Why should you advertise your business on YouTube?
Well, are you ready for some mind-blowing numbers?
YouTube reports that it has more than 2 billion monthly registered users in 80 languages in more than 100 countries. As of January 2022, YouTube was the second most popular social network worldwide, second only to Facebook.
There are a staggering number of people around the world who log into YouTube every day, so it’s no surprise that a 2022 study by Social Media Examiner found that nearly 67% of marketers surveyed said they they plan to increase its use on YouTube.
Advertising your brand on YouTube can help you build brand awareness, influence buyer decisions, drive sales, and increase brand loyalty. But the only thing that can make you hesitate about YouTube advertising is the cost.
How do you pay to advertise on YouTube? What is “bid”? How much does it cost to advertise on YouTube? It’s enough to overwhelm anyone.
As always, Foundr has you covered with all the essential information you need to start advertising on YouTube.
Let’s start with the basics:
How does YouTube advertising work?
The biggest advantage of YouTube is this: people use YouTube to find information and entertainment. In other words, he has intention.
When deciding which ads to show, YouTube considers information such as:
- Google search history
- Related videos the viewer has seen
- Google Ad Settings
- Web history, age, location and more, if someone is logged into your account
Using this information, YouTube identifies user intent and displays ads that align with user interests. To advertise your brand, you pay YouTube to show your ad to the right person at the right time.
How much do YouTube ads cost?
We get that question a lot. As with all advertising, it is very difficult to give an exact figure of how much it will cost.
Influencer Marketing Hub estimates that YouTube ads can cost between $0.10 and $0.30 per view, with an average cost of $2,000 to reach 100,000 viewers. A view is counted when a viewer watches 30 seconds of your video or interacts with it by clicking on it. If your video is less than 30 seconds long, a view is counted if a viewer watches the entire video.
The exact cost of running a YouTube ad campaign is influenced by these factors:
- ad formats
When advertising on YouTube, your primary focus should not only be how much YouTube ads cost, but also what you’re earning from your spending. This means that you’ll need to constantly evaluate and re-evaluate your campaigns to make sure you’re hitting your goals with YouTube ads and ROAS.
What is ROAS?
Return on Ad Spend (ROAS) is a metric that tells you the effectiveness and performance of your ad campaign. By calculating your ROAS, you can see which ad strategies are working well and apply those techniques to your other campaigns.
A simple formula to calculate your ROAS is: ROAS = Revenue / Cost
For example, if you spend $1,000 a week on YouTube ads and generate $1,500 a week in sales from the ads: $1500/$1000=$1.5 ROAS
A good ROAS depends on a few factors, but according to WebFX, most companies aim for a 4:1 ratio: $4 in revenue for $1 in advertising costs. However, the average ROAS is 2:1: $2 in revenue for $1 in advertising costs.
The key factors that affect the cost of YouTube ads
The power of YouTube lies in its ability to target your ideal audience at exactly the right time in the right place.
Video ads running on YouTube are also filtered on the web through Google Ads. By setting up your ads and campaigns with the right targets, your ad is presented to someone who has been estimated as a potential customer based on their interests or activity.
It has a wide variety of targeting methods you can use to reach specific audiences or niches based on where they are in the world, what they’re interested in, and your choice of content. You can also run multiple campaigns with different target audiences to test engagement.
The cost of advertising on YouTube largely depends on the audience you are targeting. Some audiences are more expensive than others to market to, so choose wisely to avoid blowing your budget.
The amount you’ll spend on YouTube ads comes down to how much you want to bid for the ad placement. YouTube placements work through a bidding system. The cost of advertising depends on how many other people are bidding on the same ad placement. Before you set up your bidding options, make sure your targeting is in place, as it will determine your costs.
Typically, you’ll bid on cost per view (CPV) or cost per 1,000 impressions (CPM). You will only be charged if someone views your ad for more than 30 seconds or interacts with your ad, whichever comes first. If your ad is less than 30 seconds long and the viewer sees the entire ad, that also counts as a view.
With certain ad formats, you can choose to go pay-per-click (PPC). With PPC, no matter how many people see your ad, you only pay for the people who actually click on it.
Set a budget
Set yourself a daily budget for how much you want to spend on advertising, and then wait to see if you need to increase or decrease the amount. Some small businesses budget $5 to $10 a day, while others use a weekly budget of 50 times their average order value (AOV).
The best part about the deals is that you have the option to set a maximum amount that you are willing to spend per day. This ensures that you don’t suddenly wake up with an empty bank account because more people interacted with your ad than you thought possible.
Setting up your offers
When you’re ready to set up your campaign, you’ll be prompted to bid on your Maximum Cost Per View. YouTube will then show you a variety of offers that will vary in cost depending on how much you’ve customized your targeting.
If you want to target a particular ad format, filter using the “Customize bids by format” option. YouTube will give you an estimated number of views per day based on your preferences. Make sure the predictions align with your campaign goals and adjust them accordingly.
Optimization of your campaigns
The secret to optimizing your campaigns and getting the most out of YouTube ads is to focus on tuning and understanding your metrics.
The two metrics you should focus on are your click-through rates (CTR) and your view rate. These two metrics will tell you if your campaign is attractive and if your budget is justified.
If your ad campaigns aren’t working, it may be because a competitor has overtaken you for the best ad positions. Saving a penny with your budget can negatively affect your ROI.
The only solutions are to bid higher than your competitor (if your budget allows) or to reassess the quality of your campaign.
3. Ad formats
YouTube offers a variety of ad formats that have different price points and reach:
- Skippable in-stream ads: the most common ad format, skippable ads are shown before, during or after a video, and the viewer can opt to skip them after 5 seconds
- Non-skippable in-stream ads: these ads are usually 15-20 seconds long and do not allow the viewer to skip them
- Video Discovery Ads: these ads appear as a suggestion in search results in the right sidebar or on the YouTube home page
- Show ads: these ads are embedded on the YouTube page, usually above the suggested videos column
- Overlay Ads: an image or text ad that covers 20% of the video at the bottom of the screen.
- Bumper Ads: non-skippable videos up to 6 seconds long
- Consecutive Ads: aka ad pods is when there are two consecutive ads before the content starts
- Outstream Ads: Outstream ads are mobile-only, so they will only appear on Google’s video partners and not on YouTube.
- Header Ads: a digital billboard placed on the YouTube homepage for 24 hours that is only available by reservation through a Google sales representative
Each of these ad formats offers a different audience reach and user experience. It’s your job to decide which ad format will best fit your campaign goals. For example, if you’re looking to promote a huge 24-hour flash sale, can you budget for a banner ad? Or if you’re just looking to build brand awareness, would a skippable ad be more effective than forcing viewers to watch a 20-second video?
Ad formats are a delicate balancing act between budget and marketing. Test the waters until you’ve found the sweet spot.
Read more: How to grow your YouTube channel and gain subscribers fast
Ready to start implementing YouTube ads?
Budgeting and paying for a new advertising avenue may seem complicated at first, but the beauty of YouTube is that you have the power to choose how much you’re willing to spend on it.
Assessing which ad format works best for you, customizing your targeting, and optimizing your campaign with bids will give you an idea of how much it will cost to advertise on YouTube. And with over 2 billion users logging in monthly, it seems like YouTube is the perfect playground to test ads and build brand awareness.
If you really want to crush YouTube, check out our free YouTube Ads course. It’s free and full of expert information.