If you’ve ever been browsing the internet and come across an ad that seemed to guess what you were looking for, welcome to the world of paid media!
It’s everywhere, helping brands connect with the right audience at the right time.
In this article, we’ll talk about ads in the digital space. This includes any type of paid advertisement on social media, search engines and display ads.
What is paid media?
Also known as paid traffic or paid media, advertising spend is how much you pay to advertise your brand, products and services.
Advertising costs are just one part of your overall marketing costs. Other marketing costs can be money spent on SEO, social media management or marketing software subscriptions.
Tracking advertising spending allows you to measure your key performance indicators (KPIs), such as:
- CPL (cost per lead);
- CPA (cost per share);
- CPC (cost per click);
- CPM (cost per thousand/1,000 impressions);
- ROAS (return on advertising investment).
All these metrics are essential if you want to know the impact of your advertising investment on the business’s financial results.
Ultimately, you should prioritize KPIs such as ROAS and CPA because of how closely they are linked to your campaign’s return on investment. Thus, metrics such as CPM and CPC can be considered secondary KPIs.
How to calculate advertising costs?
Your advertising spend is calculated by adding up the amount you spend on paid ads on each platform and channel.
Once you have this figure, you can use it to calculate your other KPIs separately, such as cost per lead, cost per action and return on advertising investment.
Why is it useful to keep track?
Advertisements give your brand visibility . They put your name in front of people and can significantly increase your sales and leads.
And in the modern advertising landscape, everyone is running ads. One study claims that brands will spend more than $601 billion on digital advertising by 2023.
Whether you’re launching a new product or service, trying to scale into new markets or hoping to win over customers, the decisions around your ads are important, and the money you use for them can influence your chances of success.
Tracking your advertising spend also allows you to be competitive. You can clearly measure how much you have invested in an advertising campaign and its performance, and then compare these figures with those of your competitors.
You can see if there are ways to make your spending more efficient and still reap great results.
Similarly, monitoring your advertising spend can provide market insights.
For example, you may notice that the public becomes saturated with certain types of ads and stops interacting with them, signaling that you should invest less money in these ads.
How to measure advertising spending?
Advertising spend per campaign/period/channel
This metric varies according to the campaign, time slot or channel for which you want to track your advertising spend.
This way, you can add up your total ad spend for the defining characteristic. For example, you can calculate the advertising spend for a ‘50% off’ campaign, for the previous month, or for all your YouTube ads.
Cost per 1,000 impressions (CPM)
This metric is commonly used to measure spending on display ads, where your brand only pays for the number of times your ad is shown to users.
So if an advertiser pays R$5.00 for 1,000 impressions, the CPM will be R$5.00.
Cost per click (CPC)
This metric tells you the average amount your campaign spent for each click on one of your ads. Measuring CPC will help you understand the effectiveness of your ads in attracting audiences to your site.
Cost per share (CPA)
This metric goes one step further than cost per click and measures how much you pay for each specific action, such as completing a purchase, registration or download.
As well as telling you how effective your ads are in attracting visitors to your site, it tells you how well your site and your ads work together to ultimately get new customers and leads.
Return on advertising spend (ROAS)
This metric focuses on the revenue generated from the money spent on ads. In other words, it is based on return on investment (ROI) and can be used for ads on specific channels or for general advertising spending.
ROAS is calculated by dividing the revenue generated by ads by the advertising costs.
The method you choose to measure your advertising spend depends on your business and ad goals, and how you calculate your wider spending budget.
Read also: Backlinks: what are they? How to get them?
Conclusion
Paid media plays a key role in digital marketing strategies, helping brands reach their target audience in an effective and measurable way.
By understanding and tracking the right metrics, such as CPL, CPA, CPC, CPM and ROAS, you can optimize your investments and ensure that your advertising campaigns generate the expected return.
This way, your brand can continue to grow and stand out in an increasingly competitive market. That’s why any commercial expenditure must be monitored and justified.
In the advertising space, knowing how much you spend is directly linked to how many people are exposed to your brand and, therefore, what your growth potential is. See you next time! 😉
