A Complete Guide to YouTube Advertising Cost & Benefits

With access to nearly ⅓ of the world’s Internet users, YouTube is one of the tools for any business to reach their target audience. And with more adults in the US watching videos on the platform than any television network, it may be time for you to consider YouTube advertising vs. traditional advertising.

Whether you are new to digital advertising or have incorporated other strategies in the past, using YouTube for ad placement is easy, versatile, and effective. But with such a large reach, you may be worried about the costs of advertising on this platform. After all, budgets are tight and marketing needs to be as efficient as possible.

To help you quickly gauge what kind of numbers you’ll be working with, the average cost per action (watch a video, click a display, etc.) is $0.10 — $0.30, with most businesses starting at $10 a day for budget. While the average click cost can change based on ad quality, targeting parameters, and other conditions, one of the best features of advertising on YouTube is that you can easily control what you are willing to spend on your campaigns.

We’ve created this guide to help you determine what your options are for marketing on this platform, as well as what is the potential YouTube advertising cost and benefits that your business could gain. We’ll also help with how to create engaging, quality ads that will help improve your ad score while keeping your budget in check.

If you’d rather work with a professional team to optimize and manage your YouTube advertising campaigns, we’d love to hear more about your goals and how we can help.

What are the Benefits to Advertising on YouTube?

Before we dive into how to use YouTube, let’s make sure you understand exactly how advertising on this platform can help your business grow. As we shared earlier, the potential reach is impressive, with more than 1 billion active users globally and 90% of Americans ages 18-44 using the platform to watch videos.

But people are doing more than just watching cute cat videos. They’re also learning more about products, with 68% using YouTube to help with purchase decisions. If your potential customers are already this far down the funnel, it’s time to be where they are and show why your product or service deserves their consideration.

How Much Does YouTube Advertising Cost?

The great news is that there are no minimum amount you need to spend to advertise on YouTube. This allows additional flexibility to create campaigns that truly fit within your budget.

So how do YouTube advertising costs work? Depending on the type of campaign you’re running, you only pay for when someone watches your ad (depending on the length, it could be the entire ad or at least 30 seconds) or clicks through to your landing page. These actions will never cost more than the set amount you decide that view or click is worth.

As we discussed before, the typical cost per action ranges from $0.10 — $0.30. While you may decide that earning engagement from a potential customer is worth more or less than this average, these numbers show that it’s absolutely affordable and achievable to reach a wider audience on even modest budgets.

When you create a campaign, you’ll set your max bid for the desired action. You’ll never pay more than this and oftentimes, you may not even pay the full amount. We’ll get into this later on, but just know that having an optimized campaign with high-quality ads and effective audience targeting can really help stretch your dollars.

Finally, you can set either a daily and/or lifetime budget. Most businesses start off at $10 a day and then increase as the campaign results start to show, but you know what you have to work with and can adjust as needed to help keep costs down.

It’s important to note that, if people seeing your video ads is not as important for your campaign goal vs. earning clicks, you can set a max amount of what you’re willing to spend on ad views. This will help make sure that your budget is being used on the actions that matter for your ROI.

Factors That Impact Advertising Costs

There are four aspects of an ad that help YouTube determine the overall quality (and how much you’ll spend for each action):

  • The ad type
  • Max bid amount
  • Bidding selection (cost-per view, cost-per-click, etc.)
  • Audience targeting

While each of these factors have differing levels of impact on your ad quality and cost, they should all considered together when first setting up your campaign. Once your ads start running, then you can focus on each element to optimize based on metrics and feedback from the platform.

But what kind of ads can you run on YouTube? It’s hard to weigh in all the factors if you’re not sure what your options are. We’ll break down the six standard ad types below!

Different Types of YouTube Ads

The ad format you choose will likely have the biggest impact on your overall spend. After all, the more space you take up on the page, the more you need to pay. Same thing goes for placement, such as if the ad is in the video itself or is part of the page landscape. Here is a breakdown of each ad format and what you need to know to decide if it’s the right type for you:

Display Ads

  • Placement: To the right of the video and above the video suggestions list. For larger screens, they may appear below the video as well.
  • Platform: Desktop only
  • Specs: 300×250 or 300×60, with the option to do either text or images
  • Benefits: Great for creating brand awareness through impressions and clicks while keeping costs low
  • Considerations: You’ll miss out on any mobile users who fit your targeting

Overlay Ads

  • Placement: Along the bottom 20% of the video with a semi-transparent design. They act as a pop-up, with the option to “X” out and remove from screen.
  • Platform: Desktop only
  • Specs: 468×60 or 728×90, with the option to do either text or images
  • Benefits: Take over a part of the video being viewed to guarantee impressions and help drive engagement
  • Considerations: Once the viewer closes your ad, it’s no longer on the screen; as well, you’ll miss out on mobile users similar to display ads

Sponsored Cards

  • Placement: The right side of the video. These are directly related to the content of the video (product showcase, stores in the area, etc.) and hover for a few seconds on screen. Unlike overlay ads, they do not disappear, but can be accessed by an icon at the upper right.
  • Platform: Desktop and mobile devices
  • Specs: Card sizes vary
  • Benefits: This is the most targeted form of display advertising, as well as the only one capable of reaching mobile users at this time
  • Considerations: Often more expensive than standard or overlay display ads, as well as limited in overall reach, making this effective for niche marketing vs. mass marketing

Skippable Ads

  • Placement: Before, during, or at the end of the video. Viewers are given the option to skip the video after the first 5 seconds or continue watching. May be placed with bumper ads (we’ll get into this type down below).
  • Placement: Desktop, mobile devices, TV, and video game consoles
  • Specs: Video format of any length
  • Benefits: If you have a high-quality video ad with a great opening hook, this allows you to reach your audience and educate them on your business
  • Considerations: If the viewer skips your video, YouTube counts that as an impression as part of the cost-per-mille setting, forcing you to pay even though your full ad wasn’t watched

Non-Skippable Ads

  • Placement: Before, during, or at the end of the video. Viewers are not given the option to skip, but must watch the ad in its entirety.
  • Platform: Desktop and mobile
  • Specs: Video format typically ranging from 10-20 seconds (depending on your target region) but can be 30 seconds or longer
  • Benefits: You’ll pay for guaranteed views, helping your overall ROI
  • Considerations: If your video is not optimized (too long, poor quality, wrong targeting, etc.), you may generate bad impressions that could damage your brand

Bumper Ads

  • Placement: Before the start of a video. Due to their short length, they are non-skippable and are often paired with skippable ads.
  • Platform: Desktop and mobile devices
  • Specs: Video format that is no longer than 6 seconds
  • Benefits: Get your message across in a short frame of time to create a favorable impression
  • Considerations: If your ad is too complicated to get across in 6 seconds, this may not be the best format for you

How to Make the Most of Your YouTube Advertising Budget (500)

Now that you better understand what your options are for ad types, it’s time to create your campaign! Here are the main steps for successful YouTube advertising:

Decide Who Will Manage the Campaign

Just like with any marketing plan, you need someone to stay on top of your YouTube advertising. If you have an-house marketing and design team, they make the most sense for handling this platform and creating the ads. If they are newer to this form of advertising or need a refresher, YouTube provides detailed videos as part of their YouTube Creator Academy to help set your team up for success!

Set Your Target Audience

This is an important piece of your campaign, as this will help determine who is seeing your advertising. While your first thought might to advertise to anyone and everyone, you need to understand your ideal customer and what defines them. If you already have buyer personas, these will help you immensely during this step.

YouTube provides a variety of ways to reach your defined audience, including:

  • Demographics
  • Topics & Interests
  • Re-marketing
  • Keywords

Based on your business goals and budget, you can create the right size audience to make your advertising effective and efficient.

Just to keep in mind, if your competitors are using YouTube to advertise as well, they’re likely targeting the same people as you. This will drive up the cost to reach this audience, so don’t be afraid to experiment and test with your targeting in order to keep your costs down while still reaching the right viewers.

Set Your Target Bids & Budget

Once you have your targeting in place, it’s time to determine what you’re willing to spend to reach this audience. By selecting max bids and a daily budget, you’ll help keep your costs down, especially if you start conservatively in the beginning.

An important thing to note on bids is that whatever price you set is the maximum you will pay. YouTube’s algorithm will determine all factors, including ad quality and competitive bids, before determining what you pay. For example, if your bid is set to $1.00 and the next highest competitive bid is $0.75, you would only pay $0.76 to win the placement.

Create High-Quality Ads

In order to encourage engagement and views, your display and video ads need to be high-quality and relevant.

No one enjoys watching grainy ads that don’t get the point across quickly, so make sure that your videos have high resolution, are well-filmed, and aren’t too long. With so many ads fighting for your viewer’s attention, you should keep your ad to 45 seconds or less to improve the chances of them watching.

For display ads, catchy headlines and striking graphics are the way to go to help encourage clicks and landing page visits.

Create Relevant Landing Pages

Speaking of landing pages, do you have the right ones? If someone clicks through from your ad to learn more about your business, having a non-optimized website can lead to high bounce rates and higher advertising costs. As well, if your web page doesn’t have engaging copy that helps convince the visitor to become a lead or a customer, then your advertising can’t provide the ROI that you need.

If you are in need of effective landing pages with brilliant copy, our team blends strategy and research to create web pages that deliver.

Monitor & Optimize the Campaign

Once your campaign goes live, YouTube provides key metrics that will help you understand how your ads are performing. These metrics include views, average bid cost, shares, and clicks. You can use this data to help you decide what needs to be optimized in your campaign, as well as what can be replicated in new campaigns to maximize your advertising.

Thanks for reading this guide — we hope this summary of YouTube advertising cost and benefits will give you the confidence you need to use the platform. If you have any questions or want to talk to our team about how we can help you make the most of digital marketing, contact us today!