How Pricing Models Shape Paid Media Recommendations

Pricing models aren't neutral. They shape behavior. Not because anyone's dishonest. Just because incentives matter.

If you get paid more when clients spend more, you'll naturally recommend strategies that increase spend. If you get paid the same regardless of spend, you'll focus on efficiency. Neither approach is inherently wrong. They just optimize for different outcomes.

Here's how the most common pricing models work and what incentives they create.

Percentage of Ad Spend (10-20%)

This is the most common model. The provider charges a percentage of your monthly ad spend as their management fee. If you spend $50,000, they earn $5,000-$10,000 depending on the rate.

What it incentivizes

Revenue grows with ad spend. That means the provider benefits financially when you increase your budget. It doesn't mean they'll recommend bad strategies. It just means they have a structural reason to favor budget increases over optimization.

Example scenario:

You're spending $50,000/month at $200 cost per lead, generating 250 leads. Your provider has two options:

• Option A: Optimize targeting to reduce cost per lead to $150. Same budget, 333 leads. Provider still earns $7,500 (at 15%).
• Option B: Recommend increasing budget to $75,000. Even at $200 cost per lead, you get 375 leads. Provider now earns $11,250.

Both options deliver more leads. But Option B is 50% more profitable for the provider. That doesn't make it the wrong choice. It just means the pricing model naturally favors it.

When this model works well

• You're in a growth phase and need to scale spend aggressively
• Your constraint is execution capacity, not budget efficiency
• You have strong internal oversight to verify recommendations

When this model creates tension

• You're focused on profitability and need to reduce waste
• You suspect inefficiencies but can't get objective evaluation
• Budget recommendations always trend upward regardless of performance

Flat-Fee Monthly Retainer

The provider charges a fixed monthly fee regardless of ad spend. Whether you spend $10,000 or $100,000, they earn the same amount.

What it incentivizes

Efficiency. Since revenue doesn't grow with spend, the provider has no financial reason to recommend budget increases. They're more likely to focus on optimization, waste reduction, and improving ROAS.

The tradeoff: they also have less incentive to push for aggressive scaling. If you want to grow fast, you may need to drive that conversation yourself.

When this model works well

• You want optimization and efficiency, not aggressive scaling
• You have a fixed budget and need to maximize results within it
• You value independence and want recommendations that aren't tied to spend volume

When this model creates tension

• You're in rapid growth mode and need someone pushing for scale
• Your spend fluctuates significantly month to month
• The provider's workload increases but their fee doesn't

Performance-Based (% of Revenue or Profit)

The provider earns a percentage of the revenue or profit generated by the campaigns. If campaigns drive $500,000 in revenue, they may earn 5-10% of that.

What it incentivizes

Outcomes. The provider only makes money if campaigns actually drive business results. This aligns incentives well in theory.

The challenge: attribution. Paid media rarely operates in isolation. If someone sees your ad, then Googles your brand, then converts three days later, how much credit does the ad get? These debates can get messy.

When this model works well

• You have clean attribution and can accurately track revenue to campaigns
• You're willing to share revenue data with an external provider
• You want maximum alignment on business outcomes

When this model creates tension

• Attribution is complex or disputed
• You're not comfortable sharing detailed revenue data
• The provider takes on significant risk if campaigns underperform

Hourly or Project-Based

The provider charges for time worked, either hourly or as a fixed project fee. Common for audits, consulting, or short-term engagements.

What it incentivizes

Depends on the structure. Hourly billing can incentivize more hours worked. Project billing incentivizes efficiency (finish faster, keep more margin). Neither is tied to your ad spend or results.

When this model works well

• You need a one-time audit or strategic review
• You want to pay for expertise without ongoing commitment
• You're building an in-house team and need training or transition support

When this model creates tension

• Ongoing management requires continuous work, making hourly billing unpredictable
• You want someone accountable for results, not just hours logged

Why This Matters

Pricing models aren't just about cost. They shape what gets recommended and how success is measured.

If you're paying percentage of spend, expect recommendations that favor budget increases. That's not dishonesty. It's just how the model works.

If you're paying flat fees, expect more focus on efficiency and optimization. Again, not because flat-fee providers are more ethical. Just because that's what the model rewards.

The question isn't which model is "best." It's which model aligns with what you're trying to accomplish right now.

How to Choose

Ask yourself:

• Are you optimizing for growth or efficiency? Growth favors percentage models. Efficiency favors flat fees.
• Do you trust your current provider's recommendations? If not, consider getting an independent audit from someone with no stake in your spend volume.
• How much oversight do you have? Percentage models work fine if you have strong internal oversight. Without it, they can drift toward spend inflation.
• What's your budget flexibility? If budget is tight, flat fees give you predictability. If budget is flexible, percentage models scale with your needs.

There's no universal answer. Just tradeoffs. The key is understanding what incentives you're creating and whether they align with your goals.