If you ask any entrepreneur, they will tell you that their greatest challenge is advertising. It costs a lot of money and they just don’t know the details about how much small businesses spending on advertisement. But the question is how much exactly do they spend?
Growing your business through online advertising has never been easier. That said, there’s a lot of information to get your head around, and for newcomers to online advertising, it can be a little intimidating, to say the least.
Every online advertising platform has its own strengths and weaknesses, and there are dozens of ad formats, campaign types, and performance metrics for advertisers to consider. Underneath it all, however, is always the same burning question:
“How much is this going to cost me?”
Today we’ll be taking an in-depth look at advertising costs on three of the largest online advertising platforms – Google AdWords, Facebook Ads, and Instagram.
We’ll examine the relative costs of advertising on Google, Facebook, and Instagram, as well as the strengths and weaknesses of each online ad platform. Finally, we’ll investigate how each platform measures up in terms of performance, and there will be plenty of real-world data and research throughout.
Here’s a quick summary of our guide to online advertising costs:
- The average cost of an advertisement on Google Ads (AdWords) is $2.32 per click on the search network. The average cost per click of an ad on the Display Network is under $0.58.
- The average cost per action (CPA) in a Google advertising search campaign is $59.18.
- The most expensive keywords in Google advertising and Bing Ads cost $50 or more per click. These are generally highly competitive keywords in industries that have high customer lifetime values, like law and insurance.
- The average small business using Google advertising spends between $9,000 and $10,000 per month on their online advertising campaigns. That’s $100,000 to $120,000 per year.
- The average cost per click of an online Facebook ad is $1.72. The average cost per action on Facebook Ads is $18.68.
- The typical CPM on Facebook Ads is around $10.
- The typical CPM for an Instagram ad is closer to $5, but Instagram ad costs are rising as the platforms gains in popularity.
Now let’s dig in, in a little more detail!
[Want a shortcut? Get our (free!) All-Star Playbook to Online Advertising]
Online Advertising Costs: How Much Do Google Ads Cost?
The granddaddy of internet advertising, Google AdWords isn’t just the world’s largest online ad platform – it’s an integral part of the Internet itself.
A typical Google search engine results page (SERP) featuring PPC ads.
You’ve probably heard the joke that Google is an advertising business that happens to own a search engine, but this isn’t actually far from the truth. Google gets the lion’s share of its billions of dollars of annual revenue from its online advertising, which in turn has enabled the company to stay on the bleeding edge of search technology.
How Does Google AdWords’ Pricing Model Work?
Before we can answer this, we need to specify which part of Google’s sprawling empire we’re talking about – the search network, or the display network.
Google’s search network is where pay-per-click (PPC) ads appear, above and below the organic search results for a user’s search query. Because Google serves online ads that are highly relevant to the search query, businesses that use Google advertising are able to drive highly qualified traffic to their site and landing pages. Instead of showing your ads to huge audiences that may or may not be in market for your products (like you do when you buy billboard space), you can target your ads at people who are searching specifically for the kinds of products or services you offer.
The CTRs may not be great, but Google’s Display Network offers
advertisers unparalleled reach.
Google’s display network is where display ads appear. The Display network spans the vast majority of the indexable web. Although advertisers can include rich media content in many display ad formats (such as animation and video), most display ads tend to be banner ads.
Ready to reduce your PPC costs while driving better results? Get your free, personalized Google Ads performance grader and start optimizing today!
What is an average marketing budget for a small business?
5-6 minutes 9/12/2020
Start by researching your industry
In the simplest terms, your marketing budget should be a percentage of your revenue. A common rule of thumb is that B2B companies should spend between 2 and 5% of their revenue on marketing.
For B2C companies, the proportion is often higher—between 5 and 10%. This is because B2C companies typically need to invest in more marketing channels to reach various customer segments.
Horvath suggests a good way of narrowing your target budget is to research what’s common for your industry and what your competitors are spending.
A 2019 BDC survey of more than 1,400 Canadian businesses found that Canadian small business marketing costs average just over $30,000 a year, while those with 20 to 49 employees spend twice that amount. Companies with 50 or more employees tend to have marketing budgets in excess of $100,000.
Average investment in websites and online marketing in Canada
Website
Less than $2 million in annual sales
Online marketing: $14,301 $37,721
Online marketing
Between $2 million and $10 million in annual sales
Online marketing: $38,396 $38,396
Total
$10 million or more in annual sales
Website: $142,197 $33,953
Online marketing: $92,488 $76,117Average spending over the last three years
Consider all your potential costs
Like any business expense, marketing has many components. Horvath suggests allocating your marketing budget to each of the following categories. You can adjust the amounts over time based on what’s most effective.
Website: The cost of your website includes the original design and build as well as monthly hosting. It also includes paying to keep the content fresh and up to date. “Make sure your site has analytics built in,” Horvath says. “That way, you can track who’s coming and from where—information that will help you identify how your other marketing investments are paying off.”
Social media: Set aside some money to invest in online advertising through social media platforms that make sense for your business like Facebook and LinkedIn. Even if your social media traffic is all organic—attracted by the content you post—creating that content requires resources you’ll want to account for.
Online advertising: For search engine advertising like Google Ads, plan for a minimum $1,000-a-month investment to be effective, Horvath says. As you monitor and refine your online advertising, you’ll be able to budget more accurately.
Traditional media: While digital advertising tends to be more budget-friendly, traditional advertising, radio, print and TV still have value depending on who you’re trying to reach. Consider your resources and how you can get the most from the budget you have.
E-newsletters: Sending regular updates to clients who have opted to receive communications from your business helps keep your company top-of-mind and encourages repeat business. Planning for, writing and using online tools to send out this material all require time and resources.
Video: In Horvath’s view, every small business should try to use video for marketing. The costs involved can include everything from hiring a camera person and editor to simply upgrading your smartphone so you can shoot video yourself.
Training: If you rely on internal staff to create and execute your marketing campaigns, be sure to set aside funds for training. “The available channels continue to evolve and it takes training for your staff to stay on top of the best practices,” Horvath says.
Set clear goals
It’s important to be clear on your marketing goals—they need to be measurable and specific. Do you want to get more people to visit your website to take a specific action? If so, how many people over what period of time? Do you want to get people to visit your store for a free sample or consultation? What kind of customers would you most like to attract? How many of them do you want to come in?
Setting your goals will allow you to plan what needs to be done—and what kind of investment will be needed.
“Think about your customer segments—the personas you want to reach and what their needs are,” Horvath says.
“Does your value proposition clearly explain how you will address their needs and why they should visit your site or shop? From there, you can decide how best to design your marketing campaigns to create offerings that are more likely to lead to sales.”
Once you’ve defined your budget and put your plan into action review it on a consistent basis to analyze whether your spending is achieving the goals you set.
There are many small businesses that advertise every day. Advertising costs money and this is essential for small businesses to find new customers.
Ultimately, what you decide to allocate for promotion should be based on how you want to grow your business, increase brand awareness, attract new customers, and drive a positive return on your investment.