Budget is as important as acquisition goals when operating web advertising. Web advertising can be broadly divided into various types based on media, advertising menu, and billing format. Managing uneven web advertising within budget and achieving goals is never easy.
One of the most difficult things for operators is deciding how much budget to spend on which web advertisements. This time, we will introduce how to determine the budget for web advertising and how to best allocate it. Please also see the column below regarding budget management.
How web advertising costs are generated
Web advertising includes search engines such as Google Ads and Yahoo! Ads, and SNS advertising such as Facebook, Twitter, and YouTube. Each media has its own advertising menu, but the billing formats are somewhat common.
Understanding how advertising costs are generated is essential when considering appropriate budget allocation. Billing formats can be broadly divided into two: (1) operational advertising and (2) non-operational advertising.
①Charging for programmatic advertising
Programmatic advertising is “advertisement that operates while changing and improving bid amounts and advertising materials in real time.” The advantage of programmatic advertising is that you can control the budget limit, distribution period, and distribution method.
Programmatic advertising includes search-linked ads and display ads on Yahoo! and Google, SNS ads on Facebook and Twitter, and video ads on YouTube. There are four main types of fee structures.
Pay per click (PPC)
A system in which fees are incurred only when the displayed ad is clicked.
The cost per click varies depending on each keyword used to display the ad and market trends.
Targets listing ads,
ad networks
, SNS, and
retargeting
ads.
Impression charge
Fees are generated based on the number of times an ad is displayed, with a fee paid for each 1,000 times an ad is displayed.
Targets retargeting ads, ad networks, Facebook ads, etc.
Conversion charge
Advertising costs are incurred only when the final goal set for advertising display is achieved.
You can freely set the cost per conversion, but Google Ads has usage conditions.
Also applies to affiliate advertising.
Engagement charge
You get paid for every click, share, and follow each user makes.
Targets ad networks and SNS advertising.
②Non-operational advertising
In contrast to programmatic advertising, pure advertising such as “reserving and purchasing a slot on a specific site” is called non-operational advertising. This applies to media tie-up projects and advertising space. There are also two main types of billing formats.
Guaranteed period
It is published in a specific slot in the media and charged for each period.
Targets article advertisements that are tie-ups with media and pure advertisements placed in media slots.
Impression guaranteed billing
It is placed in a specific slot in the media and charged for each impression.
The same type of advertising as the limited-time guarantee type is targeted, and the advertising menu differs depending on the media’s advertising menu.
How to decide your web advertising budget
There are three main ways to determine your web advertising budget.
①Determine from the sales target amount
Calculate and determine the web advertising costs necessary to achieve the target sales amount by calculating backwards. For example, if the sales target is 10 million yen and the unit sales price is 40,000 yen, 250 applications will be required.
Furthermore, if the number of clicks required for one listing ad is 100 and the average CPC is 100 yen, the required advertising budget will be 2.5 million yen (calculated from 100 clicks x average CPC of 100 yen x 250 applications).
On the other hand, the advertising budget will be in the red if the amount calculated from sales exceeds a certain percentage, so decide on a certain percentage and then multiply the set sales target amount by that percentage. You may decide on your advertising budget.
②Determine from the break-even point
This is a method of determining the advertising budget so as not to exceed the deficit, and there is also a method of calculating from the break-even point of the product/service. The break-even point is set as the sales price minus the cost of goods sold and operating costs, and the advertising budget is set so that it does not exceed the break-even point.
③Determine based on LTV
Subscription services such as SaaS assume the purchase of products and services on an ongoing basis. Therefore, advertising budgets are determined based on LTV (lifetime value) rather than the amount of a single purchase.
LTV is the total amount of profit a customer generates from their initial purchase to their final purchase. Calculate your advertising budget by multiplying the average number of continued uses by the advertising cost per purchase.
Key points for advertising budget allocation
Once you have determined your web advertising budget, you will need to decide how much budget to allocate to which web advertising. There are two points to consider when allocating your advertising budget.
① Which layer should you go for, the actual layer or the latent layer?
When operating web advertising, the first priority is to approach the visible audience. The visible demographic is the target segment that is already aware of the product or service and is willing to purchase it. Listing advertisements are the first effective way to approach the existing demographic.
Once we have sufficiently approached the visible layer, we will move on to the semi-covered layer and latent layer, and execute web advertising accordingly.
② Selection of web advertisements
You may be wondering which search engine to use for listing advertisements, such as Google, Yahoo!, or Bing, but it is best to start with search engines that come in naturally from your website.
Also, since YouTube and SNS allow for highly accurate targeting, it will be easier to get results by advertising on SNS that have a high affinity with your target audience.
Thoroughly run the PDCA cycle
Appropriate web advertising budget and optimal budget allocation are not something that can be achieved immediately. It is important to operate advertisements while strictly following the PDCA cycle without setting a rigid budget for web advertising.
Flexible budget allocation maximizes the effectiveness of web advertising by concentrating the budget on high-performing web advertising.
summary
- When considering appropriate budget allocation, it is essential to understand how advertising costs are generated. Billing formats can be broadly divided into two types: (1) programmatic advertising and (2) non-operational advertising.
- There are three ways to determine a web advertising budget: (1) Determine it from the sales target amount, (2) Determine it from the break-even point, and (3) Determine it from the LTV.
- Once the web advertising budget is determined, decide how much to allocate to which media.
- It is important to adjust the budget flexibly through the PDCA cycle, rather than setting a rigid budget for web advertising.