advertising agency
- Advertising Agency Costs: Then vs. Now
- Advertising agency cost components
- Budget considerations or tips for setting an appropriate budget
- How to measure the return on investment (ROI) when working with an advertising agency.
- Common challenges or pitfalls businesses may run into when dealing with advertising agencies.
Let’s get started.
What is an advertising agency?
An advertising agency is a professional service firm of trained individuals responsible for creating, planning, handling, and executing advertising or marketing strategies for its clients.
What does an advertising agency do?
An advertising agency helps businesses reach potential customers and build interest in a client’s business through diverse strategies, such as market research, advertising, and social media marketing.
Simply outline your goals before hiring an advertising agency, and work closely with them to determine how to achieve those goals.
In general, advertising agencies are responsible for:
- Market research
- Account management
- Content planning & creation
- Promotion
- Budgeting
- Public relations
The agency will manage all aspects of your advertising plans, leaving your team free to focus on other tasks.
As a business, you can choose from various advertising options like PPC, OTT, and more traditional formats like broadcast and print advertising.
Types of advertising and the cost per hour
There are 3 main types of an advertising or marketing agency – traditional, digital, and hybrid(of both).
Traditional Advertising Agency
Traditional advertising agencies rely on print media such as magazines and newspapers for their advertising campaigns.
#1 – TV Advertising
Advertisers purchase TV ad slots based on a CPM.
Cost per thousand (CPM) impressions is a unit that indicates how much advertisers will pay for a particular TV spot.
CPMs, however, vary by market, channel, time of day, and season.
Ads aired during popular shows or peak viewing times can consequently be more expensive.
On average, TV advertisers charge $100–$149 hourly for TV ads.
#2 – Radio Advertising
As for radio ads, they are also priced by estimated CPM and vary greatly across markets, genres, and audiences. A radio advertisement can be broadcast via AM/FM radio, podcasts, or Spotify.
On average, radio advertisers charge $150–$199 hourly for radio advertising.
#3 – Print Advertising
The cost of print advertising is based on 3 crucial factors:
how many readers they have, the size of the advertisement, and where it appears.
Newspapers and magazines are great mediums for print advertising. Flyers, brochures, and direct mail are also good options for this type of advertising.
On average, print advertisers charge $100–$149 hourly.
#4 – Out-of-Home (OOH) Advertising
Out-of-home advertising involves outdoor advertisements that are displayed in areas outside of homes.
Advertising rates are usually charged weekly or monthly.
Costs of advertising vary depending on the length of the ad, its format, distribution, demographics, and exposure.
The most common out-of-home advertising channels include billboards, bench ads, transit ads, and wayfinding ads.
On average, out-of-home advertisers charge $100–$149 hourly.
Digital Advertising Agency
Digital advertising agencies rely on online media channels such as social media or email to reach targeted audiences.
#1 – PPC Advertising
In PPC advertising, advertisers are billed for every click on their ad. The campaign’s cost, however, depends on the bid for the keyword and ad placement. A campaign with a competitive keyword or audience will cost more.
Google Ads and Quora are among the most popular advertising platforms.
On average, PPC ads experts charge $100–$149 per hour. With an agency, the average monthly cost is $350-$5000.
#2 – Social Media Advertising
Social media advertising involves paid ads displayed on social media platforms.
Different platforms offer different advertising options and typically charge by impressions (CPM) or sometimes by cost per click (CPC).
Social media platforms such as Facebook, Instagram, Twitter, TikTok, LinkedIn, YouTube, and Pinterest are popular platforms used for social media advertising.
On average, social media advertisers charge $100–$149 per hour. And average cost per month with an agency costs around $900-$20,000.
#3 – Search Engine Optimization
Search engine optimization is a process of ranking websites in SERPs organically.
An SEO service can cost anywhere from $1500 to $7500 per month or $100 to $150 per hour to $5000 to $35,000 for a single project.
#4 – Over-The-Top (OTT) Advertising
An OTT ad is a video advertisement that appears on a streaming service. In OTT advertisers are charged based on cost per thousand impressions (CPMs).
Billboards, Bench ads, Transit ads, and wayfinding ads are some of the decent OTT advertising options.
Advertising on the Internet, allows advertisers to target niche audiences, which can be more expensive than traditional television advertising.
On average, OTT advertisers charge $100–$149 per hour.
#5 – Email Marketing
Email marketing is a powerful advertising channel for businesses seeking to connect with their customers.
Businesses can utilize email newsletters to charge for ad space in the newsletter based on circulation and audience.
You can choose any platform that fits your business needs and is highly visited.
Email marketers typically charge $100–$149 per hour. Whereas email marketing’s average cost per month with an agency is $300-$1500.
Hybrid Advertising Agency
Hybrid advertising agencies utilize both print and digital media to maximize the reach of their advertising campaigns.
Advertising Agency Costs: Then vs. Now
THEN
Traditionally, advertising agencies developed creative ad campaigns for television, print, and radio ads on behalf of their clients.
A typical monetization method was utilized based on “Ad Spend” in which an agency would purchase media on behalf of its clients and earn a commission of between 10% to 20%.
For example, if a client spends $2,000,000 on ‘media’ annually, 15% ($300,000 here) of that is paid to the agency that also handles creative as part of the service. Agencies used a similar formula, though the models and commissions varied slightly.
NOW
Today, advertising agencies are offering several specialized services other than media.
Quite often, clients purchase Ads from media agencies and develop campaigns or brand assets with creative firms. Due to this, many agencies have changed their fee structure to focus on time and materials instead of media.
For clients with large advertising budgets, advertising agencies (usually larger ones) will continue working with media.
The question is, what about clients whose business does not typically invest in outbound advertising, and rely on agencies for collateral, websites, signage, inbound marketing, etc?
Here are the most common agency fees and costs.
Discovery / Onboarding Fee
In any partnership, discovery is a key part of making sure it’s off to a good start. This is the time when the marketing agency or consultancy gets to know you and your business.
It’s usually much less expensive for production agencies since they don’t necessarily have to be familiar with your industry.
An onboarding process for a small or medium-sized business usually costs $10k to $20k, depending on its size.
Onboarding fees aren’t charged by all agencies, but if they do, they make up the cost through their hourly rate or a separate fee.
Technology Fee
Like onboarding, technology fees may be included in the agency’s hourly rate or budgeted as an additional fee.
Many marketing companies use technology and software to enhance the customer experience, collect and store data, and analyze the results.
Some of these technologies may require a premium fee to access.
Generally, technology fees fall into 2 categories:
- Work-related technology costs
- Licensing fees
Initially, you will have to pay a fee for the technology the agency uses to get the job done efficiently.
In the second category of technology fees, licensing fees apply to your business’s use of martech. Depending on your agreement with your agency, they might take a cut because they’re handling the software’s service.
The cost of technology can vary from as little as $200 a year to as much as $20,000.
Media Fee
Media and advertising agencies often take a cut of your media budget – roughly around 10% to 20% – particularly on media platforms where their credit card is on file.
For example, if you spend $1 million on media, the agency may take $150k from it.
The advertising platforms themselves may impose platform fees on you as well, which you are liable to pay.
A Service Markup
Assume you are working with an agency and need materials printed. Materials might not be printed by the agency but rather outsourced to a printing partner.
To cover their role in vetting, organizing, and managing vendors, they would mark up the service between 10% and 20%.
A 10% markup means you’ll pay $110 for something that costs $100 to print, the agency keeps $10, and the vendor keeps $100.
Project Costs & Pricing
Once you have paid all other fees, you will reach the actual cost of the project.
Agencies bill their services in several ways such as fixed fee, hourly, or value pricing.
Fixed Fee
Fixed fee refers to the costs that are outlined in the scope of a project.
For example, the complete branding project costs around $150,000.
Hourly Pricing
In hourly billing, the agency or consultancy charges based on the amount of time it takes to complete a project.
For example, an agency might claim the job will take 35 hours to complete, with an hourly rate of $120.
Value Pricing
Essentially, value pricing is the practice of pricing projects based on the value of the services they offer.
For example, the agency might provide you with a quote from their observations and experience suggesting that $125k is a reasonable price for a newly designed website.