Yes, structurally — the agency earns more when it spends more of your money, regardless of what that spend returns. It is not necessarily disqualifying, but you should know what it does to incentives and what the alternatives are.

On this page

• How does this actually work?
• What behaviour does percentage-of-spend pricing encourage?
• What fee model removes the spend conflict?
• Should I pay a Google Ads agency on performance?
• What should I ask an agency instead of about fees?

How does this actually work?

Under percentage-of-spend, every recommendation to increase budget also increases the agency's fee. Every recommendation to cut waste reduces it.

That does not make agencies dishonest. It means the honest ones are working against their own compensation every time they recommend a cut, and you should not have to rely on that.

What behaviour does percentage-of-spend pricing encourage?

• Reluctance to pause underperforming campaigns.
• Enthusiasm for high-spend channels regardless of fit.
• Resistance to efficiency work that reduces spend.
• No incentive to tell you the channel has hit its ceiling.

That last one is the expensive one. The most valuable thing a media buyer can say is "this is as far as this channel goes profitably" — and percentage-of-spend makes saying it costly.

What fee model removes the spend conflict?

A flat fee inside a spend band. The fee is fixed while spend sits in a range, and steps at defined thresholds set out in the agreement at signing.

That does two things. The agency never earns more by spending more of your money inside the band. And a fee step becomes a lookup rather than a renegotiation, so nobody has to have an awkward conversation when the account grows.

The bands are published in the agreement up front. You sell the band, not the fee — a business entering at the bottom of a band can scale substantially before the invoice changes.

Should I pay a Google Ads agency on performance?

Reasonable in principle, harder than they look. Whatever metric the bonus keys on becomes the thing that gets optimised, including in ways you did not intend.

A workable pattern: flat fee for the first engagement, and revisit adding a performance component at renewal once there is enough shared history to agree what is actually being measured and who controls it. Doing it on day one means agreeing a target before either side knows what the account can do.

What should I ask an agency instead of about fees?

Not "what is your fee model." Ask: "What would you tell me if this channel stopped being profitable?"

The answer, and whether their compensation makes it expensive to give, tells you more than the percentage does.

Related questions

How do I know if my Google Ads agency is actually doing anything, or just letting the account run?

Pull the change history and group it by user. It shows every change, who made it, and when — and it is the one thing in the account that cannot be dressed up in a report. Read the full answer.

Why can't I see all my search terms in Google Ads, and how much of my spend is hidden?

Google withholds terms that were not searched by "a significant number of users," which on most accounts leaves a material share of spend unattributed to any visible query. The fix is not to recover the terms — it is to stop needing them. Read the full answer.

How do I work out what percentage to put in a Google Ads seasonality adjustment?

From your own measured conversion-rate change in the equivalent past period, not from a guess — and only for short, predictable events. If you cannot point at a comparable historical window, do not set one. Read the full answer.

Written by Usama Khan, who runs Google Ads for e-commerce brands and home-services companies at AdventurAds. Figures are from accounts under active management and are anonymised. Last reviewed 2026-08-26.