How Much Should You Be Spending on Online Ads?

When a business owner or the marketing manager of a company thinks about running an online advertising campaign, there are probably two questions that everyone thinks of:

1.  What results will I get from my campaign?

2.  How much will it cost me?

Depending on your frame of mind, the second question above may be the first question that you ask, or wonder about.

The Right Questions to Ask

Running a digital marketing agency that offers paid media ad buying, myself and many Snaptech team members get asked these two questions by companies thinking about running ads. There isn’t a definitive answer to the question – it’s like asking “What size shoe should I wear?” when the answer is always going to be “The one that fits your foot.”

You need to be open to hearing three pieces of information for you to make a judgment call on whether you should spend money on online ads:

What is a reasonable monthly budget that your business can afford to spend on ads?

How much do you need to spend monthly to see results?

What is the cost of the ads on the network that they will run on, and what is the cost of maintaining the ad campaign?

Question 1: What’s Your Budget?

Those three questions are really the best place to start and to end with. Getting back to the analogy of the shoe fitting on your foot, there are lots of differently priced shoes. Some are under $100, some are over $100 and under $200, and there are still lots of shoes well over $200. So, you need to know what sort of budget is affordable to you first.

Question 2: What’s Your Industry’s Cost-per-Click

Next comes the question of what kind of results you want to see from your expense. Back to the pair of shoes example: a pair of stylish sneakers will be fine for everyday use but if you need to impress, add maybe another $100 bill to the price tag. If you want dress loafers or oxfords, a decent pair can set you back $500 or more. If you’re a lady, it can be the same for a dressy pair of designer pumps.

Establishing what the average cost-per-click is for the industry that you want to run advertising in is the equivalent for digital advertising. If you’re going to run ads for an ecommerce shop, maybe the average CPC is around a buck or two. It may take on average 10 clicks to get a customer, so your cost of acquisition (CPA) might be around $20.

But, if you’re looking for new clients for your law firm, the average CPA is well into dozens, if not a hundred or more dollars per click.

If it costs you up to $2,000 for a cost-per-acquisition, that’s a lot of money to spend before you see a new penny come in. But, if your law firm makes $10,000 or more from the average new client that walks in your office that high CPA is now worth it.

Question #3: Your Ad Budget & Maintenance Fee

By now you have an idea of what you’d like to spend each month and how much it might take to see results. The two answers may not line up yet but that’s fine for now.

The final question has to do with how much it’s going to cost you to run your online ad campaign.

If you are going to manage and create the ad campaign yourself, you save money by not having what we call a maintenance fee, or administration fee. That’s what an ad account manager will do: create the copy for your campaign, do the research that goes into a good campaign, monitor it when it launches for mistakes, and do tweaks to improve the campaign as time goes by.

I’m not going to speak about the reasons why you should have a pro manage your ad campaigns in this blog post. That discussion I’ll leave for another time.

If you do decide to create and manage your online ads, congrats: you’ve saved anywhere from around $500 to around $2,000 per month (the cost of running an average ad campaign for a small-to-middle sized business.)

I base my figures on costs that I’ve seen other ad managers and digital agencies charge for these size of businesses. If you’re a bigger company that needs hundreds or more ad campaigns running each month and more time to maintain the campaigns, then the cost could go up to several thousand dollars a month, if not higher.

Knowing how much it will cost you to have a professional ad manager take care of your campaigns is a necessary part of making the best decision for your need of online advertising. If it’s outside of your overall budget to pay for professional help, there’s nothing preventing you from doing it yourself.

Bonus Question: How Many Hours Will I Get For My Ad Management?

Say you get three quotes from online ad management professionals that want your business. One asks for a maintenance fee of $600 a month. Agency number two asks for $1,100 a month while agency number three is $2,000/monthly.

You should go for the $600 a month agency, right?

Maybe not. Here’s why:

You haven’t found out how much time the ad manager will spend (on average) each month on your account. Minimum, you should be getting four hours. This is my advice as a digital marketing pro that’s worked in the business for two decades. MINIMUM, four hours a month – and that’s if you have a simple, no hassle industry with unsophisticated competition.

Those are rare to find.

The Average Time Ad Managers Spend Working on Client Accounts

On average, an ads manager for a SMB (small-to-medium sized business) will spend 9-14 hours a month on an account. Anyone that is spending less time on an account than that is not giving the campaigns enough focus and attention.

Accounts needs time every month for looking at the numbers. The ads manager needs to remove underperforming campaigns, look at the better performing ones, try testing out new campaigns, figure out if any new negative keywords need to be added (to stop wasting money on bad clicks), keep an eye on the competitors to see if they’re spending more or less, and then cast an eye back on the previous months to see how the overall campaigns are doing. And then they should be giving you a monthly report on things.

That report shouldn’t be a one or two-page document. It should go deeper than that, and it should cover those items that I mentioned above. And there should be recommendations in it for next month.

Say one hour to prepare and do a report. Say a half-hour to speak with a client (but it really should be an hour). That’s already two hours on the account every month that’s needed BEFORE the time goes in to write new ad copy, check in a few times each week (and it may even need daily checking in), flagging any weird things that happen (ads not running, abusive clicks, etc), and identifying any opportunities to save money or get more results from the campaigns.

If you’re spending $600 a month on ad management how much time do you think the ads specialist might spend looking at your campaigns each month?

Not every business requires 10 hours of ad management, but it’s also a one-size-doesn’t-fit-all solution, just like the shoe selling business.

Know What Online Ad Management Services You Are Getting

Ask the agency or freelancer these deeper questions to round out your due diligence:

1. Have you had any experience in running the ad campaigns for similar businesses like mine?
2. If so, how much time is needed on average each month for these businesses?
3. If not, how have you estimated the amount of time you will need to properly manage my account?
4. What happens if more time is needed one month?
5. What happens if less time is needed one month?
6. If something comes up, can we talk before our scheduled time each month?

Any experienced and respected online ads agency will have answers to these questions because they’ve dealt with these situations already. Some months will throw unexpected challenges to the ads manager; some months will be smooth sailing. What’s the manager’s overall strategy? What happens when something unexpected arises and more time is needed to maintain the account? How did the manager handle a similar situation in the past .

(Answer: there are always these problems, and if they say no it’s because they are lying or they don’t have time to handle the problems adequately.)

Ask for a testimonial or three from existing clients. Those are worth their weight in gold.

So, Freaked Out Enough?

It should all come down to this ultimate question: will spending money on online advertising produce a decent enough return on my marketing investment?

Our agency believes in this question as our foundation for good client/agency relations. No customer wakes up thinking, “Today I’m going to find a marketing company to give money to with no expectations of making more money than what it’s going to cost me!”

Clients don’t want to be spending money on ads. Google, Facebook, LinkedIn, Bing and the rest of the online advertising platforms know this. They need to show a positive return on investment or else their revenue streams dry up. They need online advertising to work.

In Q3 2023 Google reported an income of $59.6 billion dollars from its online advertising division. People are spending money on Google Search and Display. They are seeing results.

If your results from online advertising aren’t good it might not be because it’s not for you. It might just be the way it’s being run.