The Zenreach Blog

Smart marketing made simple for offline businesses.

Posted April 8, 2019 by Dominic Wong

How Much Should You Spend on Digital Ads?

how much to spend on digital ads

You can spend as little as a dollar a day on digital ads. Many companies spend thousands a day. If you underspend, your ads won’t reach enough people to have any impact. If you overspend, you’re just wasting money hitting the same people too many times. You’re aiming for that Goldilocks zone where your ad spend is just right.

The first step is to set your overall marketing budget. There are a lot of ways to figure this out. For the purposes of this article, let’s look at a fairly common method. Set it at a percentage of gross revenue or projected revenue. The average spend across all industries is in the neighborhood of 11%, so let’s work with 10% to make the math easy.

For our purposes here, let’s choose, as an example, a fairly successful fictional small restaurant located in a decent sized city; we’ll call it EAT! Their monthly gross revenue is $100,000. That would mean a monthly marketing budget of $10,000.

Decide how much digital is in the mix

Next step is to decide where you’ll invest your budget. This can include things like branding, website development, content creation, events and social media. This varies wildly between business types, stage of business, size, customer demographics and many other considerations. Everyone has a slightly different way of doing it. Ultimately, businesses have to decide how important digital ads are to their overall marketing plan.

Monthly digital ad spend breakdown

The portion of marketing budgets spent on digital media continues to climb. Most marketing teams are allocating between 42-45% of their budgets there. eMarketer predicts that digital spending will grow even further in the next five years, accounting for more than two-thirds of total ad spending by 2023. Unless you have a very unusual business model that serves people who avoid the internet, you should probably be in the same ballpark. Continuing with our sample budget from above, let’s work with the high end. 45% of $10,00 would leave EAT! with $4,500.

Choose where the money goes online

Paying for design and content will be a factor. A decent rule of thumb is, for any given ad, you’ll spend 70% on media and 30% on production. Design and copy for ads is never really done because you should be tweaking and updating them as you get more data. This would leave EAT! with $3150 for media spend.

There are all kinds of channels to spend money on, but the two dominant players are Google and Facebook. They make up 70% of the digital ad market in the U.S. Instagram is another major channel, but since it’s owned by Facebook, you can think of them as the same for now (though the vibe and function are very different). Amazon will be a contender soon, so keep an eye out.

Ultimately, a lot of the decision will come down to your target demographic and your product. Pinterest has a predominantly female user base. Instagram is great for fashion retail. The word on the street is Facebook is for old people.

Refine allocation through experimentation

Since your success is Facebook’s success, they’ve created a free program to help you become proficient in their platform. It’s called Facebook Blueprint. Google is also very helpful to its customers, and offers their own Academy for Ads. Even if you’re not hands on with social ads, it’s worth checking out the basic lessons.

A solid way to begin is to start with one of the two major platforms and master it. You don’t have to spend your whole budget at first. Once you start understanding what your customers respond to, boost the spend. When your results are consistent, take your best performing creative and adapt it to the second platform. Start with about 10% of the total digital media budget and adjust from there.

It’s all about selecting your audience

Choosing your audience is key, especially for Facebook ads. You want to get ads in front of the kind of people most likely to come in and spend their money with you. The process of how to build audiences for ads differs by platform, but the overall concept applies to all of them.

Many people build ads with nothing more than informed guesses about the kind of people they notice coming in. This is guessing and guessing is never as good as data-driven choosing. At the very least, your audience should reflect the customers you’re already in contact with through your social media pages and email lists.

Another tool to use are lookalike audiences. With Facebook, you can start with a list of people who have taken some action with your company already; they’ve liked a post or watched a video. Facebook takes data points from all of its user base and comes up with matches to other users that have similar demographics, and targets your ads to them. The most powerful lookalike audiences are built by uploading your collected email addresses.

For brick-and-mortar businesses, the best audience of all is one based on your existing customers. If you use a WiFi marketing tool like Zenreach (ok, we’re biased!) you’ll get data about who is entering your doors and when. Your actual customer demographics will show you a precise crowd to go after, not just approximations.

Ultimately, the most powerful thing about digital marketing is you get to select what kind of people you are going to spend money on reaching. The data you get back allows you to make highly-informed decisions instead of just taking guesses. If you do it right, your digital ads will be the most effective, and trackable, thing you spend money on.

Visit Zenreach for more information on how WiFi marketing can help you with your digital marketing.

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