Dec

03

2018

How Much Should You Spend On Social Media Ads In 2019?

Written By: Alexander Porter

In decades gone by, advertising and marketing meant putting up billboards, paying for radio ads, or the holy grail – appearing on TV.

Fast forward to 2018 and the advertising landscape has changed dramatically.

While a small business’ budget was once dedicated to producing memorable jingles, posters or print ads, the same budget is now centred around the pillars of search, social, email and mobile.

To put a figure on this shift in advertising, digital marketing spend has grown by double digits year after year for the last 5 years.

If you’re thinking of advertising on social media, you’re making the savvy choice.

With 15 million Australians on Facebook each month, and 9 million using Instagram, you can tap into a huge audience who not only use their mobile phones to look for products and services, but actively expect businesses to appear there.

And it’s not as though these massive audiences are made up of kids, or those looking for entertainment alone.

In fact, when asked of their motivation for using social media, 29% of people said it was to research or find products to buy.

In short, social media advertising is booming. In 2005, just 7% of adults were on social media. In 2018, this figure has grown to 65%.

So, we’ve established that social media is built up of a huge audience who actively want to shop online. The next question is, how much should you spend to connect with them?

smiling young woman using social media

 

Remember – You can buy as many customers as you want

Before we get into a price point for you, it’s important to explain why social media advertising is so much MORE valuable than traditional advertising.

Advertising can be:

a). Interruptive

b). Permissive

If you pay to appear in a newspaper, or on the TV, you are interrupting your customer’s routine to try and drive a sale. As you might expect, this can be highly hit and miss.

Take permissive advertising though. It occurs when you create an ad, and rather than jam it down the throat of your prospects, you allow them to engage with it on their terms.

As you’d equally expect, when a customer finds you based on their mutual interests, behaviours or searches, your chances of securing a conversion go through the roof.

Social media advertising is highly targeted and created to tap into the desires, behaviours and purchasing patterns of your audience.

The ads you create are not shown to everyone. And they don’t interrupt people who are not already interested in your products and services.

Instead, they can be filtered to appear to almost anyone you like.

  • Gender
  • Age
  • Birthday
  • Location
  • Likes
  • Interests
  • Relationship Status
  • Language
  • Education
  • Workplace
  • Connections
  • Friends of Connections

When you create social media ads you stop wasting money advertising to the wrong people, and start advertising to the people who you know are interested .

That’s how you start selling your products and services.

man buying products through social media on his phone

 

So, how much should I spend on my social media ads?

More and more Aussie businesses are shifting to social media because of its ability to generate ROI, and the ability to spend less to earn more.

We have clients who spend $100 a day because it matches their ambition.

That’s not to say you should spend the same. What it does show is that you should spend an amount that corresponds to your ambitions.

Do you want more conversions? Make sure your monthly budget is high enough to connect with your audience and keep you ahead of your competition.

Remember, under a pay-per-click model your money is only spent per thousand impressions, or per click.

Traditional advertising is spray and pray. Facebook though, is highly targeted.

This is why the average business spends between $500 and $1500 a month on Facebook ads.

Let’s break down where that goes.

Let’s say your cost per click on Facebook was $1.

If you were to set your daily budget at $5. That’s connecting you with 5 potential customers before your spend dries up.

If you don’t convert any of these people, that’s wasted spend.

In contrast, if you were to spend $20 a day you would reach 20 new customers each day.

Your chances of converting go up, which means your ROI goes up.

All from increasing your daily, and monthly budget.

Remember, the more you spend, the more you can convert, and the greater return you’ll see.

Social Media ROI illustration

 

How to determine your ROI

Social media hasn’t been around as long as most other forms of advertising, so it can feel like a risk to invest in social ads.

Some marketing companies encourage this and use your confusion to send you to more expensive services or packages.

Here’s how to determine EXACTLY how much money you’ll make through paid social.

 

You will need to know:

  • Your CPC: How much does each click cost you?
  • Your Monthly Ad Spend: How much do you want to invest?
  • Conversion Rate: What percent of your clicks became customers?
  • Customer Lifetime Value: How much do you customers spend on average?

 

Let’s say for example that your CPC is $1.50.

Your monthly ad spend is $800.

Your conversion rate is 30%.

And your customer lifetime value is $100.

 

Your ROI formula is:

Monthly ad spend divided by CPC = Monthly clicks.

Example: $800 divided by $1.50 = 533 Monthly clicks.

 

Find your conversion rate percentage of your monthly clicks = New customers per month.

30% of 533 = 160 new customers per month.

 

New customers per month times your customer lifetime value = revenue.

160 x $100 = $16,000 revenue.

 

Revenue minus ad spend = ROI

$16,000 – $800 = $15,200 ROI

 

man caculating how much he should spend on social media ads

Final thoughts

The longer you stick with it, the better your results will be.

Successful advertising is about optimisation. With more campaigns you’ll have more information on what works and what doesn’t. So treat your social media ads as a long term strategy to see your ROI compound over time.

Understand how to pair your social ads with other digital strategies to see your ROI increase further.

Remember, social media ads are best used in conjunction with a full digital approach. Make sure your Landing Page is technologically solid and optimised to convert. (We include free Landing Pages with all our Social Media Advertising campaigns to give you a competitive edge).

There are 15 million Australians on Facebook every month.

Make sure your business is available to them!

 

Are you using Social Media advertising to your advantage yet? If not, let’s chat about how we can connect you with 15 million customers on Facebook and Instagram today!