Digital Advertising Costs

I encourage you to look at your digital advertising costs as an investment – you definitely get a return on your investment when you make informed advertising expenditures.

Conversely, if you try out digital advertising without knowing what you are doing, you are just throwing money away.

Estimating digital advertising costs is done on a client by client basis because it is dependent upon several factors, including what type of advertising – such as display advertising vs search advertising.

You can see it is a very refined method of making sure your costs are reasonable for your situation.

With Pay Per Click advertising, it is auction style. You bid on how much you are willing to pay for leads.

I’m usually asked at this point, “what a click will cost”. Click costs are based on a lot of factors, so while I can estimate it, I just don’t know the exact cost of a particular click on a particular search phrase until we get into the bidding process.

The approach to bidding is proactive. I take you through a quick tutorial, that looks something like the following example, on what you need to take into account when setting your budget for online advertising in the pay per click model.

For an example, if a business pays an employee $20 an hour and it takes them one hour to complete a job, and you charge $50 to the client, and you want to make $20 off of the job, we aim to spend less than $10 in advertising to get the work.

You pay $20 for the employee, $10 for the advertising, and get $50. So $20 profit.

So, if a click costs $2, and we estimate it takes 5 clicks on average to get a user to bite, the cost to acquire the work is $10. This tells us we can’t go over an average click cost of $2 in order to meet your profit goals.

Or, and this is where a professional Adwords manager can be valuable, you need to increase the rate at which you convince clickers to buy… maybe every 3rd click.

Some things I will help you to take into account when determining click bids:

• Labor cost
• Manufacture cost
• Acquisition cost
• Overhead
• Repeat customers vs one-off sales

Advertising is about averaging out your costs to acquire clients/sales. In collaboration with you, I’ll make sure your advertising cost is within your allotted budget.

Therefore, even though you don’t know exactly what an individual click costs when setting up your campaign, together we can evaluate click costs and make adjustments.

The fact is, you need to be in online advertising if you want to cover all your possible advertising avenues, and we simply turn off the ad phrases that are costing more than you want to spend, and focus on the ones that are within your optimal price.

Then, as business picks up from the lower cost ads hitting their mark, we add in the more expensive ones with smaller profit margins. As long as some return on investment (ROI) is present, it is worth doing.

You Have Control Over Expenditure Levels

One of the nice features of internet advertising is that you can set a maximum daily expenditure.

Remember, it costs money to make money!

You will have these advertising costs:

• Keyword research
• Advertising account setup
• Monthly management
• Monthly click fees when someone clicks your ad

You may have these costs as well, depending on your situation:

• Web site analysis
• Web site optimization
• Web site expansion (ie creating landing pages)
• Ongoing keyword research
• Alternative Placement research for additional platforms

For as little as $300 per month over the course of the first year, you can see if it is for you — and it only gets better over time.

At a minimum, you will have $500 in startup costs, which includes one hour of keyword research, account setup, and first month management for a small (maybe ten-phrase) campaign.

More likely your small business will have a slightly larger campaign and somewhere between $600 and $2,000 setup fees plus click fees (which are impossible to say until I know what industry you are in, and what your goals are; but remember, we set maximum daily expenditures on that).

Ask me about eligibility for Google new account discounts and non-profit discounts.

If your advertising budget is small, I suggest starting with a Microsoft Ad account because the cost per click is generally much less than comparable phrases on Google Ads (formerly Adwords) due to the greater popularity of Google.

What is the Range of Click Costs?

Click fees are competitive bids, so in depends on what industry you are in, what geographic market you are in, and how well you have done with click-throughs in the past.

They can range from about $1 a click to over $100 (most businesses, except for lawyers, don’t pay anywhere near $100). The tighter you stick to an exact descriptive phrase, the less expensive clicks are, comparatively to broad keywords.

Generally, the higher the profit prospects for the product or service, the higher the click cost due to risk reward theory. But not always.

What About Display Advertising?

Display network advertising, often called banner advertising, is similar in many regards to pay per click advertising. The main differences being:

1. clicks cost much less because you are not dealing with people who are searching for your services, you are putting ads in front of likely-interested parties, and
2. you can choose to pay per thousand impressions vs per click

Therefore you set budgets based more on how much you are willing to spend per month, vs per click. Over time I will be able to determine what is a good expenditure and what is a not working as well, and shift budget towards the good and away from less effective channels.

What Should My Monthly Ad Budget Be?

Again, this varies by several factors, like what industry you are in, how much your competitors are in the space, and the search phrases you are after. But most of all it depends on how much money you want to make.

If you have one key phrase, in a non-competitive environment, you may only need to spend a couple hundred dollars to beat your competition – but that doesn’t mean you will get every client out there if you don’t allocate enough click budget!

Also, the more search phrases you add, the more you will add to your budget. Or you may choose to stay laser focused on a few great terms if you have good return on investment for those phrases. The thing to keep in mind is to allocate enough initially to get a good feel for your market – we suggest at least $600 per month for most industries, but you can still be successful with a lesser amount.

Advertising Payment Policies

I set you up with your own ad accounts, and you “invite” me to be your PPC manager for the account. Therefore, the actual click through costs are billed to your credit card via the entity you are advertising with (Google, Microsoft, etc.)

You pay one month in advance for management fees, with ongoing fees invoiced at the end of each month, at either a set amount we agree on, or variable if our agreement is for management as a percentage of ad spend. Payment is due on receipt. Generally, my services pay for themselves in saved click fees (not to mention all the new business you will be getting).

Call 720-520-0639 now to get an estimate of your costs for digital advertising.

Pay Per Click Management Costs

Pay per click management fees are typically charged as “percentage of click cost” or by “actual service required” methods to determine a fair method to both the client and the PPC manager.

Either way, you can get a fixed monthly management cost.

I advise you on the best method after reviewing your account and your goals. Ultimately, I will let you choose between “actual-service” or “percentage-of-spend” if you have a preference.

Let’s first look at PPC management based on actual service and hourly rate.

PPC Management Based on Actual Time Spent for Servicing

With this method the monthly spend is dependent on four primary areas:

1. The level of management
2. The size of the account
3. Your advertising goals
4. The number and frequency of reports

1. Management Level

Many approaches can be taken to the amount of time allocated to account management.

If you want the account to be just “monitored and adjusted”, that is one level. If you want it to be a entity that continually tests new experiments to improve ROI (return on investment) and grow to include more leads volume etc, as your company grows, that is another level.

For instance weekly “monitoring” may take roughly an hour per week, which you then multiply by 4.5, the average weeks in each month over the course of a year.

I don’t usually recommend daily monitoring, because if making adjustments daily there is not enough perspective to see trending. If you’re immersed in the day to day numbers of incremental costs per click you’re not doing yourself any favors.

But choosing monitoring is just one approach – a minimal approach, which amounts to babysitting the account.

You may also take a more aggressive approach to grow your account and get all you can from it. This may take 4 hours a week, for example.

This aggressive approach may be to spend time on things such as A/B testing of writing new ads or landing pages, or analyzing negative keywords, each month, or to visit the site once a week, or twice week.

To illustrate let’s look at a mature account that is under control and falls into a nice comfortable spot in the bidding flow of your industry. You could reduce the cost of your monthly maintenance – if you were satisfied with the amount you pay for clicks and the results you are achieving.

Most companies want to continue to improve the results they are getting until they cannot improve it, therefore the management fee has to be set at a level that allows growth of the model.

This growth management is where monthly activities such as A/B testing come into play. That is where you test one thing (item a) against another (item b) simultaneously to see which gives you better results. Your account can improve the more you determine what works best through constant testing.

That means testing the form of your phrases, the wording in your ads, the times of day the ads show the geographic areas, the bid amounts, your landing pages and more.

As long as you are making more from your advertising than the amount you are spending, you should keep exploring ways to gain small advantages in your account.

2. Account Size

The size of the campaign makes an impact on the management fee, in terms of:

• how many key phrases,
• how many ad groups, and
• how many campaigns,

The size is also affected by multiplying it across how many things you are tracking, such as how many devices or the day of the week changes or the cost report, quality scores, the rate at which we add negative keywords, etc. are a major factor in what drives the cost for PPC management.

The larger sized accounts naturally require more time to manage.

3. Business Goals

Some common account goals include:

• brand reinforcement (getting as many ad views as possible)
• driving traffic to your website (getting as many clicks as possible)
• getting sales or sign ups (converting clicks into direct sales)

Brand reinforcement alone is less time consuming than driving traffic to your site with the lowest bids, for example.

So, the more ambitious your goals, the more your management investment may be (as well as your click investment).

4. The Number and Frequency of Reports

The more reports you want me to generate on your account, the more it costs. And, the more frequently you want those reports, the more it costs.

Also, if you want the reports analyzed and summarized, vs simply having a report emailed to you for your own analysis, the management price reflects it.

Don’t worry, if you don’t need or want reports, rest assured I am still doing an ongoing analysis of what is happening with your account at any point in time.

So what determines your budget for “time spent” is the result of those four main elements.

Feel free to call Jon at 720-520-0639 to discuss the intricacies of this method, if you are interested in learning more. But, honestly, you don’t need to worry about all of that, I will keep it simple with a low monthly quote.

Management Investment as a Percentage of Spend

Many search advertising agencies use the “percentage of the amount spent” by the client on clicks to charge for management.

Typically that method is used for large sized accounts, spending over $10,000 a month. It uses different percentages for different sizes and/or phases in the account life. This could range from 10% to 30%.

An example would be if your budget for clicks was $10,000 per month, you might pay $1,000 management fee for a mature account, or $2,000 for an account that is still evolving.

The percentage of spend method is a carryover from traditional ad agencies who are used to charging a percentage of spend for advertising costs such as production costs and insertion rates.

For large accounts this is simply easier for both client and agency to work with. And, I am happy to work that way if you prefer.

Why the Percentage of Spend Model is Not Always the Best Answer

“Percentage of spend” model for PPC management is an easy barometer for the company itself to determine total cost of clicks and management before contacting a pay per click manager to see what their expertise is and what they believe your account needs.

If you’re sitting on a $10,000 budget for your click spending, you can expect to pay something in the range of 10% to 30%, depending on your number of keywords, and the cost of key phrases.

More phrases almost always equals more management fee, if all else is equal (such as cost per click), in order to pay closer attention to the details of each phrase and ad performance.

Often times I am asked “what will it cost to create a campaign, and how much to manage it?”. This question ignores what your campaign looks like, and what life-stage it in. So, I may start by saying “20% of your click budget is a decent starting estimate”.

You could stick with that and it would be fine, but you might miss out on some opportunities due to running out of management budget.

For example, I can manage a campaign for as little as $100 a month; if it’s a small campaign with a handful of search phrases, regardless of the spending on clicks, $100 can be extremely effective. A five hundred phrase campaign would not be effectively managed for $100.

So when you contact me, I will make a suggestion as to the amount that would be best for your particular campaign. Then together we can determine if what you want to spend will be sufficient to meet your goals.

Bottom Line – Fair Monthly PPC Pricing

I can give you a quote based on the size, or anticipated ultimate size, and the other factors listed above and together we can determine if a monthly management based on hourly or percentage of spend is best for you.

Either way, I will provide you with excellent service at an excellent value with a fixed monthly budget. Then as your leads turn into clients you can invest more when it makes sense, up to your comfort level.

Call Jon at 720-520-0639 to get started.