How much do companies pay for advertising?
Companies bid on ad space on a pay per click (CPC) or per thousand views basis (CPM). Pay depends on a number of factors, but companies pay more to bid on competitive keywords.
As a blog or website owner, you can make money charging companies for advertising. You need to know how much you can reasonably charge for ad space.
A small business needs to know how much to spend on advertising. What should you expect to pay per click? You don’t want to over pay for advertising or have a negative return on investment.
Knowing how to set up an ad campaign will help you understand the cost to advertise on a website.
Luckily for you, I’m going to show you how much a company should pay for advertising. I’ll also show you how much you should be charging if you own a website.
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How much do companies pay for advertising?
Small businesses usually pay up to $10,000 per month on advertising. A company is willing to pay for advertising as long as it proves to be profitable. Most companies increase their ad spending until it stops returning additional income.
What is really important is for a company to measure their return on investment. Return on investment measures the amount of money made versus money spent.
For example, assume you spent $10,000 advertising a digital course which made $20,000. The ad campaign generated 100% ROI.
ROI is calculated by your initial investment spent from the final value of the investment, then divided by the initial investment, all multiplied by 100.
In this example, ROI is calculated as $20,000 earned minus $10,000 spent and then divided by the initial $10,000. Multiplied all by 100 for a 100% ROI.
Eventually, there comes a point where throwing more money at advertising produces diminishing returns. You spend more money on advertising, but are producing minimal increases in profit.
For example, now you spend $15,000 on ads, but make $25,000. Your ROI is now 67%. Increasing ad spend to $30,000 now brings in $32,000 for a measly ROI of 6.7%.
You’re goal as a company is to keep ROI as high as possible.Click to Tweet! Please Share!Click To Tweet
How much do companies pay per ad?
Companies pay for ads depending on the bid type and platform they advertising on. Advertising on Google is much more expensive than advertising on Facebook. Therefore, your ads will cost more depending on where you choose to run your ads.
It’s estimated the cost per click on a typical Facebook ad costs $1.72. A similar ad campaign on Google Adwords could cost around $2.32. However, the cost per action on Facebook is around $19 compared to $59 on Google!
As mentioned, companies need to pay for maximizing return on investment.
How much do cost per click ads cost?
Cost per click is one of the more frequently used bid types. As stated, the average CPC is $1.72 on Facebook and $2.32 on Google. However, your cost per click will vary depending on your product and keywords.
It’s important that you know how to estimate your cost per click and calculate return on investment. The last thing you want to do is spend money to lose money.
So how can you get a warm and fuzzy feeling that your ads will be profitable? Let’s take a look.
So how can you estimate your cost per click?
The best way to estimate CPC is by using the ad network’s advertisement planning tools. Each tool will provide you with an estimated cost per click for your ad. Knowing your conversion rate will allow you to estimate your ROI.
One such tool is the Google Keyword Planner. Start by using the Keyword Ideas to create a list of keywords to include in your ad campaign.
Once you have keywords selected. Click on “Copy” to copy the keywords to your clipboard. Head down to Keywords to see how Google estimates your ad will perform.
Google estimates this ad campaign will have an average cost per click of $1.63. I can use this as a starting point to estimate my ad reach and return on investment.
What if you don’t know your conversion rate?
If you don’t know your conversion rate then start with a small bid. Typically, starting an ad campaign with $100 to $1,000 is enough to find a conversion rate.
For example, on Facebook you create an ad campaign bidding $200 at a cost per click of $0.50. Your ad campaign would create 400 clicks to your landing page. You would have a 2% conversion rate if 8 people bought your product.
Therefore, your product would need to be priced at $25 to break even. Let’s assume your product was priced at $40. You would have grossed $320 and had a return on investment of 60%.
If your budget is tight then you can use a conservative conversion rate of 1%. Assuming a conversion rate is never ideal, but you have to start somewhere!Click to Tweet! Please Share!Click To Tweet
How do I get companies to pay for advertising?
Plenty of companies are willing to pay you for advertising. So, how do you get a company to pay you for advertising?
Companies will pay you for advertising when you can reach an audience. You will get paid more money for advertising with the larger audience you can reach. Affiliate marketing, blog networks, and display ads are all ways companies will pay you for advertising.
- Affiliate Marketing – Sell a companies product and earn a commission.
- Blog Networks – Blog Networks partner content creators with brands. You can partner and get paid by brands to create content for them.
- Display Ads – Throw an ad on your website and get paid every time someone views or clicks an ad. Display ads are one of the easiest ways to make money online.
So first and foremost, focus on building an audience. Too many new bloggers want to start earning money from the beginning and end up failing. The larger your list, the more money you’ll make.
For example, a new blogger uses display ads on their website. A new blogger doesn’t have much traffic and might earn $15 per thousand pageviews. At 500 pageviews per month, they would be earning $7.5 per month.
Now, the same blogger grows their website to 100,000 pageviews per month. At $15 per thousand pageviews they are now making $1,500 per month!
Reaching more of an audience is how you can be successful in advertising.
How much should you charge for advertising?
How much you charge for advertising is up to you and the advertiser. You need a system to determine your advertising rates. Advertisers are willing to pay for whatever makes sense in their budget. Remember, if it’s not a good deal for either party then it’s not a good deal for anyone.
The first thing you need to determine is what advertising services you’ll provide. Common website advertisements include banner ads, sponsored posts, email newsletters, and social media posts.
Tracie Fobes wrote a great article on how much to charge for a sponsored post. The article walks you through creating an advertising plan that makes sense. You can apply the same tactics for banner ads, newsletters, and social media content.
Once you’ve established your base rate, then you can tack on fees. Example of fees include social media advertising costs, hourly rate, and more.
Keep in mind the amount of time it takes you to create content for an advertisement. You wouldn’t want to charge $50 for a sponsored post when it takes you five hours to write a good article. It’s simply not worth your time.
Therefore, it’s important for you to build an audience before seeking outside advertisements.
Advertisers won’t pay much to advertise on a small website. However, they will pay much more for a heavily trafficked website. Therefore, you’re doing the same amount of work but pay varies depending on the size of your website.
Focus on building your audience and then focus on chasing advertisers.Click to Tweet! Please Share!Click To Tweet
Who pays the most for advertising?
Companies who have high profit margins and a great sales history pay the most for advertising. These companies already know advertising works. Also, these companies have money available to pay for advertising.
As a marketer, how can you use this knowledge to your advantage?
First, you can select a niche for your website around profitable companies. Maybe you’ll focus on a supplement website over a bodyweight fitness. There are more products and advertising spent on supplements than exercises you can do from home.
Selecting the right niche for your website can mean a huge difference in ad revenue!
Maybe websites aren’t your thing. You may want to help advertise for companies and get paid.
Therefore, you need to attract clients with money for advertising. You should be focusing on companies with high profit margins and a great sales history. You will be able to make more money because these companies aren’t strapped for cash.Click to Tweet! Please Share!Click To Tweet
Summary: How much do companies pay for advertising?
As you can see, most small businesses pay around $10,000 per month on ads. A company will pay for advertising as long as it proves profitable. Therefore, it’s important for companies to measure their return on investment to make sure ads are working.
Generally, companies pay an average of $1.72 per click on Facebook and $2.32 on Google. However, the cost of your ad campaign will vary based on keywords in your ad group.
You can estimate the cost of your ad campaign by setting up an ad. For example, you can set up an ad on Facebook to get a rough estimate on cost per click. You can also use Google’s keyword planner to get an idea of how much an ad campaign will cost.
Start with a small ad budget to test your conversion rate. Make sure your return on investment is worth the ad spend before scaling. If you already have a small budget then you can guestimate with a 1% conversion rate.
Companies will pay you for advertising if you have an audience. Common ways to get paid include banner ads, sponsored posted, and blogging networks.
Determine your advertising fees by setting a base rate. Then tack on fees such as social media posting and your hourly rate. Remember, the larger your audience the more you can charge.
Focus on advertising for companies with a good sales history and high profit margins. These companies have the most money for advertising.