Advertising Costs for Small Business: 2 Possible Scenarios
February 16, 2023
Advertising costs for small businesses and nonprofits can be extremely high. And where to spend your advertising dollars can be admittedly confusing.
You can throw your hard-earned money in many different directions, hoping that it results in sales or donations, but we know you’re looking for more than a gamble.
Before investing money in ads, it’s essential to understand your options and how much each might cost. To help make your decision easier (and more profitable!), we’ll explore two possible scenarios and give you a ballpark of what you can expect to pay per click, views, or engagement. Let’s dive in!
Advertising Costs For Small Business
When you’re thinking about advertising, it helps to start with the proper perspective: advertising isn’t an expense, it’s an investment.
Expenses are costs you have for things you need just to get business done (toner, utilities, the mortgage, etc.). Investments are things that you spend money on with the expectation that they will generate more income in the long run than “outgo” in the short term.
The entire purpose of creating ads for your business is to motivate people to purchase something from you. So how do small businesses determine how much to spend on advertising? The short answer (as usual) is “it depends.”
Several factors affect a company’s ad-buying decisions, such as:
- Type of Industry
- Type of Business
- Stage of Growth
- Health of Sales
- Condition of the Market
Companies that are looking for quick results will spend differently than ones that are looking for more of a long-term play.
Read More: 3 Ways Web Design and Marketing Work Together to Grow Your Business
Online Advertising Costs
Given that digital counts for nearly 72% of ad spend (and counting!), that’s where we’ll camp out in this post. So we’re all on the same page; different types of online advertising include Pay-Per-Click (PPC). Essentially, this means buying visits to your site. Even better, you only pay when someone clicks on your ad.
The most prominent uses of PPC are through:
- Social Media Advertising – Placing ads on high-traffic platforms like Facebook, Twitter, and Instagram
- Google Ads – Ads strategically positioned on the pages of search engine results
- Retargeting Ads – These are ads that “target” people who have interacted with your website or are in your database but haven’t made a purchase. The goal here is to take prospects from browsers to buyers.
Each of these tactics has its strengths depending on where someone is on the buyer’s journey. They often work best in tandem to keep prospects moving down the sales funnel. A lead may find your business via a Google ad. They visit your website, click around a bit, and move on. They then see a retargeting ad while reading the news online, and—boom!—you’re top of mind again. Now they’re back on your site and closer to making a purchase.
For what it’s worth, this “bouncing around” we see in the online buyer’s journey is the primary reason Google is changing the way they record and report analytics. For more on that, check out this post, “Are You Prepared for Google Analytics 4? Here’s What You Need to Know.”
How Much Does It Cost to Advertise on Social Media?
Different sources will give you slightly different results, but with over 50% of the world using social media, there is no shortage of data to consider. In a nutshell, the answer (again) is “it depends” on a couple of different factors: what platforms you’re targeting (as their rates vary) and what type of ad you’re running.
Online advertising can be an incredibly complicated world (which is why we’re here to help). Here are a few scenarios we recommend to set your organization up for success.
Scenario 1: Google Ads
Google Ads operates under a pay-per-click (PPC) model. As a business owner/marketer, you bid on certain keywords (along with other people) and adjust your settings so that Google knows the maximum amount you’re willing to pay. This allows you to set a budget and stick to it.
If the cost per click of an ad is determined to be lower than your maximum bid, congrats—you win! Google will show your ad to users who type in those keywords. If it costs more, your ad doesn’t show.
Cost of Google Ads Per Month
The average cost per click with Google Ads in the U.S. is generally between $1-2. However, actual prices vary because there are several factors that Google considers when charging for ads.
First, there’s the type of campaign you’re running. These include:
- Search campaign – Your ad shows up as a block of text with search results for your keywords.
- Display campaign – Visual ads can be gifs, text, videos, images, or some combination. They appear in various places on Google search pages or one of their millions of partner pages.
- Shopping campaign – The item you’re selling shows up near the top of search results as a product card.
- Video campaign – These are the pre-roll ads that show before many YouTube videos.
- App campaign – These are ads that Google formats for apps using your text and images.
Another consideration is your billing model. You can choose from three options:
- Cost Per Click (CPC) – you pay whenever someone clicks on your ad
- Cost Per Mille (CPM) – you pay for 1,000 views at a time
- Cost Per Engagement (CPE) – you pay when someone performs a specific “call to action” in your ad
Google also weighs variables such as the quality of your website, the size of your bid, and the Quality Score of your ad (a ranking of 1-10…higher scores lead to lower prices). The result is your “Ad Rank.” The better your rank, the better your ad’s visibility.
You should also consider your goals when choosing a campaign. For example, if you want to recruit top talent to your organization, you may consider using a combination of approaches to attract new job searchers to your open positions.
Or if you run a service-based business and need leads fast, such as landscaping or custom home building, there are various campaign combinations that could do more to elevate your business’s brand awareness in your local community.
Read More: Tips for Creating Effective Marketing Campaigns That Will Engage Your Audience and Produce Results
How Much Should You Spend On Google Ads?
If you’re just wading into the world of Google Ads, we recommend that you start small and increase your budget as you see how well (or not) your ads perform.
In order to keep from overspending, you can set a “maximum daily budget.” When your money runs out for the day, so do your ads. Google suggests starting out with a $10-50 daily spend, which can be a pretty budget-friendly entry point.
Our team can help guide you through the process and craft click-worthy Google Ads for your target audience. Let’s talk!
And if you lead a nonprofit organization, you may not need to spend any donor dollars on advertising. Be sure to look into Google Ad Grants for Nonprofits for more information and let us know if you’d like some help with setting that up!
Scenario 2: Facebook & Instagram
Sometimes, the best way to reach someone is in their hand. According to Meta, the parent company of Facebook and Instagram, “one in five minutes a user spends on mobile is spent on (those social channels.) That’s more than the next ten mobile platforms combined.”
As Instagram advertising becomes more popular, it’s proving to be an excellent place to get noticed. Even if you prefer to use Instagram, you still need to have a Facebook account to set up your ads through Facebook’s “Ad Manager” or “Power Editor.”
How Much Is An Instagram Ad?
Even though Facebook owns Instagram, the rates are different. According to recent information, you can expect to pay $.25 – $8 (CPC) depending on your industry, product or service, and type of ad.
How Much To Spend On Facebook Ads?
The reality is that since your business is unique, your Facebook ad spend will be, too. Much like Google Ads, you set your maximum budget, and that’s all they’ll spend. How that money gets allocated depends on your objectives: impressions, conversions, CPC, CPM, CPE, etc.
As with other ad strategies, starting small and building slowly is usually wise. It doesn’t necessarily take a lot of money to get a lot of results. As Facebook points out, “some people spend more on coffee each day than they do on their ad campaigns.”
It’s worth reiterating here the power of video in this process. Instagram and Facebook users overwhelmingly prefer video content over all others. So if you’re looking for a way to add more punch to your campaign, try incorporating video marketing into your online ad strategy.
How to Measure The Success of Your Online Ad Campaigns
Before investing in online advertising, keep these things in mind:
- Base it on your goals. Only you know exactly where you want your business to go. The success you’re looking for will determine the aggressiveness or style of your ad spend.
- Keep ROI in mind. As we’ve said, advertising is an investment. Therefore, you should get something in return for every dollar you spend on it. Investing wisely means studying your target audience, their habits and preferences, and the most effective ways to reach them.
- Spread the love. Divide your spending among several kinds of ad campaigns. Not only will you not have your eggs all in one basket, but you can better compare what’s working and now have multiple angles for reaching your prospects.
- Track your results. At the start of any campaign, set up a measurable way to track the effectiveness of your different strategies. You might use UTM codes or include “how did you hear about us?” on an online form on your website to help you determine the source of your traffic. Concrete numbers help you evaluate the effectiveness of your strategies throughout the year. Then, when it’s time to budget again, you’ll be equipped to make smarter decisions with your investment.
Read More: How to Use Social Media to Get More Leads for Your Business
How to Maximize Your Monthly Ad Spend
As we come to the end of this digital advertising 101 post, we know you may have questions. If that is the case, please send us a note and we’ll get in touch to set up a meeting right away. To get the most out of your monthly ad spend, it’s helpful to partner with a group of creatives who are passionate about seeing your company or nonprofit succeed!
In addition to helping you launch a killer ad campaign, we can bring your brand to life with videos, logos, websites, and social media that go way beyond the ordinary.
Schedule a meeting to learn more and get started!