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What are advertisers willing to pay for internet advertising (e.g. an ad on Google, Snapchat, FB, Hulu)? How does that vary across levels of engagement (e.g. banner ad vs. required watching) and levels of targeting (e.g. general demographics vs. location)?
Hello! It is my pleasure to respond to your query in providing you with information on internet advertising across multiple online channels. In this response, we’ll begin with a general overview, then we’ll address the three (3) major aspects of information you are seeking, including:
• What advertisers are willing to pay for internet advertising on various channels
• How advertising costs differ by level of engagement and level of targeting
• Whether advertisers will pay more for location-based targeting
We’ll focus specifically on PPC (pay-per-click) advertising, as requested, in seeking average CPC (cost-per-click). Please review the findings of my deep dive below.
CPC – GLOBAL, NATIONAL, GENERAL OVERVIEWS
For this section, we’ll begin with an overarching look at the national averages for PPC (pay-per-click) marketing from WebPageFx. They state that, “Pay-Per-Click (PPC) marketing is an inexpensive and highly-effective form of online advertising. After paying the costs to configure your PPC campaign, you only pay a few cents every time someone clicks your ad.” The initial costs are for the set-up process, which includes web configuration, with general set-up costs equaling anywhere from $4000 – $10,000. The next cost is that of associated media, which averages $0.05 to $3.00 per qualified visitor. The cost to run the campaign includes the cost of clicks, plus around $500-per-month to an internet marketing company/service.
The best demographic to reach with PPC advertising is those people who would be actively searching for a company like the one being advertised. The pros include ROI tracking and a “free stream of qualified traffic,” while the cons include that PPC campaigns are easy for amateurs to mismanage (and therefore waste money). PPC marketing has great potential to increase the conversion rates (from traffic to actual sales) at an incredibly low cost. Let’s look at some historical cost data before we get into the data from various channels. According to HochmanConsultants, the average CPC on PPC adverting for the years noted is as follows (Note: This is not fully representative of the entire country, but only the segment surveyed.):
• 2016: CPC – $2.14
• 2015: CPC – $1.58
• 2014: CPC – $1.02
• 2013: CPC – $0.92
• 2012: CPC – $0.84
From this five-year data, you can see the exponential rise in costs-per-click, so you know they are effective! Now, let’s look more closely at the costs for this type of advertising.
ADVERTISING COSTS ON VARIOUS ONLINE CHANNELS
Now let’s look more specifically at the cost-per-click of PPC advertising across various channels, including Google Adwords, Youtube, LinkedIn, Facebook, and Snapchat.
• GOOGLE ADWORDS: Like with most advertising of this type, the answer to “How much does it cost?” depends – and can vary widely based on several variables. Overall, the cost is based on an auction system, which “rewards businesses who have high-quality ad campaigns with lower costs and better ad placement,” according to WordStream. The article goes on to say that, “The average cost per click in Google Adwords is between $1 and $2 on the Search Network. The average CPC on the Display Network is under $1”. Differently ranking keywords have different costs associated with them, with “the most expensive keywords in AdWords and Bing Ads cost[ing] $50 or more per click”. An average small business could spend between $100K - $120K a year (or $10 - $12K/month) on these ads, while giant retail companies could spend upwards of $50 million a year – just on paid searches in AdWords. Cost-per-click in AdWords is calculated by first determining your Quality Score and Ad Rank (which is the “ad rank of the person below you”). From here, $0.01 is added per-click, which gives you your total CPC (based on the auction system). In order to best utilize Google AdWords, you need to have a clear, firm understanding on how it works, why it works, and what’s most important in getting it to be most successful, which the article from WordStream can certainly help you with. It is worth noting that this option has become much more expensive in recent years, “keyword competition [being] fierce,” as noted by Enerica. Additionally, Kissmetrics reports on a less-used advertising medium on Google AdWords – for videos! They note that “costs will vary greatly depending on your industry and keyword focus, but on average, they are about 6 cents per view or click”. Find out more about this from Kissmetrics.
• YOUTUBE: SearchEngineLand reports that Youtube’s TrueView ads cost much less per-click and garner higher watch-rates than other types of ads. These ads cost very little – like $0.09 - $0.11 per-click on average – which is the lowest of any channel or similar ad-type. The article goes on to say that, “CPC pricing on Youtube for TrueView ads, ads that users choose not to skip, is lower than CPC pricing on desktop and mobile ….”
• LINKEDIN: Enerica discusses LinkedIn’s ad bidding modes (which you can select from after targeting the specific demographic for your ads). These modes include CPC Mode and Impressions Mode (per 1k). The article notes that each of these options costs “about $2 per measurement unit”. They also note that the user interface is more difficult (than Google, for example) and the “reporting is primitive and only allows downloading a CSV report”.
• FACEBOOK: WordStream notes that the average CPC on Facebook differs based on your industry, although the overall average (across all industries combined) equals $1.72-per-click. The highest CPCs are for financial advertisers at $3.77-per-click, and the most expensive keywords are “insurance,” “loans,” and “mortgage” – which each cost around $50-per-click. The cheapest clicks are for industries like apparel ($0.45), hospitality/travel ($0.63), and others in the retail industry ($0.70). The user interface is easy and offers a multitude of features, and ads are approved by admins within about an hour (much faster than other platforms). The ads are easy to target toward specific demographic and/or geographical foci, which we’ll talk more about later.
• SNAPCHAT: Even though Snapchat offers a variety of advertising types, like SnapAds, Sponsored Geofilters, and Sponsored Lenses, I could not find any specific information on CPC-type advertising or what it might cost. If you’d like to learn more about Snapchat’s ads and their associated costs, you can check out this article from WallarooMedia or Snapchat’s website.
Now that we have established an average CPC historically (across all channels), as well as CPC pricing across various online channels, let’s look into the cost differentials associated with engagement and targeting of ads.
COST DIFFERENTIAL PER LEVELS OF ENGAGEMENT & TARGETING
Now let’s look more specifically at the cost differentials for engagement and targeting on channels including Google Adwords, Youtube, LinkedIn, and Facebook.
• GOOGLE ADWORDS: GoogleSupport discusses the demographic segmentation that AdWords can be broken down into, including mobile app demographics, age, and gender. For Display or Video campaigns, demographics can include “parental status”. For Video campaigns, demographics can also include “household income”. You can also exclude certain demographics. It did not appear (from initial research) that ads addressing more demographic areas cost more, nor did it appear that you can segment ads into geographical areas, either, though this cannot be confirmed (as I am not an AdWords customer).
• YOUTUBE: As noted above, CPC ads that users choose not to skip cost less than average CPC pricing for both desktop and mobile-based ads. VideoPower notes that Youtube ads provide four basic targeting options: Content Keywords, Remarketing, Placements, and Topics & Interests. Additionally, they report that “each targeting group that you make for your Youtube ads can be further segmented by demographics”.
• LINKEDIN: According to their website, LinkedIn ads offer a variety of demographics targeting options, including location, industry, job title, schools, skills, age, gender, years of experience, and others. Additionally, they offer further audience filtering with the options to exclude specific followers and/or audiences. With Sponsored Content and Text Ads, there are two bidding options, including PCP (which is the maximum you’re willing to pay per-click) and CPM (pay-per-1k-impressions, which you specify also). “With both options, Campaign Manager shows you a suggested bid range which represents an estimate of the current competing bids by other advertisers who are targeting the same audience. In general, the higher you bid the more competitive your ads are and more likely you will have the opportunity to quickly hit your goal.” No specific information is given on the costs of these ads – or how much targeting might add / subtract to those costs.
• FACEBOOK: According to their website, using the Ads Manager and Power Editor, you can “reach people based on their demographics, location, interests, and behaviors”. Additionally, you can target specific audiences (like loyal and/or potential customers, web visitors, and mobile users, as examples). Again, the actual cost to run ads on Facebook (as well as Instagram and Audience Network) will vary based on their ad auction. The factors that determine the winner of an auction (ad spot) include the advertiser’s bid amount (and whether it’s an automatic or manual bid), the relevance and ad quality, and the estimated action rates. For these ads, the advertisers choose the objective, as well as the impressions and conversions – “and only pay for that”. From this information, it appears that ads may cost more or less based on demographics and other types of targeting. An article from UpWord confirms this, as they ran a test to see how inexpensively they could run targeted ads, and those targeting locations with less buying power/intent cost less than those targeting individuals in areas that were more likely to “buy”.
Now, let’s look at further information about whether advertisers are willing to spend more per-click (or per-impression) to get better targeting (for demographics and or locations, as examples).
WILLINGNESS TO PAY MORE FOR LOCATION-BASED ADS
Any marketer or business owner will tell you that they always try to get the most ROI for every ad placement possible – for the lowest price possible, though sometimes they are willing to pay more – to reach a specific audience, a specific location, or to promote a high-dollar/value campaign. With the success of each of the advertising streams detailed above, and the information detailed below, it seems very likely that advertisers are willing to pay more to get better targeting – and are required to do so by the auction-based ad-buying systems in place across most online channels.
WordStream notes that each state in the US offers PPC costs that vary – based on that state’s demographics. The top five (5) states with the highest CPC average include Alabama (78% higher), West Virginia (60% higher), Maine (48% higher), Alaska (43% higher), and Louisiana (34% higher) (higher than the national average cost for CPC). The five (5) least expensive states include Wyoming (38% lower), Rhode Island (42% lower), Delaware (45% lower), Nebraska (45% lower), and South Dakota (65% lower). Their research shows that “rural regions have higher CPC,” America’s largest states fall in the middle range (closest to the national average), and states with the highest unemployment rates are those with the lowest mean PPC costs. Additionally, if you’re interested in discovering more about global CPC rate differences, you can check out this additional article from WordStream.
It’s clear from the research that specifically-targeted demographic and/or location-based ads cost different amounts – not only based on the keywords chosen, but the demographics selected, the location(s) selected, and the actual bid for the ad.
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SUMMARY
In the US in 2016, the national average cost-per-click on PPC (pay-per-click) advertising was $2.14, which shows an increase of nearly a third from 2015’s rate of $1.58. On Google AdWords, the average CPC rate is between $1 and $2 on the Search Network, and under $1 on the Display Network. On Youtube, the average CPC runs between $0.09 - $0.11. On LinkedIn, the average CPC is about $2, while on Facebook, the average runs about $1.72-per-click.
Most platforms, like Google AdWords, Facebook, LinkedIn, and Youtube, offer an auction/bid-style ad-buying platform, which includes costs associated with selected keywords, size of the audience, and targeted (included and/or excluded demographics). Costs for specific targets (like specific locations and/or demographics) depend on the locations and audience segments being targeted, as well as the medium in which it is delivered, and the platform on which it runs. Additionally, CPC varies based on the type of engagement (banner ad, video that can be skipped, video that must play, etc). Although it appears that advertisers must (sometimes) opt for the more expensive ads (based on their needs), there is no data to determine their willingness to do so (other than the success of the ad platforms – and the expensive ads sold each day).
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Thank you again for your question, and I hope this information gives you what you need. Please contact Wonder again for any other questions you may have!