The problem with charging on ad spend
The most common Amazon agency fee is a percentage of monthly ad spend, often 10% to 20%, with a monthly minimum. It’s simple to work out. It also pays the agency more when you spend more, regardless of whether the extra spend makes you any money.
Picture the day your agency finds that you could cut ad spend by a third and keep the same sales. That’s great news for you. Under a spend-based fee, it’s a pay cut for them. Most agencies act in good faith, but it’s not a good idea to build a working relationship on an incentive that points the wrong way.
Here’s the worked example from our approach, with a 10%-of-spend agency fee added:
| Low ACOS | Balanced | Aggressive | |
|---|---|---|---|
| Profit after ad spend | $1,000 | $1,200 | $750 |
| Agency fee at 10% of spend | $100 | $280 | $525 |
| Your profit after the fee | $900 | $920 | $225 |
The agency earns the most in the month you make the least. We’d rather be paid in a way that means our best month is also yours.
Our two pricing models
Advertising profit share
$1,000 a month + 5% of ad profit
We're paid a share of the profit from your advertised sales: ad sales, less product cost, Amazon fees and ad spend.
- Simple to measure from your ad reports
- Good for brands that want to start with the ads alone
- Our fee rises only when ad profit rises
Account profit share
Our preference$1,000 a month + 5% of account profit growth
We're paid a share of the growth in your total Amazon profit, from paid and organic sales together, above an agreed baseline.
- Counts the organic sales your ads help create
- Removes any reason to buy sales you'd get anyway
- We win only when your whole account wins
These are our standard rates for one marketplace. For larger accounts or several marketplaces, we’ll confirm the numbers after the free profit audit.
Why there’s a base fee
The base fee covers the fixed work of running an account: set-up, daily management and reporting. We keep it small so that most of what we earn depends on results. It also means the profit share can be lower than it would be on a pure results deal.
How the baseline works
For the account profit share, we agree a starting line before we begin, based on your recent trading history. We adjust it for seasonal patterns, so a normal Q4 peak doesn’t count as our work. We only share in profit above that line.
We write the baseline, the costs included and the method into the agreement. You’ll see the same numbers we invoice from.
What’s included in profit
We use a simple, agreed definition:
- Sales revenue from Amazon
- less product cost (the landed cost you give us)
- less Amazon fees (referral, FBA and storage)
- less advertising cost
If you want other costs included, like inbound shipping or prep, we add them to the agreement. Refunds come off revenue.
Minimum term
We ask for an initial three-month term, because PPC changes take a few weeks to show in the numbers. After that, the agreement runs month to month.