Finance

How Much Do YouTube Ads Cost? A Beginner’s Pricing Breakdown

Why should you advertise your business on YouTube?

Well, are you ready for some mind-blowing numbers?

YouTube reports having over 2 billion monthly logged-in users across 80 languages in over 100 countries. As of January 2021, YouTube was the second most popular social media network worldwide, coming in a close second behind Facebook.

There’s a staggering amount of people across the world logging in to YouTube every single day, so it’s no wonder that a 2020 study conducted by Social Media Examiner found that almost 55% of surveyed marketers said that they prefer to use YouTube.

Advertising your brand on YouTube can help you to build brand awareness, influence buyer decisions, boost sales, and increase brand loyalty. But the one thing that may have you hesitant about YouTube advertising is the cost.

How do you pay to advertise on YouTube? What is “bidding”? How much does it cost to advertise on YouTube? It’s enough to overwhelm anyone.

As always, Foundr’s got 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?

YouTube’s biggest advantage is this: people use YouTube to search for information and entertainment. In other words, it has intent.

When deciding on which ads to display, YouTube considers information like:
Google search history
Related videos the viewer has watched
Google Ad settings
Web history, age, location, and more, if someone is logged into their account

Using this information, YouTube pinpoints user intent and displays ads that align with the user’s interests. To advertise your brand, you pay YouTube to display your ad to the right person at the right time.

How Much Do YouTube Ads Cost?

We get this question a lot. As with all advertising, it’s very difficult to put an exact figure on how much it will cost.

Influencer Marketing Hub estimates that YouTube ads can cost anything between $0.03-$0.30 per view, with a $2000 average cost 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 shorter than 30 seconds, a view is counted if a viewer watches the entire video.

The exact cost for running a YouTube ad campaign is influenced by these factors:

  1. Targeting
  2. Bidding
  3. Ad formats

When advertising on YouTube, your main focus should not only be on how much YouTube Ads cost but also on what you are gaining from your spending. This means that you’ll need to be constantly assessing and reassessing your campaigns to make sure that 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 are spending $1000 a week on YouTube ads and generating $1500 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 to $1 in ad costs. The average ROAS, however, is 2:1—$2 in revenue to $1 in ad costs.

The Key Factors Affecting the Cost of YouTube Ads

1. Targeting

YouTube’s power lies in its ability to target your ideal audience at exactly the right time in the right location.

Video ads that are run on YouTube also trickle across the web through Google Ads. By setting up your ads and campaigns with the right targets, your ad is presented to someone that has been estimated as a potential lead based on their interests or activity.

Learn more about how targeting will help grow your brand on YouTube.

You have a wide variety of targeting methods that you can use to reach specific audiences or niches based on where they are in the world, what they are interested in, and their choice in content. You can also run multiple campaigns with different target audiences to test engagement.

The cost to advertise on YouTube is heavily dependent on which audience you are targeting. Some audiences are more expensive than others to market to, so you need to choose wisely to avoid burning through your budget.

2. Bidding

The amount you’ll spend on YouTube ads all comes down to how much you want to bid for ad placement. YouTube placements work through a bidding system. The advertising cost depends on how many other people are bidding for the same ad placement. Before you set up your bidding options, make sure that your targeting is in place, as it will dictate your costs.

Generally, you’ll be bidding on cost-per-view (CPV) or cost-per-1,000 impressions (CPM). You’ll only be charged if someone watches the ad for longer than 30 seconds or interacts with your ad, whichever comes first. If your ad is shorter than 30 seconds and the viewer watches the entire thing, that also counts as a view.

With certain ad formats, you can choose to do pay-per-click (PPC). With PPC, it doesn’t matter how many people see your ad, you’ll only pay for the people who actually click on it.

Setting A Budget

Set yourself a daily budget on 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 between $5-$10 per day, while others use a weekly budget of 50x their average order value (AOV).

The best part about bidding is that you have the option to set a maximum amount you’re willing to spend per day. This ensures that you don’t suddenly wake up to an empty bank account because more people interacted with your ad than you thought possible.

Setting Up Your Bids

When you’re ready to set up your campaign, you’ll be asked to bid a Max Cost Per View. YouTube will then show you a variety of bids that will range in cost depending on how much you’ve tailored your targeting.

If you want to target one particular ad format, filter using the “Customize Bids Per Format” option. YouTube will give you an estimated number of views per day depending on your preferences. Make sure that the predictions align with your campaign goals and adjust accordingly.

Optimizing Your Campaigns

The secret to optimizing your campaigns and getting the most out of YouTube Ads is to focus on adjusting and understanding your metrics.

The two metrics to focus on are your Click-Through Rates (CTR) and your View Rate. These two metrics will tell you if your campaign is engaging, and if your budget is justified.

If your ad campaigns are not performing, it may be because a competitor has outbid you for the best advertising positions. Penny-pinching with your budget can negatively impact your ROI.

The only solutions are to bid higher than your competitor (if your budget allows for it) or to reassess the quality of your campaign.

3. Ad Formats

YouTube offers a range of ad formats that carry 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 choose to skip after 5 seconds
  • Non-skippable in-stream ads: these ads are typically 15-20 seconds in length and do not allow the viewer to skip
  • Video discovery ads: these ads appear as a suggestion in the search results in the right-hand sidebar
  • Bumper ads: non-skippable videos that are up to 6 seconds in length
  • Outstream ads: outstream ads are mobile-only, so they will only appear on Google video partners and not on YouTube
  • Masthead ads: a digital billboard placed on YouTube’s homepage for 24 hours that is only available on a reservation basis through a Google sales representative

Each of these ad formats offers a different audience reach and a different user experience. It’s your job to decide which ad format will best suit your campaign goals. For example, if you’re looking to promote a huge 24-hour flash sale, can you budget for a masthead ad? Or if you’re just looking to build brand awareness, would a skippable ad be more effective than forcing viewers to sit through a 20-second video?

Ad formats are a delicate balancing act of budgeting and marketing. Test the waters until you’ve found the sweet spot.

Ready to Start Rolling Out YouTube Ads?

Budgeting and paying for a new advertising avenue might 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 bidding will give you an idea of how much it will cost to advertise on YouTube. And with over 2 billion monthly logged-in users, it seems like YouTube is the perfect playground for testing ads and getting your brand out there.

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