This post was updated in November 2024 to provide you with the latest information.

Coming out of an era of video consumption disruption, media buyers are burning their fingers simulating and finding the most cost-efficient YouTube advertising cost. According to CampaignLab data, US video ad spending rose 17% last year. Social video (Non-CTV) saw a 21% increase in ad spend, while CTV video ad spending increased by 13%.

Among all video platforms, YouTube stands out as the primary choice for advertisers, reaching both long-form video watchers and short-form video swipers in all device screen sizes. 

The question arises: “How much does a YouTube ad cost?”

Understanding the investment required for every video view or ad click allows media buyers to maximize their advertising efforts without blowing the budget. Whether you are a seasoned marketer or new to YouTube advertising, familiarizing yourself with the diverse ad formats and effectively setting your campaign budget will be vital to leveraging the video platform to its fullest potential.

Overview of YouTube Ad Formats

Choosing a suitable YouTube ad format can be daunting for media buyers, especially with the platform’s constant updates and expanding inventory. The selection process is critical as it directly influences the ad’s effectiveness and cost.

Here’s a closer look at YouTube’s various ad formats and how they can align with different marketing goals:

TrueView In-Stream Skippable Ads

TrueView In-Stream Skippable Ads allow viewers to skip the ad after 5 seconds. Advertisers will be charged only when the advertisement is interacted with or engaged with for at least 30 seconds.

This model is particularly effective for those looking to cost-effectively balance reach with viewer engagement.

TrueView In-Stream Non-Skippable Ads

TrueView In-Stream Non-Skippable Ads capture viewer attention by ensuring your message is fully delivered without a skip option. These ads, lasting up to 15 seconds, are billed on a CPM basis.

Advertisers must carefully consider the advertising rates to manage their investment effectively, making it ideal for delivering concise and impactful narratives.

Video Action Campaigns (VAC)

Video Action Campaigns aim to drive user actions by combining the benefits of video advertising with distinct, actionable prompts.

This adaptable format appears across various YouTube placements, including home feeds and shorts, making it an excellent choice for advertisers seeking to enhance ROI through direct viewer actions such as clicks, sign-ups, or purchases.

Bumper Ads

Bumper Ads are brief, 6-second, non-skippable ads designed to convey a quick message. Charged on a CPM basis, these ads are perfect for boosting the reach and frequency of a campaign, particularly beneficial for those juggling a YouTube marketing budget across multiple campaigns.

Understanding these ad formats and their respective cost structures is not just about managing YouTube Advertising Costs; it’s about effectively leveraging YouTube’s ad solutions to meet specific campaign objectives. 

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Further Reading

Using YouTube CTV Ads from Awareness to Conversions

Connected TV (CTV) ads are gaining traction as larger screens offer an impactful way to reach new audiences. But is CTV only effective for awareness, or can it also drive lower-funnel actions and support conversion-focused campaigns?

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How is the Cost of YouTube Ads Calculated?

YouTube’s pricing model varies based on the ad format chosen, interaction with the ad, and several strategic bidding factors. Here’s how these elements play together to determine your advertising spend.

TrueView In-Stream Video Ads Skippable Ads CPV

YouTube’s viewer-first approach ad format is typically measured by a cost metric, Cost Per View (CPV). The formula to calculate CPV is (Total cost / Total Video Views).

Another metric to consider is the View Rate (VR). This metric indicates the percentage of viewers who watch your ad past the 5-second skippable point. A high VR signifies that your ad captures attention and effectively engages viewers, potentially leading to better campaign results and lower advertising costs.

By analyzing both CPV and VR, you can optimize your TrueView In-Stream Skippable Ads for efficient budget allocation and maximize the attention stickiness of your video ad. 

TrueView In-Stream Video Ads Non-Skippable Ads CPM

Known as non-skip ads, this type of ad format is effective for video ads with concise and compelling narratives. The structure of TrueView In-Stream Non-Skippable Ads is to keep the viewers’ attention for 6 or 15 seconds, and advertisers are charged on a Cost Per Mille (CPM) basis. Here’s how CPM is calculated:

An additional metric for Non-Skippable Ads is the Click-Through Rate (CTR), which measures the effectiveness of the ad in encouraging viewers to take an action, such as clicking on a call-to-action link. CTR is calculated by = (Total Clicks / Total Impressions) × 100%. A higher CTR indicates that the non-skippable ad format maintained the viewer’s attention and motivated them to engage further with the content. This ad format aids in driving specific viewer actions beyond mere views.

By focusing on both CPM and CTR, advertisers can understand the cost-effectiveness of reaching a broad audience through CPM trends, While CTR provides feedback on the ad’s ability to engage viewers and drive conversions. 

Video Action Campaign CPC

Unlike TrueView In-Stream Ads, which are focused solely on views or clicks, YouTube Video Action Campaigns prioritize conversions, incentivizing viewers to take specific actions, like visiting your website or purchasing. This format utilizes a Cost-per-Click (CPC) model, meaning you are charged only when a viewer clicks on your ad, regardless of whether they complete the desired action. CPC is calculated as = (Total Cost / Total Clicks).

While CPC reflects the cost of acquiring website traffic through ad clicks, it must capture the complete picture of campaign success. In this context, Click-Through Rate (CTR) takes a different angle. Instead of measuring the click rate, consider how many viewers who clicked on your ad converted (e.g., made a purchase, filled out a form). This more profound understanding of the conversion funnel, achieved by tracking both CPC and conversion rate, allows you to assess the effectiveness of your ad in driving meaningful actions beyond the initial click. 

Bumper CPM

YouTube Bumper Ads are short, six-second video bursts ideal for delivering quick brand messages, product teasers, or catchy slogans. Due to their brevity, these micro ads pack a punch in brand awareness and reach. Unlike other TrueView formats, they are not charged on a cost-per-view (CPV) basis. Instead, advertisers utilize a Cost-per-Thousand Impressions (CPM) model, meaning you pay each time your ad is shown 1,000 times.

Bumper ads are vital in creating brand recall and memorability, which are essential for brand awareness campaigns. Media buyers can run a brand list study and viewer recall metrics in conjunction with analyzing YouTube Bumper Ad’s effectiveness.

Download our QSR YouTube Case Study

By leveraging YouTube’s Skippable TrueView In-Stream ads and Connected TV, Strike Social achieved a 28% reduction in CPM, maximizing budget efficiency. This targeted YouTube ad strategy ensured the campaign reached the most cost-effective and relevant audiences.

Download the report

How Much Does Advertising on YouTube Cost in 2024?

Understanding the trajectory of YouTube advertising costs into 2024 requires looking back at historical prices, which serve as a critical prediction baseline. Advertisers can gauge potential cost fluctuations by examining previous year’s trends and preparing their YouTube marketing budgets accordingly.

Over the years, the average cost of advertising on YouTube has seen fluctuations influenced by market demand, platform changes, and the industry’s economic climate. By analyzing these trends, advertisers can anticipate shifts in pricing, preparing for 2024 key events, such as the 2024 Summer Olympics in Paris and the 2024 US Presidential elections.

Factors Affecting YouTube Ad Costs

Several key factors play a pivotal role in determining the cost of advertising on YouTube, each contributing to the dynamic pricing model of the platform:

Focusing on YouTube Advertising Costs on Specific Verticals 

To provide the most accurate predictions and insights, we focus our analysis on specific industry verticals that showcase significant and consistent data trends. This approach enables us to offer precise guidance on expected YouTube advertising costs and strategies to maximize budget efficiency.

Whether in retail, technology, or any sector, understanding the trends of your industry’s advertising costs on YouTube can spell a big difference in your marketing effort.

YouTube Cost Per View and View Rate for Trueview Instream Skippable

CPV Insights for Trueview Instream Skippable:

• TrueView Instream Skippable Ads typically range from $0.01 to $0.03 per view. This provides a starting point for budgeting.
• Industries like Healthcare & Insurance, Government & Advocacy, and Gambling often have higher CPVs due to intense competition for viewers’ attention.
• Industries like Science & Technology, Toys, and Entertainment generally have lower CPVs, suggesting a more saturated market with potentially lower competition.
• Categories like Food and Pets often fall within the lower to mid-range of the overall CPV spectrum.

View Rate Insights for Trueview Instream Skippable:

• View Rates typically range from 43% to 57%, with Entertainment content achieving the highest rates (up to 96%). This highlights the importance of engaging storytelling and creative ad formats.
• Education, Food (CPG), Government & Advocacy, and Healthcare & Insurance consistently showcase higher View Rates, suggesting audiences in these areas might be more receptive to video advertising.
• Industries like B2B tend to have a narrower range for View Rates, potentially reflecting the specific targeting and content tailored to a niche audience.

YouTube Cost Per Impression and Click-Through Rate for Trueview Instream Non-Skippable

CPM Insights for Trueview Instream Non-Skippable:

• CPM typically ranges from $5.70 to $12.36, providing a starting point for budgeting.
• Healthcare & Insurance and Government & Advocacy typically have the highest CPMs, likely due to the high value of reaching these specific audiences.
• Industries like Automotive, QSR, and Adult Beverage also tend to have higher CPMs, potentially reflecting competition for viewers’ attention.
• Categories like B2B, Household Appliances, and Pets often fall within the lower to mid-range of the overall CPM spectrum.

CTR Insights for Trueview Instream Non-Skippable:

• CTR typically ranges from 0.07% to 0.17%, indicating that a small percentage of viewers click on these non-skippable ads.
• Photography, Publishing, & Art content achieve the highest CTRs, suggesting that viewers in these areas are likelier to engage with non-skippable ads that align with their interests.
• B2B, Travel, and Government and advocacy content tend to have lower CTRs because it focuses on brand awareness and lead generation.

YouTube Cost Per Click and Click Through Rate for Video Action Campaign

CPC Insights for Video Action Campaign:

• CPC typically falls between $0.34 and $1.42, providing a starting point for budgeting action-driven campaigns.
• Healthcare & Insurance and Science & Technology generally see lower CPCs, potentially due to a higher volume of searches and engaged audiences.
• Fashion exhibits a narrower CPC range, suggesting a well-defined target audience and potentially targeting lower competition demographics but receptive to ads.
• Industries like Education and Household Appliances often have higher CPCs, which might reflect their focus on driving specific actions, like website visits or purchases, which can be more challenging than simple clicks.

CTR Insights for Video Action Campaign:

• CTR ranges from 0.11% to 1.22%. Remember, these campaigns prioritize conversions, so a lower CTR doesn’t necessarily signify ineffectiveness.
• Photography & Publishing and Science & Technology achieve higher CTRs due to content that resonates with viewers and compels them to click.
• While Entertainment has a high CPC, counterintuitively, its CTR is relatively low. This trend might indicate that the content engages viewers but is not necessarily driven to take action.
• The low CTR for Household Appliances aligns with industry expectations, as online purchases might not be the primary action for this category. They might aim for brand awareness or store visits instead

YouTube Cost Per Impression and Click-Through Rate for Bumper Ads

CPM Insights for Bumper ads:

• CPM typically ranges from $2.87 to $8.02, providing a baseline for budgeting.
• Fashion exhibits the lowest CPM range, possibly due to a high volume of advertisers targeting this audience.
• Travel and Food (CPG) fall within a mid-range, potentially reflecting a balance between audience interest and competition.
• Government & Advocacy and Healthcare & Insurance generally have higher CPMs, suggesting a potentially more engaged audience willing to pay attention to short messages on these topics.

CTR Insights for Bumper ads:

• CTR falls within 0.01% to 0.11%. However, remember that Bumper Ads aim for memorability and brand awareness rather than immediate clicks.
• While Fashion has a low CTR, its consistent brand message across multiple short exposures can still leave a lasting impression.
• Travel achieves a slightly higher CTR than other categories, suggesting that their short, engaging visuals might spark viewers’ curiosity and prompt them to learn more.
• Industries like Food (CPG) and Healthcare & Insurance demonstrate a slightly higher CTR, indicating their ability to spark immediate action or curiosity within a short timeframe.

Striking Gold with YouTube Advertising

While there’s no standard cost when running an ad on YouTube, media buyers can always look back to the historical prices of their previous campaigns. This blog will be an excellent map for advertisers seeking to benchmark when developing budgeting for YouTube campaigns. More than just knowing the cost to run the ad but the knowledge of choosing the suitable ad formats—such as TrueView In-Stream Skippable, Non-Skippable, Bumper Ads, and Video Action Campaigns, increase the campaign ROI.

Our team of experts offers tailored guidance for brands and agencies looking to deepen their understanding of YouTube ad costs and going through the complexities of campaign setup. Drawing on comprehensive industry data and performance metrics, we’re prepared to help you refine your advertising approach to achieve optimal cost-efficiency and engagement.

The post How much does it cost to advertise on YouTube? appeared first on Strike Social.

This post was updated in August 2024 to provide you with the latest information.

How to Calculate YouTube ROI and ROAS

There are two important metrics to measure the effectiveness of your YouTube ad campaign: the YouTube ROI (return on investment) and the YouTube ROAS (return on advertising spend).

These metrics are essential to justify your investment in YouTube advertising and prove what the impact of your campaign was on reaching your business goals compared to other marketing efforts.

In essence, they help you evaluate where to invest the money you put into your YouTube ads and the impact of these investments on your campaign performance.

But which metric is better for you? And how do you calculate ROI and ROAS correctly? Keep reading for a complete overview of all things related to YouTube ROI and ROAS.

Understanding ROI and ROAS

The big difference between ROI and ROAS is that your YouTube ROI takes into account the amount earned after the expenses were subtracted, whereas the YouTube ROAS gives you a ratio based on the comparison between the amount earned and the amount spent.

Let’s understand how those differences have an impact on your results:

Return on investment (ROI)

This is a strategy-oriented metric that will compare the efficiency of an investment to reach your goals. It is expressed as a percentage and takes earnings into account only after expenses have been deducted, which means that you will be able to identify the return generated by a YouTube marketing campaign relative to its costs. If you are selling physical goods that have associated production costs, then ROI is the perfect metric to assess your ad spend.

Return on advertising spend (ROAS)

It measures the effectiveness of a digital marketing campaign and helps you to identify what is working and how to make your advertising more efficient. ROAS also helps in tracking the conversion rates. If you are selling a service or the goal of your ad campaign is a soft metric, such as to raise awareness for your organization, then ROAS is your go-to metric.

Calculating the ROAS and the ROI of a YouTube ad campaign

Because YouTube ROI and ROAS highlight different results, there are different formulas to calculate them. Let’s dive into the specifics of each one.

How to calculate ROI on YouTube ads

Example: Suppose you’re promoting a product that costs $50 to produce and sells for $100 per unit. If your YouTube ad campaign results in 6 sales, your total revenue is $600. With advertising costs of $100 and production costs of $300, your ROI can be calculated as follows:

ROI = (Total Revenue – Total Costs) / Total Costs * 100%

In this case, the ROI is 50%. You can use the calculator above to apply this formula to your own campaign data and assess your YouTube ads ROI.

Note:

• Ensure all fields are filled in the ROI Calculator to proceed.
• We do not store any information entered into the ROI Calculator.

How to calculate ROAS for YouTube ads

Example: You spent $4,000 on an online advertising campaign in a single month. During this month, the campaign yields a revenue of $20,000.

The YouTube ROAS (Return on Advertising Spend) would be calculated as:

ROAS = Revenue / Advertising Spend

In this case, ROAS is 5:1, or 500%. This means for every dollar spent on the campaign, you earned $5 in revenue.

Note:

• Ensure all fields are completed in the YouTube ROAS Calculator for accurate results.
• We do not retain any information entered into the ROAS Calculator.

Additional considerations

Remember to consider these factors into your ROAS calculation:

• Partner/vendor costs: In order to explain the efficacy of individual marketing efforts through ROAS, add customary fees and commissions associated with partners and suppliers that assisted on the campaign or channel level. Make sure to tabulate an accurate accounting of in-house advertising personnel expenses such as salary and other related costs.
• Affiliate commission: Remember to add the percent commission paid to affiliates, as well as network transaction fees.
• Other metrics: You should also consider metrics such as average cost per click, the total number of clicks, the average cost per thousand impressions, and the number of impressions purchased.

Analyzing and improving YouTube ads ROI and ROAS

The main objective of video advertising is to build brand awareness. YouTube ads, whether on the YouTube app or TV channels, provide a powerful platform to introduce your brand to millions of people globally and increase familiarity with your business. YouTube’s recent advancements, such as integration with YouTube Connected TV and Google TV, and features like Video Reach Campaigns, have further expanded the reach of video ads.

However, video advertising can also significantly influence the bottom of your sales funnel and drive purchase intent.

Download our YouTube Demand Gen Case Study

Explore how our client collaborated with Strike Social to drive purchase growth through YouTube Demand Gen campaigns (formerly VAC) With strategically targeted video ads, we facilitated over 900 conversions and achieved a 3.4x YouTube ROAS.

See full case study

Google’s Brand Lift tool is an invaluable resource for assessing audience reactions to TrueView skippable ads on YouTube. The study revealed that 35% of campaigns resulted in a lift in purchase intent. When it comes to people who watched 30 seconds or more of an ad, the numbers are even higher. In those cases, 61% of campaigns resulted in a difference in purchase intent.

The study highlights that increases in lower-funnel metrics generally require multiple exposures over time, but surprisingly, TrueView campaigns were capable of driving lifts in purchase intent in 35% of the campaigns after only one exposure.

A previous Google research had already shown that the longer someone views a video ad, the higher the lift in brand awareness. After identifying that ads can also increase purchase intent, Google now advises YouTube advertisers to get viewers to watch more of their ads.

The longer the exposure to an ad, the best the lift in metrics throughout the consumer journey. So make sure to also invest in the quality of your creative as it plays an important part in driving your ROI or ROAS up.

Get ready for YouTube success

Understanding the metrics that matter the most for your campaign is essential to reach success with YouTube advertising.

Remember to listen to the data. Your numbers will tell you the targeting segments that are performing better, where to shift your ad spend and what the real impact of your YouTube campaign was.

The post How to calculate ROAS and ROI on YouTube appeared first on Strike Social.