How Much Should You Be Spending on Ads?

So how much do ads really cost?

Having generated millions in client revenue across the numerous marketing platforms, it’s a question we get asked all time time.

The honest answer is… it depends!

A true minimum budget to expect to see success varies from business to business, and platform to platform.

In this article I’m going to break down the factors and considerations that must be considered when determining what kind of budget will work best for you.

How Do Ad Costs Work?

The first reasonable place to check for this kind of information will always be directly from the source… unfortunately they aren’t helpful.

The big platforms typically advertise something like “Buy ads on any budget”..

While our clients never find that answer very funny, it is worth mentioning.

At the heart of this question is another question: What are you even paying for?

Technically, you are paying the platform to equip a robot (the machine learning model) with money to reach people.

Meaning that when you find some consistency for your business, you should in theory be able to increase your budget and increase your reach.

so if you spend $50, your ads might reach 1000 people.

and if you spend $100, your ads might reach 2000 people.

This KPI metric is typically referred to as CPM, which represents the cost per thousand impressions.

Behind this metric are a few additional key metrics that play an important role on the CPM of your ads.

1- Ad Relevance

While this isn’t something that carries a quantifiable value in your ads managers, it is an extremely important part of your ads success… or failure.

To elaborate, ads managers measure every ad shown for quality, engagement, and conversions.

This is done to help show their users the best and most relevant advertisements. While this can sound troublesome at first, if used correctly, this will prove to be advantageous.

It’s for this reason that understanding your audience and your brand’s product market fit will prove to be so so helpful when scaling with paid ads.

2- Audience Size

Generally, the smaller (more narrow) your audience is, the higher the costs will be.

To better illustrate this concept, I’ll go ahead and exemplify why this is the case because the statement above can sound a bit counterintuitive.

If you start with an extremely general audience consisting of 1 million users.. but then continue to add filters and specifications and parameters until your audience only consists of a VERY specific group of 1000 users, you now have a much more limited spread of your ads.

Because the audience is so small, you’ll probably be very limited in reaching them, and it will be harder to do on a daily basis, if they even use the platform every day.

The problem is there’s likely hundreds, if not thousands, of other advertisers who also want to reach that same audience for that period of time, making it much more competitive, and of course, more expensive.

3- Ad Competition

Another large factor that plays into your advertising cost is going to be how in-demand your desired audience is. There are some audiences that are more competitive than others.

For example, it may cost more to reach C-Suite Executives at Fortune 500’s than it would to reach animal lovers.

Keeping all this in mind, we can now discuss the logistics of determining a great starting budget for your digital advertising campaign!

In general → the more you spend, the more you reach

Without going to much into detail, this is true for two reasons. The first being that means your “robot” will be able to pay to put your ad in front of more people. The second being that your “robot” runs on machine learning. For machine learning to be most successful, it requires as much data as possible (which means reaching more people, and therefor, learning more effectively).

So in summary, the more you spend, the higher your chances are of success.

The next thing to consider is your brand’s current position.

Is the brand already well founded with a lot of social proof?

Is your brand just starting and low in things like followers and likes and daily visitors?

Do you have a lot of well-made creatives and lots of high quality content?

Considering these metrics can give you some insight on elements like your current conversion rate.

Next up is the cost of your product or service.

If your selling a product that has an average order value of $1,000 then it wouldn’t make sense to start with a budget of $50… or really any budget that is less than 2-3x your average order value.

More definitively, you can think of it from an objective standpoint and simply reverse engineer from your desired outcome like so:

While I know all of this theoretical information is extremely important to consider, it’s not going to work out perfectly for everyone like some beautiful fairytale… there is still the harsh reality that your campaign may not perform perfectly to start.

Because of that, you need to invest in digital marketing based your needs, not just the platform’s demands.

You should be prepared to lose the money you invest into a campaign, especially if it’s your first time doing so.

How Much Should You Invest In Your Ads Cost To See If It Will Work For Your Business?

Considering all the factors we’ve gone through above, it won’t be the same for everyone, but I recommend starting with a budget of around ~$5,000.

If that’s a very high starting budget you could come down closer to $2500.

If you don’t have a well-founded digital presence or lack creatives, I recommend:

1. Starting to build your presence on platforms like TikTok, Instagram, and Facebook
2. Starting on Google in the meantime as the platform requires minimal creatives and doesn’t display social proof beyond reviews (through a separate search)

If that’s something you’re very comfortable with and your brand is already optimized in a number of other ways, then starting higher is always recommended!

Are There Any Additional Costs Associated with Ads?

The answer is no, you actually do not need to invest in another thing to get started. In fact, you can even host your store or services on platforms like Facebook or Instagram (and soon TikTok)!

With that said, there are a few other considerations that can potentially help you boost sales drastically very early on.

Like investing into a quality agency like Adamant Media that uses proven marketing strategies backed by data science and machine learning to ensure your business’ growth.

Or investing into a quality website or creatives to help you convert more visitors and viewers into buying customers.

But that depends on you are as a business and what you’re comfortable investing in.

But if you’re juggling managing your business, balancing delegation with responsibility, while constantly tending to customers, it might be best to hire a partner to devote the necessary time for this.

If that’s you, send us a message and we’ll be happy to help.

Either way, I hope this article helps you create a successful (and well-informed) advertising campaign to grow your business!