No one ever said advertising was cheap, but it doesn’t need to burn a hole in your pocket either. For businesses working on a budget, digital advertising has become a dependable, cost-effective option. We saw this first-hand last year when companies reacted to the coronavirus pandemic and lockdowns by slashing advertising budgets.
According to IAB’s Internet Advertising Revenue Report, in Q2 of 2020, year-over-year growth for digital ad revenue declined by 5.2% as brands tried to figure out how to advertise in our new, unpredictable world. By Q3 and Q4, digital advertising kicked into high gear, with revenue seeing a positive year-over-year growth of 11.7% and 28.7%, respectively.
It seemed that most companies came to the same conclusion last year: when your ad dollars are tight, and you’re living in uncertain times, digital advertising could be the most cost-effective option. However, digital advertising is not a single, monolithic channel. There are many different types of digital advertising: search ads, display ads, social media ads, sponsored ads, and mobile ads.
Who’s Online Anyway?
No matter the types of digital advertising you run with, taking your ads online is a smart decision for a number of reasons. The reach of digital ads is unparalleled. By 2022, 289.67 million people in the US will be using the Internet by Statista’s estimates, and even if you’re only targeting a fraction of these users, that’s still potentially an audience size of millions.
Choose Your Own Adventure
Marketers have an unmatched level of control over digital campaigns compared to other channels. Once a billboard is up, there isn’t much tweaking you can do - you can’t change its location or alter its design easily. Online, you can monitor key metrics such as cost-per-click (CPC), site traffic, bounce rate, impressions, and conversions daily and make changes to your campaign as needed.
Digital Pricing
In the world of virtual ads, there are several ways campaigns can be priced depending on your goals.
Cost-Per-Click (CPC) Pricing: You only pay when a user clicks on your ad. This is ideal for ad campaigns that aim to drive website traffic.
Cost-Per-Thousand-Impressions (CPM) Pricing: This method requires you to pay for ad views based on 1,000 views. It’s especially good for brand awareness campaigns in which you aren’t necessarily concerned about getting users to click on your ad.
Cost-Per-Acquisition (CPA) Pricing: Using this option, you only pay when your ad leads to a conversion. CPA pricing is a good choice when your goal for a campaign is to drive sales.
Digital Darlings
Google Ads:
By far one of the most popular pay-per-click (PPC) platforms, Google Ads allows you to reach audiences who are already searching for the products or services you offer. This means that your audience will have commercial intent; if they’re searching for a trampoline, they likely wish to purchase a trampoline.
On Google Ads, you have the ability to not only target your ads according to the key phrases your audience searches, but you can also optimize your campaign by location, days of the week, device, gender, age, and more. All of these enhancements help you make the most of your budget by more precisely targeting the users most likely to click on your ads. Based on data from Wordstream, the average click-through-rating (CTR) across all industries is 5.06% on the search network, which - you’ll come to see - is fantastic.
Ads served on Google’s search network are typically charged on a CPC basis. The cost is calculated according to Google’s ad auction process. Each time a user searches something on their platform, an auction takes place in the fractions of a second it takes for the search results to load. The ads that win the auction are the ones shown. Both your ad position on the page and your CPC are determined by both the maximum bid you have set and your ad’s quality score.
Like any other costs associated with advertising, the cost-effectiveness of Google Ads depends in large part on the industry you find yourself in. While Wordstream reports the average CPC in Google Ads across all industries to be $2.41, some industries such as information technology, insurance, legal, or loan services can be much more expensive.
Display & Banner Ads:
Beyond the search network, Google also serves display ads across the web via the Google Display Network. This group of more than 2 million websites, videos, and apps reach more than 90% of internet users worldwide, which is excellent news for your ads. While the CTR for the display network averages 0.50% across all industries, this doesn’t mean display and banner ads aren’t worth investing in. Numerous studies show that people still see and remember the ads, even if they don’t click on them. They even encourage site visits and searches after the fact.
Across most industries, the average CPC for the display network is very affordable. Overall, Wordstream reports the average CPC for all industries to be $0.59. However, clicks are not usually the goal of an ad campaign on the display network. It’s more about the impressions. In that regard, Top Draw found that display campaigns average $0.50 to $4 CPM, with an average of $3.12.
Facebook Ads:
Advertising on Facebook can be an affordable way for brands to reach new audiences, drive website traffic and improve conversions. The pricing model is very similar to that of Google Ads. You set a daily or lifetime budget for your campaign, and the platform evenly paces your ad spent throughout the day. In addition to placing maximum bids for each campaign, you can also set bids to control how much you spend on getting users to take specific actions, such as downloading an app or signing up for email marketing.
Across all industries, Wordstream reports an average CTR of 0.90%, but some industries such as apparel, beauty, and retail see higher rates. In fact, industries such as legal services that struggle on Google sport some of the highest CTRs on Facebook. On the other hand, industries that do well on Google, such as employment and job training, finance and insurance, and customer services, don’t perform well on Facebook.
Your budget on Facebook Ads should consider your industry, niche, and target location(s). Across all industries, Wordstream reports the average CPC on Facebook to be $1.72. That can be higher for some industries (customer services, finance, and insurance) and lower for others (travel and hospitality, retail). For the most part, though, costs will remain low on Facebook. The trick will be creating a campaign that users want to engage with.
Instagram Ads:
Facebook acquired Instagram in 2012, allowing Facebook to expand its advertising platform to this more image-heavy platform. Instagram is an excellent outlet for visual brands to reach and engage their target audiences, especially since these ads are less disruptive than other types of digital advertising. They’re seamlessly placed right in a user’s posts feed.
Instagram Ads are bought through the same type of auction system as Facebook Ads. The ad that creates the most value for the user will be what’s served. Value is determined based on your bid, how likely users are to take action on the ad, and the ad’s ad quality and relevance for a user.
According to Rival IQ, the median across all industries is 0.98%, with higher education, sports teams, and influencers seeing the best engagement rates. Because Instagram has fewer placements than Facebook, competition for impressions is more elevated, increasing the price.
Since the beginning of the year, CPM for better-performing campaigns has ranged from $2.50 to $3.50, according to Wordstream, which is less than half of Facebook’s average CPM. Instagram’s average CPC ranges from $0.40 to $0.70. This cost accounts for all clicks on an Instagram Ad, too, including link clicks, likes/reactions, comments, and shares.
Finding the Right Types of Digital Advertising for You
There are, of course, more platforms and types of digital advertising out there on the world wide web. You’ll find most digital channels to be relatively affordable. The determining factor should be your campaign objectives. For instance, if you want users to purchase your products, sponsoring product ads on Amazon - which is now the third-largest seller of ads behind Google and Facebook - may be your best bet. If you’re marketing an app, you could look into Apple Search Ads. If you want to target other businesses, LinkedIn may be a good investment.
The Ward Group has over a decade of experience in digital advertising. Our media stewards have seen it all, from paid search to mobile and desktop display ads to paid social media. One of the most important things we do as media stewards is help you establish realistic goals for your ad campaigns. By helping you determine exactly what you want to see from the get-go, we can help you nail down the best types of digital advertising for you.
If you want to optimize your digital advertising activities, contact The Ward Group today to start exploring your options.