The wave of the future is here: video marketing. By 2022, 82% of the global internet traffic will come from video streaming and downloads. Video, utilized as a marketing medium to reach audiences online, has skyrocketed in popularity – and for good reason – compounding consumer proclivity for video is a result of its ability to capture, engage, entertain and absorb audiences. In the era of “Digital Darwinism”, failing to incorporate video into your marketing strategy, will put your business at a substantial competitive disadvantage – but unless you’re living under a rock, you probably already recognize the importance of leveraging video marketing channels, especially YouTube.

The principal reason people visit YouTube is to watch videos. YouTube is far more than just the largest video platform in the world: it is a uniquely designed hybrid channel that serves as both a search engine and a social media network. With 2 billion active monthly users, YouTube ranks second as the largest search engine and social media networking site, globally. With extensive global reach and accessibility, YouTube is unsurprisingly a leading paid media advertising channel businesses utilize world-wide. The platform’s evident impact on purchasing behavior also illustrates its power. 90% of consumers have discovered a product or service on YouTube and when YouTube users watch an ad to completion, they are 23x more likely to visit or subscribe to a brand channel, share a brand video, or watch more of that brand. If you’re searching for a new approach to build brand awareness, drive traffic and engagement, and improve ROI, YouTube advertising may be your solution.

From an advertising perspective, price is an essential component to acknowledge. Despite YouTube’s apparent statistical advantages, evaluating potential costs remains a fundamental initial step in launching a profitable campaign.

So, how much do YouTube Ads cost? The answer nobody wants to hear: Well, it depends. But don’t be discouraged – we’ve assembled this guide to help you decide whether YouTube ads align with your marketing objectives, and eventually, harness the power of YouTube advertising.

Factors That Affect YouTube Ad Cost

• Bidding – Owned by Google, YouTube advertising is powered through Google Ads. Every time Youtube has available impression slots, Google Ads runs an auction where the highest bidder is selected for placement. Regardless of the amount you bid, when your bid wins the auction, you will only pay slightly more than the second-highest bid.
• Budget – The amount spent on YouTube advertising is dependent on the daily budget you set over the course of a month. You will not be charged more than the selected budget.
• Target audience – It is essential to understand your ideal target audience when trying to run an effective YouTube advertising campaign. Poorly targeted audiences will amp up costs, yielding negative returns. Depending on the competitiveness targeted audience, you may end up paying more for the target audience.
• YouTube ad format – Multiple ad formats are available with varying advantages and prices. You will pay more or less based on the format you select.

How Much Do YouTube Ads Cost?

There is no fixed price you’re required to spend on advertising. YouTube’s flexible platform enables ad placement for as little as $1 per day. Depending on your advertising goals, the cost of YouTube ads is calculated based on multifarious components: your budget, the bid placed, the competitiveness of the designated target audience, and the type of ad you run. Across YouTube’s ad platform, ad campaign performance is analyzed using variable metrics (impressions, views, engagement, and clicks). The dominant payment models or metrics are CPM (“cost per thousand”), CPV (“cost per view”), CPC (“cost per click”), and CPA (“cost per action”). CPM is the cost for every 1,000 impressions. CPV is the cost for every view. Advertising rates vary regularly, but on average businesses pay $0.10 to $0.30 per view or action, which amounts to $10 per day. To reach 10,000 viewers on YouTube, the average price is $2,000. Broadly speaking, YouTube is relatively cost-efficient compared to other highly populated advertising platforms. YouTube is one of the best channels for building a cost-effective advertising campaign, but be wary of getting sucked into a financial black hole.

Fed Fact: CPM calculators are useful tools that can project the total cost of advertising campaigns by taking into account your ideal CPM rate and total ad impressions.

YouTube ad formats

YouTube’s advertising costs vary and are contingent upon the ad format you select. Since each ad format has unique marketing objectives, each is individually priced and measured. YouTube offers a range of advertisement formats, and not all will be well-suited to your campaign’s goals and interests. Your campaign’s initial marketing objectives should provide clear guidance as you select which ad formats will be most appropriate, efficient, and cost-effective. YouTube ad campaigns list goals including sales, leads, website traffic, product and brand consideration, and brand awareness and reach. YouTube’s average bid type prices include $3.20 per click, $0.10-$0.30 per view, and $10 per 1,000 impressions, but do not directly calculate the cost of your ad campaign. Rigorous evaluation and comparison of these diverse ad formats are crucial to determine which, if any, are appropriate for your campaign.

• Skippable in-stream ads: These ads are featured before, during, or after the selected main video and play for 5 seconds before offering a skip option. You are charged when viewers watch at least 30 seconds of your video and for any click-throughs. The skip option ensures that you only pay for the viewers who choose to watch the ad; therefore, are interested in your brand. Skippable in-stream ads are cost-efficient, engaging, and reach a wide target audience. To use this ad format, select either “sales”, “leads”, “website traffic”, “brand awareness and reach”, or “product and brand consideration” campaign goal in YouTube’s ad platform.
• Non-skippable in-stream ads: These ads are featured before, during, or after the selected main video without a skip option. Videos are no more than 20 seconds in length. You are charged for every 1,000 impressions. Reaching an enormous audience and forcing viewers to watch, the costs for this format typically run higher. When targeted efficiently, Non-skippable in-stream ads are effective for delivering an entire message to a broad audience. To use this ad format, select the “brand awareness and reach” campaign goal in YouTube’s ad platform.
• Discovery ads: These ads are featured on the homepage, as a related video in the sidebar, and search result pages – usually as an image thumbnail with three lines of copy. You are charged every time a user clicks on your ad. This format helps consumers discover and engage with your brand while exploring their interests. With higher levels of engagement at lower prices, discovery ads are ideal if you’re unfamiliar with YouTube advertising or unable to shell out a great deal of money. To use this ad format, select the “product and brand consideration” campaign goal in YouTube’s ad platform.
• Bumper ads: These ads are featured after the selected main video for 6 seconds without a skip option. You are charged for every 1,000 impressions. Relative to in-stream ads, this CPM model prices Bumper ads at a low price. These short videos increase the probability the audience views your ad entirely. Bumper ads are valuable formats to raise brand awareness and expose new audiences. To use this ad format, select the “product and brand consideration” campaign goal in YouTube’s ad platform.

With diverse ad format offerings and advanced targeting capabilities, YouTube ads are a flexible, effective, and cost-efficient advertising strategy. In relation to other online advertising platforms, YouTube is a neoteric advertising platform susceptible to constant modifications. Inevitably, promoting your business on YouTube isn’t the most instinctive strategy. With proper guidance, YouTube Ads are a valuable addition to your marketing mix.

This article is originally posted on Galactic Fed.