2018 is upon us. Right about now, most companies are looking at Q1 budgets, and planning for the next thing never stops. This post helps you with some tips for setting your 2018 online advertising budget.
Consider Your Overall Marketing Budget
How much you allocate to online advertising is dependant on your overall marketing budget, which itself depends on annual sales, the size of your business, and how much your competition is spending, among other factors. Typically, a marketing budget will include a base amount, divided into subcategories.
One method used to determine the base amount is through percentage of your gross revenue. For example, The U.S. Small Business Administration recommends spending 7 to 8 percent of your gross revenue for marketing and advertising if you’re doing less than $5 million a year in sales and your net profit margin — after all expenses — is in the 10 percent to 12 percent range.
Other methods used to determine the base marketing budget include setting a flat dollar amount based on what you think the company can afford, or reviewing how much your competitors are spending. With the base amount set in your overall marketing budget, you can then determine how much you can spend on online advertising.
Consider Specific Spend Across Different Online/Digital Channels
Online advertising has one benefit that other advertising methods can not offer. It enables measurement of ROI for every dollar spent. Now, how much should you spend across the different online/digital channels you ask? Here are some conclusions generated from Forrester Research and eMarketer, which show the estimated allocation of marketing funds offline vs. online and across the digital channels.
- In 2018, the average firm was expected to allocate 41% of their marketing budget to online, and this rate is expected to grow to 45% by 2020
- Search engine marketing will capture the largest share of online spend with online display (banner ads, online video, etc.) taking the second largest share
- Social media advertising investments will continue to grow, with a 17% compound annual growth rate from 2016 to 2021, and is expected to represent 25% of total online spending in 2018.
- Mobile marketing has grown to a point that it’s no longer tracked in the forecast and it’s presumed to be considered across all channels
- Digital marketing is pacing at an 11% compound annual growth rate between 2016 and 2021 with the biggest growth occurring in online video.
- Investment in paid search, display advertising, social media advertising, online video advertising and email marketing is predicted to account for 46% of all advertising by 2021.
Ultimately, the nature of your business, analyzing the competitive marketplace, and knowing how your target customers typically find your type of product, content or service, should be the driving force behind where your marketing funds are allocated.
Production Costs for the Content
The quality of your content for online advertising is dependant on how much you want to spend to produce the ad. With content being more important than ever in gaining attention, driving traffic and growing revenue, keep in mind “you get what you pay for,” and you want your ads to look professional.
If you want stellar online ads that have the potential to go viral, you have to have a good production budget. Production costs to consider within your online advertising budget include:
- Graphic Design
- Written Content
- Website / Landing Pages
Production costs for online ad creation can often be overlooked or not budgeted accordingly, because – far too often – creative is an afterthought. However, these are necessary costs if you are looking to have effective online advertising.
Thinking about adding video advertising into your mix for 2018?
Read the Video Advertising Playbook to get started on the right track.
In order to achieve success in 2018, review your overall marketing budget, determine how much to spend on online advertising, and consider where to allocate your production funds. With online advertising, you can enjoy the perk of being able to monitor your marketing costs and effectiveness throughout the year so you can well prepare for the next.