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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! Thanks for your question about costs for internet advertising. The most useful sources I found to answer your question are the 2016 US Digital Marketing Budgets. The short version is that advertising costs vary greatly depending on a number of factors. The majority of pricing seems to be performance-based, meaning advertisers will pay more based on how successful their ad campaigns are. Below you will find a deep dive of my findings.
METHODOLOGY
I searched corporate websites, trusted media sites, and industry reports to find information about the costs of advertising on different platforms and the differences in cost related to level of engagement and level of targeting. I also looked at information about advertising budgets and trends.
ADVERTISING MARKET
Advertisers spent more than $77 billion on digital advertising in 2016 and that number is expected to hit $103 billion in 2019. One industry report said mobile advertising will make up 66% of the growth in digital ad spending over the next five years. A survey of 200 marketing executives revealed that around 75% of marketing executives believe digital advertising results in a better return on investment than traditional marketing. Advertisers are currently spending around $10 million annually on digital video, representing an 85% increase from 2014.
Google will is by and large the most dominant player in the advertising market. The company's earnings will account for 40.7% of US digital ad revenues in 2017. Snapchat’s ad revenue is expected to grow 157.8% to $770 million in 2017, and Facebook is expected to capture 39.1% of the US display market in 2017. Meanwhile, Twitter's ad revenues were $545 million in the third quarter of 2016, which was a 60% increase from the same time the year before.
Industry reports showed non-mobile (desktop) display advertising made up nearly 30% of advertising spending in 2014. Banner ads made up 16% of desktop ads, digital video had a 7% share, rich media had a 3% share and sponsorship made up 2% of sales.
Search ads made up roughly 40% of advertising spend in 2014, and online advertisements had a 25% share of the advertising market that year.
FACEBOOK
One ad management company found their clients paid an average of $.32 per click when using Facebook advertising. Another company found that the global cost-per-thousand impressions (CPM) decreased by 11% to $3.30 from the fourth quarter of 2014 to the first quarter of 2015. During that same time period in the United States, the Facebook CPM decreased to $3.72 while the click-through-rate (CTR) increased to 0.86%. Ads placed in Facebook newsfeeds are considerably more expensive; in the first quarter of 2015, the CPM for desktop newsfeed ads was $12.86 and the CPM for mobile newsfeed ads was $6.63.
TWITTER
On Twitter, the cost-per-engagement (CPE) for promoted tweets was $.45 for the first quarter of 2015 and the CPM was $8.92.
SNAPCHAT
An industry source said advertisements for Snapchat can cost a company hundreds of thousands of dollars, depending on what type of ad they are looking for. A "Live Story" runs about $250,000, and a "takeover" ad of a Snapchat Discover publisher channel runs about $50,000.
GOOGLE
Some Adwords for Google are more expensive than others, and some industries see higher rates than others. The prices range from one extreme to the next, for example, the CPC for dating and personals ads run for about $.19 on the search network while the CPC for legal ads on the search network is $5.88. The most expensive Google Keyword is the word "insurance," at $54.91 per click. The average CPC across all industries is $2.32 on the Google search network and $.58 on the Google display network.
To wrap it up, the online advertising market is steadily growing, and advertisers are expected to dedicate more of their advertising budgets to online ads each year. The market is largely performance based, meaning ad campaigns get more expensive as they experience more success. Thanks for using Wonder! Please let us know if we can help with anything else!