Recent data shows that digital advertising spending increased by 12% in 2020.
You might want to spend more on digital ads, but you might worry about getting a bad return on investment. You may feel this way because you may not really understand how digital advertising spending is calculated.
Keep reading, and you’ll learn the basics of how digital ad spend is calculated. Once you know this information, you will feel more confident in your ability to run a profitable ad campaign.
Let’s begin!
How Is Ad Spend Calculated?
In general terms, the amount you spend on a particular advertisement is often determined by the competition you face.
This is because ad platforms only have a certain number of ad spots available for a given keyword or audience.
Thus, to decide who can use these ad spots, ad platforms use a bidding mechanism. Therefore, the person willing to bid the most will often receive the best ad spot for a particular keyword or target audience.
Now, it’s important to note that you can identify what this figure is without launching a campaign.
For instance, if you provide the Google Keyword Tool with a keyword, it will tell you how much it’ll cost per click to target this keyword.
Note that if you want to calculate Facebook ad spend, you can still calculate this figure.
You just need to use the Facebook ad creation tool, as this tool will tell you how much it costs to run your ads once you’ve identified a target audience.
In any case, this is just one part of how ad spending is calculated, as you also need to account for a ‘daily budget.’
Your daily budget will determine how much you actually spend each day. So, if your CPC is $5 and your daily budget is $50, you won’t spend more than $50 per day.
How Is Return on Advertising Spend Calculated?
Advertising spend is important, but you should also learn how to calculate ‘return on ad spend.’
You need to know how to calculate this to identify how much money a given ad makes. This information will then help you determine if your ad spend is actually producing results.
One way you can figure out this metric is by using a ‘return on ad spend calculator.’ This kind of tool will use a special return on ad spend formula to calculate this metric.
If you’d like to see an example of a tool like this, visit https://www.webcitz.com/ppc-management/ppc-tools/roas-calculator.html.
Note that a lot of ad platforms also tend to provide a specialist ‘pixel,’ which will help you do track ad spending returns automatically.
This pixel will automatically track ad interactions, and it’ll also calculate ad conversion rates. You can then use this information to optimize your campaigns so that they produce better results.
Will You Launch a Digital Ad Campaign?
Now that you’ve finished this post, you should understand how ad spend is calculated.
However, you might still feel a bit nervous about jumping into this world. If that’s the case, you may want to experiment with launching a very small ad campaign that only costs $3-5 per day.
In doing so, you can get some real-world experience in terms of how advertising spend is calculated. This knowledge will then give you the confidence you need to launch bigger, more ambitious campaigns later on.
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