It was all profitable. Ad agencies are borderline scammers - they measure traffic and clicks as performance, which makes you to spend more money to increase "performance" and pay more agency fees.
Sometimes I burned $15000 before first conversion, but ROI was always positive in the end.
People launching ads without any experience, redirecting people to homepage and loosing money are the same kind of people trying trade stock market and loosing money, creating their own amateur e-commerce shop and loosing money getting zero customers, hiring high-school nephew for company website etc etc. You need experience, and before that - knowledge.
First, manage your ads in-house. Agencies have no reason to work for your conversions, that's not their business model.
Second, don't treat ads like "we'll slap users with our ad and see what happens". Prepare user flow, conversion funnel, dedicated landing pages, drip campaigns, remarketing etc.
Adwords and Facebook are fully-fledged promotion channels and they have to be treated as such. It's a craft which consultants make huge money from - because they know how to bring profits.
A percent of media model isn't perfect, but if a client isn't seeing results, the relationship won't last long, and word gets around.
Now, there are scammy agencies out there, but it is hardly the norm. I loved stealing business from them because it was shooting fish in a barrel with all the problems on those accounts.
Be careful about making such broad, and highly inaccurate statements... They really don't help paint you in the best light.
What paints me in good light is my results and my results only. Also, I'm a cool, likable guy :)
I had my share of dealing with agencies and nothing beats knowledge of business goals, internal processes and clientbase and reports honesty while working in-house.
Many agencies exist because it's cheaper to outsource. Just like Indian coders - but quality of work is often questionable.
I stand by my words and refuse all agency work - still, I have many recruiters regularly saying "hi" on LinkedIn.
Next, I experimented with very low budgets for my own websites.
After that, small business for family friend. It all went surprisingly well and wasn't that hard, really. You just need to be very data-driven and methodical.
Game changer for me was NGO and Adwords grant (https://www.google.com/grants/), which gives you $10 000 per month. You can experiment without fear, trying everything you read or thought about.
When you optimize campaigns and grant limitations are starting being annoying, that's when you are ready for the real big work.