Guide to Planning Your Digital Advertising Budget

Digital Advertising Budget Guide

How to Set Your Digital Advertising Budget

One of the greatest benefits of self-serve digital advertising is the flexibility to spend what you want. But with this flexibility comes the pressure of choosing the right budget. You don’t want to spend too much and waste money, but you also don’t want to spend too little and miss out on potential customers. 

Whether you’re working with a small team or navigating the budgeting process within a larger organization, this guide will equip you with the knowledge and tools you need to set your digital advertising budget with confidence.

1. Know your goals.

Before you can decide on a budget, you’ll need to know what you want your ads to achieve. Do you want to increase website traffic, generate leads, boost sales, or all the above? With well-defined goals, you can approach budgeting logically and make informed decisions that align with your organization’s broader strategic and marketing plans.

Already have your goals and cost benchmarks on hand? Try our Ad Budget Estimation Tool to quickly calculate your minimum digital advertising budget!

2. Identify an acceptable range.

Next, you’ll need to review your budget limitations to identify the minimum and maximum amounts your organization could allocate to digital advertising. This range will depend on factors like: 

  • Your organization’s overall financial situation 
  • Past or present marketing budgets 
  • The level of buy-in from relevant departments 
  • The relative importance of digital advertising to other marketing efforts 
  • Ongoing costs for ad optimization, creative development, and reporting 

Working within constraints helps to structure your decision-making, which can make the budgeting process easier. By identifying an acceptable range of spend, you’ll be better equipped to select a budget that suits your organization. 

Tip: When identifying a minimum spend, be aware that some platforms have minimum budgets. For example, LinkedIn requires a minimum daily budget of $10 per campaign. Review the latest documentation for the platforms where you plan to advertise to be sure your available budget meets the platform requirements. 

3. Estimate your market size.

Knowing your market size can help you to fine-tune your budget to make sure your campaigns saturate your target audience without overspending. When it comes to estimating your market size, there are some differences to consider between inbound and outbound advertising strategies. 

When you’re advertising to inbound traffic (like on Google search), spend is effectively capped by the available demand. If your budget is set too high and not enough people search for your target keywords, you’ll be unlikely to spend the full amount. Performing keyword research in advance can help you set a budget that matches the level of opportunity and competition in your market.  

On the other hand, outbound advertising (like on YouTube or Facebook) is limited only by the size of your audience. Unless your targeting is very specific, you’re more likely to spend your full budget, since the available ad inventory is larger and more flexible.

4.Use available benchmarks.

Now that you’ve identified your goals, constraints and market size, benchmarks will prove useful in pinpointing your target spend. The best source of benchmarks is your historical data from past marketing campaigns, which can provide valuable insights for predicting future performance. 

For example, if you aim to generate 300 leads per month through Google Ads and your previous campaigns had an average cost of $50 per lead, you should allocate at least $15,000 per month for similar campaigns going forward. Adding 15-20% to this amount can provide some flexibility and improve your chances of hitting your target. 

If you don’t have reliable data for leads and sales, you can also use metrics like CPC (cost per click) and CPM (cost per 1,000 impressions) to estimate the number of clicks and impressions you’ll receive at different budget levels. If you’re advertising for the first time, you can research the latest benchmarks for your industry and the platforms where you plan to advertise.

Ad Budget Estimation Tool

Now that you have your goals and cost benchmarks ready, use this tool to estimate your minimum monthly digital advertising budget. We recommend budgeting enough to achieve at least 30 conversions (valuable website actions) per month.

Cost per conversion

Monthly target conversions

Monthly budget

Seeking expert advice? Get in touch with us to discuss your digital advertising budget!

How to Allocate Your Budget Effectively

With all the opportunity available online, it can be difficult to decide how to allocate your budget across channels and campaigns. Below are some tips to get the best possible results out of your digital advertising budget. 

Research the landscape.

Identify your ideal customer profile and their preferences, behavior, and online habits. Then, research and analyze different advertising platforms, such as Google Ads, Facebook Ads, LinkedIn Ads and others, to understand their audience demographics, targeting options, ad formats, and costs. This will help you select the most relevant platforms and campaign types that will engage your target audience effectively. 

Know your competition.

To maximize your return on investment, you’ll want to focus your spending on the channels that aren’t already dominated by your competition. 

If you’re contemplating search ads, a quick Google or Bing search can give you an idea of what you’re up against. If your search returns 3 or 4 high-quality ads from big players in your industry, the auction is competitive and running a profitable search ad campaign might be challenging. In this case, there might be other, more cost-effective ways to spend your budget. 

To find where these opportunities lie, it’s important to know where and how your competitors are advertising. Luckily, researching ads has never been easier since many platforms have introduced tools to increase ad transparency. 

  • Meta’s Ad Library shows you all the ads a particular advertiser is currently running on Facebook, Instagram, Messenger and WhatsApp. 
  • Similar results are available for LinkedIn from the ‘Ads’ tab on a competitor’s LinkedIn profile page. 
  • In 2023, Google announced their Ads Transparency Center to help consumers (and marketers) learn more about the ads they see online. 

Although these free tools can’t reveal your competitors’ budgets or results, analyzing the number, type and quality of ads they run can provide some insights into their strategy and resources. This information can help you to find the best opportunities for your business.

Give your budgets room to breathe.

Ad delivery is driven by machine learning algorithms, which need sufficient data to learn and adapt. Consolidating your budget into fewer campaigns allows the algorithm to identify trends faster and optimize performance more effectively, often resulting in higher ROI and better performance. 

For new advertisers, starting with just one or two high-priority campaigns can help you generate results quickly. Even advanced advertisers should strive for streamlined campaign portfolio to meet their objectives with the fewest possible campaigns. 

Consider seasonality.

Certain times of the year or events may require higher budgets to capitalize on increased demand, while other times may see lower ad costs. Stay up-to-date with industry trends and adjust your budget allocation accordingly. 

Test and optimize.

Testing different campaigns and platforms is often the best way to understand which ones will drive results for your business. To maximize your budget’s effectiveness, adjust your budget allocation based on the platforms and campaigns that are delivering the best ROI. If you notice performance on a particular platform is declining, testing can also provide opportunities to diversify your advertising strategy. 

Consult professional advertising specialists.

The digital advertising landscape is constantly evolving, and it can be difficult to manage your budget effectively while juggling other marketing efforts. If you don’t have the resources for budget monitoring, testing and optimization, we can help!

When to Raise or Lower Your Budget

If it’s been a while since your last budget change and you want to improve your advertising effectiveness, it might be time to adjust your budget. Consider these factors before making any changes.

Raising Your Budget

When your campaigns are performing well, raising your budget can help you to get even more out of your advertising. Here are the top reasons to consider increasing your budget: 

  • You have new, higher sales targets. 
  • Your business has expanded to offer new products or services or target new markets. 
  • Your campaign performance is strong, but you want to scale the results even more. 
  • The market is getting more competitive, and you’re looking to maintain your results. 

If any of the above are true, it’s probably time for a fresh look at your budget. 

See: How to Set Your Digital Advertising Budget

The Impact of Raising Your Budget

Before you raise your budget, it’s important to consider the potential impact on your campaigns. In the short-term, a significant budget increase tends to send ads back into the “learning phase”. This means you’re likely to see 2-4 weeks of performance fluctuation as your campaign adjusts to the new budget. 

In the long-term, increasing your budget can have one of three effects: 

  1. Increasing returns: Your new higher budget accelerates machine learning optimization and improves cost efficiency, resulting in significant campaign-wide performance improvements. 
  1. Proportional returns: You’re able to capture more available impressions and clicks at a similar cost, resulting in more leads or sales roughly proportional to the increase in budget. 
  1. Diminishing returns: Your costs might increase as your campaign works to capture market share from your competitors or expands to target less efficient opportunities. A decline in overall performance is possible. 

Often, it can take weeks or even months to see the full effects of a budget change. Make sure an experienced advertising specialist is overseeing your account to monitor and address any issues that may arise. 

Lowering Your Budget

Here are the top reasons why you may want to consider lowering your budget: 

  • Campaign performance is poor, and you’re looking for opportunities to cut costs. 
  • Market conditions are challenging and making it hard to run effective campaigns. 
  • Budget utilization is consistently low, and you’d like to set a more realistic estimate. 
  • Your campaigns have become more efficient and you’re confident you can achieve the same results with less expense. 

If your advertising isn’t driving the results you wanted, you might opt for reducing spend instead of turning the ads off entirely. But before you reduce your budget, consider a third-party audit to uncover areas for improvement that could help to get more out of your campaigns. 

How Ontario SEO Can Help

We know that budgeting for advertising can be a challenge, especially with multiple campaigns and platforms to manage. Our experienced digital advertising specialists can provide expert budget recommendations, identify and eliminate wasteful spending, keep your budget on track, and uncover new opportunities to meet your goals.

Contact us today to get started!

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