November 2021: How to set your digital ads budget
Greetings! This edition of The Good Stuff is a special one because I have now been delivering this newsletter for one full year. The Good Stuff started on wheels while I was living in an RV, and now she’s delivered from a “sticks and bricks” in Bend, Oregon. If you would be so kind as to share this link on your social channels or directly with a friend who will benefit from the content, I would really appreciate it!
Oh, and as promised, here’s documentation of my Halloween costume. Aidan really shined this year as Marv, though we both bore a pretty uncanny resemblance to our characters...
Now, let’s get down to business. This month’s topic was selected via a LinkedIn poll:
How to budget for digital advertising for the year ahead?!
The short answer is, only spend what you’re willing to lose. The other short answer is, you should set your ad budget based on your goals—and invest enough that the results matter to you.
Let me explain both points in more detail.
Only spend what you’re willing to lose.
An ad campaign is never a sure bet. I have advertising clients on retainer who consistently bring in similar revenue month to month and I still advise them to only invest each month what they’re willing to lose. Platforms like Google/YouTube and Facebook/Instagram have fluctuating ad costs, are adjusting their algorithms constantly, and can even crap out entirely once in a while— as we recently witnessed.
So if you’re with a small business or organization and feel like you only have $500 to lose right now, that’s OK! You can spend $20/day for 25 days, optimizing along the way, and get some great results—doubling, tripling, even 10x-ing your investment.
Set your ad budget based on your goals, and spend enough to have some skin in the game.
Keeping spend-what-you’re-willing-to-lose in mind, I recommend setting your ad budget based on your business or organizational goals to the extent possible—not the other way around—and investing enough in your advertising that you’re committed to getting great results. Setting your ad budget based on strategic goals makes it far more likely that the return on your investment will yield the results you deem a smashing success.
Let me walk you through an example:
Local nonprofit Caroline’s Closet accepts used clothing and monetary donations to provide free clothes to people in need. Caroline’s top organizational goals for 2022 are to:
Receive high-quality clothing donations from 1,000 people
Raise $200,000 in monetary donations
She has laid out a multifaceted marketing plan that involves requesting discounted ad space with local papers and TV stations, asking local businesses to become partners and host clothing drives with their employees, and putting on a thrifty fashion show at a local bar as a fundraiser. Between all of these activities, she hopes to bring in clothing donations from 700 people and $170,000 in monetary donations.
Digital ads seem like the perfect option to get her the rest of the way. She needs to bring in 300 more clothing donors and $30,000 in monetary donations.
This is when she turns to industry benchmarks (and so should you!). For the nonprofit sector, the M+R 2021 Benchmark Report is her best bet. For businesses, Wordstream Benchmarks are broken out by industry for Google Ads and Facebook Ads. The Revealbot website is another great resource for weekly Facebook ad cost data. If you’re exploring running ads on a streaming service or a different platform, you can Google for benchmarks and relevant case studies.
In the M + R Report, Caroline finds this nifty chart:
For a small nonprofit, it looks like her most affordable option is social media advertising. She can invest roughly $35 per donation. Another chart in the M+R report shows her that the average donation made to an organization her size is $103.
$103/35=2.94, so she’s aiming for a 3:1 Return On Ad Spend (ROAS)—meaning she should earn $3 in donations for every $1 spent on advertising. So to raise $30,000 using social media ads, Caroline will need to invest $10,000 over the course of 2022.
Then, to bring in 300 local clothing donors with digital ads, she references the “Cost Per Lead” data in the M+R report. The average cost per lead for a small nonprofit from digital ads is $2.75. According to WordStream benchmarks, roughly 9% of leads from Facebook Ads actually convert. So to get 300 qualified clothing donors in the door, Caroline needs at least 3,333 leads.
To bring in 3,333 leads at $2.75 per lead will cost roughly $9,000.
Considering social media advertising is new territory and it will take some experimenting to achieve optimal results, Caroline decides to budget $20,000 total for social media ads in 2022 to split between her lead acquisition campaigns and her fundraising campaigns.
She decides that she will spend $1,500/month January - October and then spend $2,500/month next November and December because ads are more expensive during the holidays and people are most likely to donate at the end of the year.
I like this method of walking back from your strategic goals to determine ad spend because it forces you to set those measurable goals, set realistic expectations, and work advertising into your larger marketing strategy.
If the thought of spending $20,000 on ads makes you choke on the almonds in your mouth or spit up your coffee , fear not! You can scale this example down, but you must rely on industry benchmarks to scale down your expectations, too. I believe a 3:1 return on ad spend is a healthy goal for any digital advertising platform. Some of my ad campaigns for clients have far surpassed this ROAS, but many have landed right in this ballpark.
Yes, that means you should be able to triple your money! If you follow best practices to write and design compelling ads and provide a seamless user experience.
Every year, you should test multiple advertising platforms and strategies.
For some of my clients, Facebook/Instagram ads are a consistent winner. For others, they’re a flop—but Google and YouTube work better. For another, running a Spotify campaign this year brought in the most qualified leads of all! And while LinkedIn Ads used to be extremely expensive and ineffective, they’ve done a lot this year to improve the platform.
So my biggest piece of advice if you’re running digital ads for the first time in 2022, or investing more than you have before, is to test multiple platforms and strategies. Devote the first two months of the year to A/B testing, then dig in and analyze the results. This way, you can spend the rest of the year advertising where your money brings in the highest return.
FAQ: "What’s the minimum amount I can spend on digital ads?"
If your ads follow best practices and your campaign/offer is appealing, you should be able to achieve a 3:1 return on ad spend with any investment, whether it’s $200 or $20,000.
I will say, though, that because these platforms’ algorithms learn and improve over time, spending at least $10/day (if you can afford to lose it!) and running your ads for at least a week before analyzing results is a good idea. So you’re in the door with $70. And if we’re talking about Google Ads, it totally depends on how competitive your keywords are.
Because of the time and effort that goes into building and managing digital ad campaigns, I recommend spending no less than $300/month on any digital advertising platform. This is an annual investment of $3,600 which should earn you back at least $10,800 at a 3:1 ROAS.
FAQ: "What if I just want someone to do it for me? How do we budget for that?"
If you’d prefer to pay someone like me to design and run your ads for you, I offer this service in two formats:
I can run your Facebook/Instagram, YouTube, LinkedIn, Google Search, or Display ads year-round through a digital ad retainer. My fee for this starts at $1,000/month and depends on the complexity, your ad budget, and the number of platforms.
You can hire me for a two-month Digital Advertising Pilot where I will test out different platforms and strategies for you and identify a winning strategy that you can replicate on your own for the rest of the year (and beyond). My fee for this starts at $4,500 for one platform and includes a report with recommendations you can follow after the pilot ends.
If you’d like my help with this whole digital advertising thing, build one of these ^^ options into your 2022 budget! If you need help making the case, reply to this email and I can help.
FAQ: "What if I want to do it myself but I need more training?"
Yay! Digital advertising is an awesome skill to have in your marketing tool belt, and cutting out a middle woman like me = a higher profit margin for your good work.
Facebook/Instagram Ads Training: Check out Digital Donors On Demand. Starting in December, you can work through this course and then schedule a campaign review with me before launching your ads. Use this link to purchase and add the discount code “CAROLINE” for $50 off.
Google Ads Training: Google offers free training and certifications through their Google Ads Skillshop! This (combined with the wonderful world of YouTube tutorials) should equip you with the knowledge you need to get started.
I hope this edition encourages you to invest to grow. Please feel free to reply with questions. I love this stuff!
Go get ‘em, tiger,
-Caroline
