In this article, we will aim to answer the question, “How Much Do YouTube Ads Cost, really?"

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We will go over:

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√ All the factors that influence how much YouTube Ads cost

√ What amount most advertisers spend per day on YouTube Ads

√ How to create and produce highly-converting video ads on a budget

√ A detailed pricing guide for how much money to spend on your first YouTube ads campaign for the best results.

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Let's dive right in.

Why Advertise on YouTube?

“Be seen where everyone is watching”. This is what the YouTube slogan reads—and rightfully so!

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YouTube is the second most-visited website on the planet with more than 2 billion monthly users. That’s right—advertising on YouTube fundamentally places your product in front of the entire world.

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Now here is why marketing your brand on YouTube gives you the upper hand: since people generally use YouTube to search for entertainment and information, it has intent. 

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With YouTube’s advanced targeting options (thanks in part to being part of the Google network - you can target your YouTube ads based on people's Google searches), when you pay YouTube to display your ad, you are paying them to display your brand to the right person at the right time! 

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Exciting stuff, huh? 

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7 Factors that Influence How Much YouTube Ads Cost

Truth of the matter is, there is no straightforward answer to the question of how much YouTube advertisements cost—however, there are several factors that generally influence what YouTube ads may cost you.  Keep in mind that YouTube Ads costs can also vary based on your geographic market (US and Canada may have higher advertising cost per click due to higher competition).

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1. User Actions
2. Ad Format
3. Bid
4. Placements
5. Targeting Options
6. Creating and Producing a Video Ad
7. Testing + Optimization

User actions

According to Influencer Marketing Hub, you can expect your YouTube ad costs to be anywhere between $0.10 to $0.30 cost per view or click, with a $2000 average cost to reach 100,000 viewers. Because its parent company is Google, YouTube follows a similar cost-per-click and cost-per-view pricing model. 

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This means your ad costs depend on user actions, and that you are only charged when someone clicks or watches the entirety of your ad; and as for choosing whether to pay for views or clicks? Well, that depends on the kind of ad you create. 

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YouTube Ad Formats

YouTube has a variety of ad formats to cater to your varying needs. Bear in mind that these ads have different payment options depending on the actions your audience takes.

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Skippable ads: skippable ads appear before, during, and after video content. These ads take up the entirety of the video box but have a countdown timer that generates a button you can click to skip the ad. The button typically appears after the ad plays for 5 seconds.

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‍Non-skippable ads: viewers must watch these video ads before the content can be viewed. These videos are short and typically only last up to 15 seconds.

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Bumper ads: these ads last up to six seconds in duration. They must be watched before someone can view the video content. These video ads get straight to the point and get the message across quickly.

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In-feed ads (formerly referred to as TrueView video discovery ads). These are ads that appear on YouTube home page, search results, and Watch Next page. In-feed ads are shown to viewers in the form of a headline, description, and thumbnail. The final destination URL of the ad is a YouTube video instead of a landing page or website.

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Overlay ads: these are semi-transparent ads that overlay a video. They appear on the lower 20 percent portion of your video. Overlay ads give you the option to “X” them out when they pop up.

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Bid

The good thing about YouTube ads is that there is no minimum amount you ‘must’ spend—but the question remains: how much should you start with?

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The answer to this question really depends on the daily budget you are willing to set for your campaign—but, the general rule online is seemingly: the higher the bid, the more likely your ad will be accepted. 

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A good rule of thumb is to bid 2-4 times your average front end cost per conversion. If you are optimizing for clicks then 2-4x your ideal CPC (cost per click) is a safe bid. If you are running target CPA (cost-per action) campaigns and are optimizing for $10 leads, then adjusting the tCPA bid to $25 is appropriate.

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That being said, we have seen businesses invest around $10 or more a day to run an advertising campaign on YouTube. This by no means is the standard cost every time, but is typically the rate at which businesses are comfortable investing in. Regardless of what number you set your campaign ‘spend’ per-day to, you would want to gradually increase this amount as you get to know more about your campaign’s performance. 

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Placements

What really sets YouTube ads apart is its ability to do contextual placements.

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Contextual placements allow you to show your ads on specific videos, channels or websites. Simply put, it places your ads where it will most likely attract an audience with high conversion potential—allowing you to target high-intent users at different stages of the buying process. You could even place ads on competitor videos and run off with their leads. 

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Clever, eh?

Targeting options

With YouTube's neat ad targeting capabilities, you'd be able to set demographic targeting to select audiences, as well as keywords, topics, interest targeting and remarketing to make sure your ads reach people who have already shown a particular interest in topics linked to your business. 

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Targeting done right will ensure that your ad is shown to your ideal customer, while preventing irrelevant audiences from clicking on your ad.

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Creating and Producing a Video Ad

Let's not forget that when you are running video ads on YouTube, there are costs associated with creating and producing your ad.

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So how much money should you set aside to produce your video ad for YouTube?

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Many people think that to run successful YouTube Ads, they need to have a big budget and a Hollywood-level production. But in reality, that couldn’t be further from the truth.

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Matter of fact, some of the most successful video ads ever made have been filmed with nothing more than an iPhone, and in settings like a garage or a warehouse.

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And that's because, essentially, what makes a winning YouTube Ad have nothing to do with the production quality, but EVERYTHING to do with the creative.

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It doesn’t matter what video equipment you are. Or what your filming location is. Or how famous is your spokesperson. (YouTube is a platform that values authenticity)

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Truth be told, some of our clients’ most successful video ads (we are talking ads that have generated millions of dollars in sales) have been filmed with a cell phone while walking through a park.

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We have seen selfie videos, animated videos, user-generated content, and b-roll footage with voiceovers perform really well for our clients across multiple niches.

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Of course... you can always start investing more into the audio and visual quality later on…(In fact, we highly encourage you to do so.)

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But to start, don’t let the production quality hold you back from getting the ball rolling with YouTube Ads.

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Watch our video below where we go over tips and tricks to create highly effective YouTube Ads on a small budget.

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See Also: How to Create Video Ads For YouTube that Convert

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Testing and Optimizing Your Ad

A successful digital marketing campaign is the kind that targets its audience with laser-like precision that yields higher conversion rates; and the only way you’d know exactly what a successful campaign looks like is by testing. 

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Which video creative converts the most? Which targeting options and audiences works the best? These are questions that you need to figure out through testing. 

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When we ran tests for our clients by:

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1) showing the ads to difference audience groups

2) creating different ad variations (various scripts, edits, hooks)

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We predicted that certain audience groups + certain creatives will outperform others. Yet time and time again, the data from our test has proven us wrong.

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So what is the main takeaway here? It is that the market is the one that dictates the success of your ad.

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When advertising, you can never assume something is ‘bound’ to work - or you might stumble with a surprise.

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The best you can do is test many variations of your Ad, see which one performs better - and optimize from there.

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How Much Should You Spend on Your First YouTube Ads Campaign?

In our How much money do you need to run YouTube ads in 2022 vlog shown below, we mentioned you can get started with a minimum budget of $2.5k USD (if you are considering YouTube Advertising in the US market).

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At this amount, you can make at least 4-5 ads that are shot using your mobile device, tested on a variety of audiences and get some level of testing done. 

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If you have a good batch of ad variations queued up to test, this is better news because this means you can allocate the majority of your budget to just testing your ads. 

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Now you may be tempted to start lower but, consider this: any number less than $2.5k is going to prevent you from doing the tests that you need, to know exactly which ads convert or not.

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Take it from our experience working on one of our projects: the client is a web design/development company that offers to build websites for small businesses through their platform. The goal was to get qualified booked calls at $250 or less through cold traffic which may be supplemented with warm traffic. 

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Since they already have a significant amount of ad variations we can test with,  70% of their $2.5k budget went to building custom intent and custom affinity audiences. This is so we can find similar competitors, as well as relevant KWs which we built custom intent audiences around off. The remaining 30% were used on Google stock audiences, in-market and topics. 

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The result? 

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We were able to generate just five calls for $500 CPA—which isn’t great…BUT this is just after a week of doing just one test. The weeks that followed definitely gave us better results because we were able to run 3-4 more tests which ultimately led to us finding ‘the’ winning ad. 

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Now, we emphasized on the if-you-have-a-good-batch-of-ad-variations-queued-up-to test for a reason because this is another factor that will drive your overall costs. This is important because you would want to know which messaging or hook can get you that qualified lead. 

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So if you really want ‘in’ and not just a foot in the door, we recommend you start with  the higher end of the minimum recommended budget at $15,000. At this price point, you’d be able to buy yourself a number of tests, allocate a budget for production, and get your ads set up; but if you’re dead-set on making do with $2.5k budget, here are several tips you can follow when setting up your ads:

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• Make ad variations to test.  The more creative you have to test with, the quicker you can make changes to meet your KPIs. Period.

• Start specific and relevant. Whether it's keyword audiences or custom intent, base it off of relevant and  congruent keywords for your offer. This will dial-in the customer avatar that you'd like and get conversions right away which will pave the way to get other broad testing going when you're ready to scale.

• Do not throw in the towel too soon. All too often, business owners get discouraged when results come in after just week one of testing either because: (a) costs are a bit high at the beginning; and (b) they don’t see results. But when it comes to YouTube ads, patience is key if you're looking to make it work. Indications on whether your ads or audiences have potential can neither be observed through a single test, nor overnight results so don’t rush.

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As for budget segmentation, that’s entirely up to you—but for us, we usually allocate $5k of the $15k for video production to cover overhead (video editing, writing copy, etc.), camera gears, and other relevant costs. The rest goes to testing audiences and topics. 

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So—

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