Expanding your business using online advertising has become incredibly accessible. Nevertheless, there’s a significant amount of information to understand, which can feel overwhelming for those who are new to the world of online advertising.

Each online advertising platform possesses its own advantages and disadvantages, along with a wide array of ad formats, campaign options, and performance indicators for advertisers to analyze. However, amidst all these details, one crucial question always arises: “What will be the financial impact on my business?” In this comprehensive guide, we’ll delve into the costs associated with advertising on three of the most prominent online advertising platforms: Google AdWords, Facebook Ads, and Instagram.

Our exploration will encompass the comparative expenses of advertising on Google, Facebook, and Instagram, highlighting the strengths and limitations of each platform. Additionally, we’ll examine the performance aspects of each platform, presenting real-world data and research findings.

Here’s a concise overview of our guide to online advertising costs:

• The typical cost of a Google Ads (AdWords) advertisement is $2.32 per click on the search network. Ads on the Display Network have an average cost per click of less than $0.58.
• **A Google advertising search campaign has an average cost per action (CPA) of $59.**18.
• The priciest keywords on Google advertising and Bing Ads can reach $50 or more per click. These usually involve highly competitive keywords within industries known for high customer lifetime values, such as law and insurance.
• Small businesses utilizing Google advertising typically allocate between $9,000 and $10,000 per month for their online advertising endeavors, translating to $100,000 to $120,000 annually.
• An online Facebook ad has an average cost per click of $1.72, while the average cost per action is $18.68.
• The standard CPM for Facebook Ads is around $10.
• Instagram ads generally have a CPM closer to $5, although costs are increasing as the platform’s popularity surges.

Let’s delve deeper into the specifics!

Exploring Online Advertising Costs: What’s the Price Tag on Google Ads?

Considered the pioneer of internet advertising, Google Ads isn’t just the biggest online ad platform globally; it’s fundamentally intertwined with the internet itself.

An example of a Google search engine results page (SERP) that includes PPC ads. You might have come across the humorous saying that Google is an advertising company that owns a search engine. There’s a grain of truth to it, as Google generates the majority of its billions in yearly revenue from online advertising, which has enabled the company to remain at the forefront of search technology.

Decoding Google Ads’ Pricing Structure

Before we can answer this, we need to be clear about which aspect of Google’s vast domain we’re referring to – the search network or the display network.

Google’s search network is where you see pay-per-click (PPC) ads displayed above and below the organic search results when a user enters a search query. Because Google displays ads closely aligned with the search terms used, businesses leveraging Google advertising can attract highly relevant traffic to their websites and landing pages. Instead of presenting your ads to a massive, potentially uninterested audience (as with billboards), you can specifically reach people actively searching for the exact products or services you provide.

While the CTRs might not be impressive, Google’s Display Network offers advertisers unmatched reach. In contrast, Google’s display network is where display ads are featured. This network encompasses a large portion of the indexable web. While advertisers have the option to include multimedia elements like animations and videos in various display ad formats, the majority of these ads are banner ads.

Unveiling Google Ads PPC Ad Costs

True to their name, PPC ads operate on a cost-per-click (CPC) basis, meaning advertisers are billed a small fee whenever someone clicks their ad.

Every time your ad is shown, your cost per click is determined in real time through a process known as the ad auction. This auction is Google’s mechanism for selecting the ads to showcase when someone conducts a keyword search, arranging the order of those ads, and establishing the amount each online advertiser pays per click. Our guide to the ad auction offers a deeper understanding of this process.

Factors influencing both your ad placement and cost per click include the competitive landscape, your maximum bid (the highest amount you’re willing to pay for each click), and your Quality Score (a 1-10 rating reflecting your ads’ quality). A higher Quality Score elevates your ad’s ranking while decreasing your CPC.

Numerous other elements impact your CPC and overall Google Ads expenses. For instance, CPCs can fluctuate significantly based on geographical location (even for related keywords and search terms) and the industry being targeted.

Financial keywords, for example, frequently command higher CPCs compared to other industries (more on this later).

Demystifying Google Ads Display Ad Costs

Generally, display ads on the Google Display Network (and other networks) tend to have considerably lower click-through rates (CTRs) than PPC ads. Solve Media suggests you’re actually more likely to 475 times more likely to survive a plane crash than you are to click on a banner ad – a statistic that highlights the stark difference.

However, the CTR of your display ads can improve drastically by incorporating strategic targeting options such as remarketing and life-event targeting. Just like with search ads, the higher the click-through rate, the greater the ROI you can achieve with display ads.

When you opt for advertising on Google’s display network, you have three pricing options at your disposal:

• Cost-per-click (CPC) Pricing – You’re only charged when a user clicks your ad, making it ideal for campaigns designed to boost website traffic.
• Cost-per-thousand impressions (CPM) Pricing – You pay for ad views (bidding on one thousand views), which is optimal for brand awareness campaigns aiming for maximum visibility among your target audience.
• Cost-per-acquisition (CPA) Pricing – You set a target CPA and incur charges only when your ad leads to a conversion. This option is perfect if your ultimate goal is sales or other online transactions.

Now that we’ve clarified the main distinctions between these ad formats and their respective pricing structures, let’s examine the data.

Analyzing the Average Cost of Google Ads by Industry

The costs associated with online ads can fluctuate widely, not just across platforms, but also based on the advertiser’s specific industry. With that in mind, let’s explore the average Google Ads ad cost across 20 distinct industries:

Across all industries, the average CPC in Google Ads is $2.32 on the search network and $0.58 on the Google Display Network.

That’s why AdWords’ most expensive keywords are found in niches like business services and asset management, where the value of products or services tends to be higher.

To provide context, the typical monthly PPC spending for a nexus-security customer is $9,813. It’s important to acknowledge that bigger companies often allocate substantially more, potentially reaching millions in online advertising expenditures annually.

Strategies for Managing Your Google Ads Advertising Costs

Businesses have several options at their disposal to effectively manage and control their AdWords advertising spending.

One way to lower your overall campaign cost per click is by improving your Quality Scores. Higher click-through rates play a significant role in boosting your Quality Score. You can increase your CTR by crafting compelling and pertinent ads that resonate with users on an emotional level, making clicking irresistible.

For valuable insights on writing ads that achieve exceptionally high CTRs, refer to our study that dissects the elements behind the top-performing Google Ads.

Let’s explore some additional techniques to optimize your online ad expenditures.

The first method, known as dayparting or ad scheduling, allows you to define specific timeframes throughout the day when your ads are eligible to appear. For instance, a traditional retail business looking to maximize foot traffic to its physical stores can leverage dayparting to limit ad displays to hours or days when the store is open.

Adjusting dayparting settings in Google Ads. Beyond offering better control over ad display times, dayparting can also serve as a cost-saving measure, even during less optimal time slots. As depicted in the illustration below, the average cost-per-action (CPA) can exhibit significant variations depending on the time of day. Savvy advertisers can capitalize on this fluctuation to lower costs, particularly when dealing with tight ad budgets.

CPA by time of day, encompassing both weekday and weekend searches. Observe the tendency for weekend CPAs to be significantly higher than weekday CPAs. Geotargeting is another effective method for controlling your Google Ads budget.

Continuing with our real-world retail example, a business aiming to attract customers to a physical location is unlikely to see substantial returns on ads displayed to users residing outside their service area.

Geotargeting options implemented in Google Ads. This illustration highlights a physical radius of 20 miles surrounding Boston. This is where geotargeting proves invaluable. It empowers advertisers to focus on locations poised to yield the most favorable outcomes. When coupled with dayparting, it provides advertisers with unparalleled control over the “where” and “when” aspects of their ad displays.

Device targeting adds yet another layer of control to manage your AdWords advertising budget. Once again, using our physical store illustration, device targeting enables advertisers to – you guessed it – tailor their ads to specific devices. For example, they might choose to bid higher for searches conducted on mobile devices.

In the figure above, Enhanced Campaign bid adjustments are utilized to modify bids based on Locations. Advertisers have the option to employ bid adjustments within the Devices tab. This strategic approach allows advertisers to bid on higher-priced keywords, such as those lucrative “near me” searches. These keywords typically signal a stronger intent to make a purchase and suggest a higher probability of the searcher translating their online search into a physical store visit – in our case, the store running the AdWords campaign.

Evaluating Google Ads: Cost vs. Performance

While certain keywords might command higher prices than others, Google Ads consistently delivers excellent returns on investment for advertisers of all sizes. The average cost you can expect to pay will vary depending on your budget and industry. Contrary to popular belief, paid search marketing isn’t exclusive to large corporations with substantial resources. Even small, independent businesses can leverage AdWords to expand their reach cost-effectively.

It’s true that Google Ads might appear pricier compared to online ads on platforms like Bing or Facebook, but the power of search intent is undeniable. These ads excel at capturing sales at the precise moment when individuals are prepared to make a purchase, making them well worth the extra investment.

Online Advertising Costs: Unveiling the Expense of Facebook Ads

Our exploration of online advertising costs continues with Facebook Ads.

As the world’s largest and most widely utilized social networking platform, Facebook stands as a dominant force in the realm of online advertising. It’s not uncommon for businesses to run multiple online advertising campaigns across both PPC and paid social channels, and Facebook Ads provide an effective avenue to diversify your digital strategy and boost lead generation and sales.

Understanding Facebook Ads’ Pricing Model

In essence, Facebook Ads’ pricing structure shares similarities with Google’s advertising model. Advertisers can establish a daily budget for their campaigns (irrespective of their objectives), and once that budget is exhausted, the ads are paused until the following day.

Moreover, advertisers have the option to set bids, allowing them to control their ad budget allocation. Beyond specifying a maximum daily budget, they can also establish maximum bids for their campaigns. Just like Google’s approach, the Facebook ad auction empowers advertisers to manage their spending on specific actions (such as content downloads or newsletter sign-ups) within the boundaries of their daily budgets. This grants advertisers significant control over how and when their advertising funds are utilized.

While Facebook’s pricing model for its online advertising inventory affords advertisers the necessary control to execute successful campaigns even on limited budgets, it can still feel perplexing to newcomers, especially those accustomed to the more straightforward world of PPC and CPM models. Let’s take a closer look.

Breaking Down Facebook Ads Costs

While Facebook Ads provides advertisers with considerable flexibility in terms of campaign goals, the costs can still be analyzed as real CPCs. Let’s examine the data:

As you can see, Facebook CPCs remain consistently low across the board, even within more expensive industries. With an average CPC of $1.72, Facebook Ads represent a compelling ROI opportunity for advertisers, particularly smaller businesses operating with constrained budgets. Advertisers within the apparel, retail, and travel and hospitality sectors are strategically positioned to leverage Facebook’s low CPCs.

Moreover, the average cost-per-action (CPA) on Facebook is substantially lower compared to AdWords:

Average Cost Per Action (CPA) for Facebook Ads by Industry

Strategies for Reducing Your Facebook Ads Costs

The good news is that Facebook simplifies the process of monitoring and managing your Facebook Ads spending.

The most straightforward approach to budget control in Facebook Ads is setting your maximum daily or lifetime budgets to an amount that aligns with your financial comfort level. As the name suggests, a maximum daily budget ensures that once your specified daily limit is reached, regardless of your campaign type or objectives, your ads will be paused until the next day.

Facebook’s interface makes budget management simple and efficient. Lifetime budgets function similarly to daily budgets, but instead of being restricted to a single day, the lifetime budget encompasses the entire duration of your campaign. For instance, if you set a daily budget of $50 in your campaign parameters, you can either specify a six-day campaign duration or establish a lifetime budget of $300 – both approaches will yield the same outcome. Keep in mind that you don’t need to set both a lifetime and a daily budget; you have the flexibility to choose one or the other based on your specific needs.

When working with tighter daily budgets, you can also define maximum bids to prevent modest campaign budgets from being rapidly depleted due to higher CPCs or CPAs. For example, you could set a maximum daily budget of $50 coupled with a maximum bid of $5.

Our comprehensive guide to Facebook Ads’ budgeting, bidding, and scheduling at the official Facebook Ads site provides further insights.

Another effective strategy for optimizing your online ad expenses on Facebook is harnessing the platform’s extensive array of targeting options.

By strategically displaying your ads exclusively to demographic groups that are likely to be interested in your offerings, you can maximize the return on investment (ROI) for your Facebook advertising endeavors.

Evaluating Facebook Ads: Cost vs. Performance

Overall, Facebook Ads demonstrate exceptional performance and deliver impressive ROI, particularly for smaller businesses or brands with a highly specialized target audience. This can be attributed to the platform’s sophisticated and granular targeting capabilities. Not many online advertising platforms can boast a decent return on a $50 ad budget, but on Facebook Ads, even such a modest sum can go a long way.

It’s crucial to remember that people browsing (or spending time) on Facebook might not exhibit the same level of purchase intent as those actively searching for specific products or services on platforms like AdWords. However, running Facebook ads presents an excellent opportunity to connect with new audiences, gradually influencing their brand perception and swaying their decisions when they are ready to make a purchase.

Online Advertising Costs: Exploring the Price of Instagram Ads

Facebook’s acquisition of Instagram in 2012 for $1 billion in cash and stock wasn’t merely one of the largest tech acquisitions in recent history at the time; it was a strategic move aimed at expanding Facebook’s already extensive global media empire.

Decoding Instagram Ads’ Pricing Structure

Being integrated into Facebook’s ecosystem, Instagram’s advertising pricing model closely mirrors that of Facebook Ads. This is advantageous for both newcomers and seasoned Facebook advertisers. If you’re new to both platforms, getting started is relatively simple. If you’re already familiar with Facebook Ads, launching your first Instagram campaign will be a seamless transition.

Managing Instagram campaigns is made easy through the Facebook Ads Power Editor dashboard. Notably, ad creative elements like images can be effortlessly reused across both platforms. Given Instagram’s nature as a primarily visual platform, ads on this platform are generally priced using the CPM model. In the recent past, Instagram ads were significantly more affordable than their Facebook counterparts. As we discussed in a recent blog post about Instagram ad costs, CPMs on Instagram used to be considerably lower than those on Facebook – approximately half the price, according to consultant Keith Baumwald.

However, the cost gap between advertising on Facebook and Instagram is gradually narrowing, bringing expenses across the two platforms closer to alignment. When Instagram initially opened its doors to advertisers, average CPMs hovered around $5 to $6.50. Now, they’re steadily approaching the $10 CPM mark – essentially on par with Facebook.

Benchmark data for the App Install ad format on Facebook and Instagram.

Unveiling Instagram Ads Costs

The rising cost of advertising on Instagram is no secret, especially as the platform’s popularity continues to soar. However, an objective assessment of Instagram advertising costs necessitates considering these expenses within the context of the remarkably precise and potent targeting options offered by both Instagram and Facebook.

While advertisers might encounter higher costs today compared to a couple of years ago, it’s crucial to acknowledge the potential for robust user engagement with ads on Instagram. Take a look at the following data:

As evident from the figures, brands are experiencing phenomenal success on Instagram. Boasting engagement rates far surpassing any other social media platform (sorry, Twitter), this data underscores the potential return on investment for Instagram campaigns, particularly for those with engagement-driven objectives.

When Instagram first introduced advertising, only a select group of major brands received invitations to leverage the platform. This strategy aimed to maintain an aura of exclusivity while simultaneously testing the performance of predominantly visual ads within Instagram’s environment. Based on the data presented above, it’s safe to say the experiment yielded overwhelmingly positive results.

Instagram ads have the potential to deliver exceptional outcomes. However, user expectations regarding ad creative can be considerably higher compared to PPC ads. However, this success does raise the bar in terms of overhead – though not necessarily in the context of CPM or other metrics. As previously mentioned, the initially lower CPMs advertisers enjoyed are reaching parity with Facebook’s rates. However, one challenge newcomers to paid social (on both Facebook and Instagram) encounter is the need to produce high-quality ads. This implies either creating the ads in-house or outsourcing the task to professionals.

The good news is that crafting compelling content for your ads doesn’t have to drain your resources. For inspiration, browse through this collection of 13 Instagram ads we found captivating. Then, delve into this comprehensive guide on creating impactful ads for both Facebook and Instagram.

Strategies for Lowering Your Instagram Ads Costs

Fortunately for budget-conscious advertisers, controlling and managing your Instagram Ads budget mirrors the process in Facebook Ads. The same campaign settings within the Power Editor dashboard govern both platforms.

Let’s explore specific strategies to optimize your Instagram ad spending:

• Strive to make your Instagram ads appear as “native” and organic as possible, seamlessly blending with the platform’s aesthetic.
• Analyze your data to identify demographic groups that generate the most expensive outcomes, and consider excluding those audiences from your targeting parameters.
• Enhance campaign effectiveness by creating dedicated landing pages tailored to each Instagram ad, providing a cohesive user experience.
• Implement retargeting strategies to re-engage individuals who have previously visited your website, capitalizing on existing interest.

Evaluating Instagram Ads: Cost vs. Performance

As we’ve established, the cost of Instagram Ads is likely to continue increasing until it aligns with Facebook Ads’ pricing. However, we’ve also highlighted that engagement with sponsored or branded content on Instagram reigns supreme, surpassing all other online advertising platforms.

Considering these factors, rising costs – particularly CPA – might not necessarily translate to diminished returns. Therefore, Instagram Ads offer substantial ROI potential, especially for campaigns focused on engagement and businesses targeting avid Instagram users.