This framework covers the right metrics to track, benchmarking against realistic targets, activity-based evaluation, the quarterly review process, leading vs lagging indicators, and when results justify the fee.
1. Choose the Right Metrics
Not all metrics are equally useful for evaluating your agency. Some metrics reflect the agency's work directly. Others are influenced by factors outside their control (your product, your pricing, market conditions). You need to focus on the metrics your agency can actually move.
Metrics your agency directly controls:
- Cost per click (CPC) relative to impression share
- Click-through rate (CTR) on ads they wrote
- Quality Score improvements
- Search term relevance (percentage of spend on relevant queries)
- Campaign structure efficiency (budget utilization, wasted spend reduction)
Metrics influenced by your agency but also by external factors:
- Conversion rate (also depends on your website and offer)
- ROAS (also depends on your pricing and product-market fit)
- Total conversions (also depends on your budget and market size)
Evaluate your agency on the first group primarily. Use the second group as directional indicators, but do not blame your agency for a low conversion rate if your landing page loads in 8 seconds.
2. Set Realistic Benchmarks
Before you can evaluate, you need benchmarks. There are two types that matter: historical (your own past performance) and industry averages.
Historical benchmarks are more useful. Compare this month to the same month last year, or compare this quarter to the quarter before your agency started. Apples-to-apples comparisons that account for seasonality.
Industry benchmarks are helpful context but should not be your primary evaluation tool. Your business is unique. A 5% CTR might be exceptional in one vertical and mediocre in another. Use industry data to sanity-check, not to grade.
3. Evaluate Activity, Not Just Results
Results lag behind activity. An agency that made smart changes this month might not see the results until next month. So if you only look at results, you are always evaluating the agency on work they did 30-60 days ago.
Activity metrics fill this gap. Look at:
- Number of tests run this period
- Changes made in the change history (with rationale)
- Negative keywords added
- New ad copy and creative launched
- Campaign structure changes
- Recommendations made (even if you did not approve them)
An agency with strong activity metrics but temporarily weak results is probably doing the right things. An agency with declining results and no activity is coasting.
4. The Quarterly Review Process
Monthly check-ins are for tactical updates. Quarterly reviews are for strategic evaluation. Here is what a quarterly review should cover:
Performance summary: Where are we vs where we were 90 days ago? What improved? What declined?
Test review: What tests ran, what worked, what did not? What did we learn?
Competitive landscape: How has the market changed? New competitors? Cost shifts?
Next quarter plan: What is the agency's plan for the next 90 days? What will they test? What will they change?
If your agency cannot present a clear quarterly review with these elements, they are not operating at a strategic level. They are just maintaining campaigns.
5. Leading vs Lagging Indicators
Lagging indicators tell you what already happened: revenue, conversions, ROAS. Leading indicators predict what will happen: impression share trends, Quality Score changes, CTR improvements, new audience test results.
A smart evaluation looks at both. If your lagging indicators are flat but your leading indicators are improving (rising Quality Scores, better CTR on new ads, expanding impression share on high-value terms), the agency is building momentum. Give them time.
If both leading and lagging indicators are flat or declining, something is wrong and the agency needs to explain their plan to fix it.
6. When Results Justify the Fee
Simple math: if your agency fee is $5K/month and they are driving $5K+ in incremental profit (above what you would have gotten without them), the fee is justified. If they are not, it is not.
The tricky part is defining "incremental." Your PPC campaigns would still run without an agency. The question is how much worse they would perform. This is hard to measure precisely, but you can estimate it by looking at the improvement since the agency started vs what performance trends suggested before they arrived.
7. The Conversation to Have
If your evaluation reveals concerns, do not just fire the agency. Have the conversation first. Present your findings: "Here is what I am seeing in the data. Here are my concerns. What is your perspective?"
A good agency will engage with your data, acknowledge gaps, and present a plan. A bad agency will get defensive, blame external factors, or promise to "look into it" without specifics.
Give them 30-60 days to address the concerns with a specific, measurable plan. If nothing changes, you have your answer. If you need a framework for the transition, read our guide on switching agencies without losing performance.
Frequently Asked Questions
Monthly for tactical performance checks and quarterly for strategic evaluations. The quarterly review is where you assess whether the relationship is delivering value. Monthly reviews should focus on specific campaign metrics and upcoming plans.
Compare current results to historical baselines (same period last year or pre-agency performance). Evaluate both results metrics (ROAS, CPA) and activity metrics (tests run, changes made, negatives added). Results without activity means luck. Activity without results means patience may be needed.
Sometimes. Market changes, new competitors, and seasonal shifts do affect performance. But a good agency anticipates these factors and adjusts proactively. If the explanation is always external and never followed by a plan to adapt, the agency is making excuses.
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