How to Determine Online Advertising Costs for Your Business?
Launching ads campaigns often requires a lot of knowledge and understanding of subtle details. Lots of factors can influence whether or not the campaign would end up successful, but most of them usually depend on one key thing - your advertising campaign budget. In this post, we are going to take a closer look at online advertising costs for different channels and campaigns, as well we’ll share some insights on campaign planning and distribution.
Online advertising costs: what’s considered a norm?
The first thing to remember about your web ad costs is that the budget depends a lot on the specific business needs, so the precise numbers will vary from case to case. We can still get some general vision by analyzing and comparing the average online advertising prices, which you can then apply to your campaigns based on your specific goals and available resources.
When it comes to average ad rates, the most general metrics are the monthly advertising budget or ad spend. Depending on the marketing strategy, some find it more convenient to count it on a weekly, daily, or annual basis for a more general picture. Let us now turn to real examples.
According to a recent survey, middle and small business advertising spend reaches around $750-$2500 per month for both digital and offline channels. Among such businesses 68% have 1-5 people on their marketing team and almost half prefer to outsource some of their marketing activities. The online ads cost can vary greatly depending on many factors, such as your marketing goals, the current state of your business, what kind of specialists you have onboard.
How much does online advertising cost? Google and paid social
Some of the most widely used ad channels include Google, YouTube, Facebook, and other social media, so let’s start with exploring online advertising rates within these platforms.
Note: There are lots of bidding models used to calculate the ad price, such as CPC, PPC, CPM, CPI, CPA, and CPL. Among these, the two most commonly used models include cost-per-mille (cost per thousand impressions CPM advertising) and cost per click (CPC).
for example, offer different cost per click (CPC) and CPM depending on your business vertical and types of ads. Average CPC on Search Network range from $1 (for Ecommerce) to $6 (Legal services) and are generally more expensive compared to Display Network with $0.4 for Travel & Hospitality and almost $1.5 for Dating & Personals business categories. While there is no universal solution for every business, some estimates show that the average monthly budget for Google ad network can go up to $10,000.
Other popular platforms include TikTok with $10 CPM and $500 minimum ad spend per campaign, LinkedIn with $5.26 average CPC and $6.59 CPM, and Twitter with $0.38 CPC and $6.46 CPM. All of these have their own pros and cons for different types of business, so it is essential to do your research and develop a unique approach for each platform before launching campaigns.
How much does it cost to advertise programmatically
Things are much more flexible with programmatic advertising. While there may be a minimum daily spend at your demand-side platform, CPM can vary greatly depending on lots of factors, such as your audience’s geo, average CPM rates by industry, quality of ad space, page views, business vertical, and many others. This gives you lots of flexibility and potentially allows you to make your campaigns much more affordable.
Your web ad cost can also depend on the chosen formats and channels - video ads ($11-17 average CPM) are usually more expensive than native, and native ads ($4-10 CPM) will cost more than online display advertising or mobile ($1-6 CPM). Careful consideration of these factors and adjusting them for your specific business will make your programmatic budget precise and cost-effective.
Things to keep in mind before ad budget planning
So with all this in mind, let us now review some of the most essential practices for budgeting your programmatic campaigns. Key questions to consider include, but are not limited to:
- What is your customer lifetime value? Depending on your retention rates and the amount of money each customer brings to your business in the long-term perspective, you can determine how much you afford to pay for acquiring new customers.
- What are your conversion process and cost-per-acquisition? Make sure you have a precise strategy for getting new customers - what tools and channels you are going to use for each step of the funnel? How much does it usually cost you to advertise online with these tools? Remember that your customer lifetime value should cover these costs.
- What is the percentage of your budget that you can spend on marketing? The average number for mid-sized companies is 8-10%, but it is always up to you to stretch this number one or another way as long as it covers your business needs.
How to set your programmatic ad budget?
All these questions are easy to answer once you have all the necessary data from your previous marketing campaigns. If you are only starting out, it is important to take your time to experiment and get a clear picture of what works best for your business. Our recommendation is to start with $1000 - this would cover the optimal payment and give you some space for testing your first campaigns. You can then adjust even and timely budget distribution, and set spending limits either in $ or the number of impressions on SmartyAds demand-side platfrom.
Although budgeting your advertising might seem like a complicated issue, the nature of programmatic advertising allows you to be quite flexible. The more you understand specifics of your business niche, the easier it will be for you to predict the sufficient cost of online advertising essential for reaching your goal. If you don’t know your audience well enough yet, start with $1000, set up several campaigns: experiment with creatives, targeting options, and campaign controls until you pinpoint which ad budget brings you the best results.
Launch your first CPM ad campaign with SmartyAds to keep your ad budget effective and flexible!
IRINA KOVALENKO, CMO OF SMARTYADS