Google owns YouTube. So you use the Google AdWords network to advertise on YouTube. Like any other type of Google AdWords campaign, the price of YouTube advertising involves you bidding for ad placement. Therefore, it’s impossible to say exactly how much YouTube advertising costs.

We’ve looked at YouTube advertising from a YouTube user’s perspective before in How to Make Money on YouTube. This article focuses on YouTube from an advertiser’s perspective.

• The average CPV for YouTube ads is $0.010 – $0.030, and the views you generate will count toward your overall YouTube views.
• The average cost to attract 100,000 viewers is about $2,000.

Why should you advertise on YouTube?

YouTube has a huge following – in fact, it has over 1.5 million logged-in users every month. On average, they watch YouTube on their mobile devices for more than an hour a day. With the current popularity of smart TVs, watching YouTube on TVs has also increased rapidly.

It’s also hard to ignore the fact that the YouTube search engine is second only to Google when it comes to search usage.

With the power of Google AdWords, it’s no wonder that YouTube is now the most preferred medium for advertisers around the world.

The only difficulty from a budget perspective is that there is no clear price rate for YouTube advertising costs. However, this is no different than many other types of online advertising. The general rule online seems to be that you bid for ad space and the highest bidder is usually accepted.

Ad formats to consider

YouTube offers a variety of ad formats. These include:

• Display ads (these ads appear above the list of video suggestions to the right of the feature video) only appear on desktop platforms.
• Overlay ads (These are semi-transparent overlay ads that only appear in the lower 20% of the video – only on desktop platforms. These can be image ads or text ads
• Skippable Video Ads – The most common type of YouTube ad. These are ads you see before or after the video, and viewers can skip them after 5 seconds
• Non-skippable video ads – These are video ads that viewers must watch before they can view the main video. There is an extended version with 30-second ads, but YouTube is phasing out these ads due to their unpopularity. Non-skippable videos are usually 15-20 seconds long.
• Bumper ads – These are 6 seconds long unskippable videos that viewers must watch before watching the main video
• Sponsored Cards – These cards provide content related to the video, such as featured merchandise in the main video

Video ads are sometimes called TrueView video ads. YouTube recently simplified their ad naming. They divide ad types into TrueView in-stream ads and TrueView video discovery ads.

In-stream ads are ads that appear as part of a video, skippable and non-skippable video ads, and bumper ads. As the name suggests, video discovery ads are ads you use to help users discover your videos, primarily display ads and overlay ads.

Simply put, you pay for TrueView in-stream ads when someone watches your ad for at least 30 seconds (unless the ad is shorter). You pay for TrueView video discovery ads when someone clicks on your ad thumbnail.

By far the most popular ads are skippable video ads. While non-skippable ads may sound lucrative to advertisers, they are unpopular with users.

Display ads

Display ads may be less popular with advertisers because they don’t infringe on the video the user is watching. However, they can still bring positive results to your campaign. As I mentioned above, YouTube contains the second largest search engine in the world. This means that these ads can serve as an alternative to Google ads if you operate in a highly competitive niche.

If you promote your videos here, you could end up paying as little as 3 cents per view.

If you can identify a phrase that people in your niche search for frequently, you can create a video that matches that phrase and promote that video in display ads. This way, your ads are as relevant to searchers as other feature videos on YouTube.

The idea is to create videos that meet searchers’ needs and then promote them through display ads.

Overlay ads

Overlay ads are a great way to drive traffic to your own YouTube channel or website. To make it work on your YouTube channel, you first need to fill it with engaging and entertaining videos. You also want to create an engaging welcome video that encourages users to stick around the moment they click through to your channel.

Of course, you can create overlay image ads that appear on anyone’s videos. However, you get added value if they click through to your channel.

Skippable video ads

You only pay for skippable videos that viewers watch for 30 seconds or more (unless your ad is shorter than that). So you don’t have to worry about paying for everyone who skips the video as quickly as possible.

Bumper ads

Businesses use bumper ads when they want to deliver a short, memorable message to potential customers. Since they are six seconds or less, they need to be to the point.

You pay per impression for bumper ads. They are charged on a CPM (cost per thousand impressions) basis. So you’ll pay for the bumper every time your ad gets 1,000 impressions.

Target video ads

You’ll find a “Targeting” tab for each video campaign. It works similarly to how you target different types of users when purchasing AdWords on Google Search.

You can use the Targeting tab to narrow down the types of users to whom YouTube will serve your video ads.

To keep your YouTube advertising costs down while ensuring you get enough clicks to make your campaign worthwhile, you need to target only the right users to see your ads.

The more targeting options you choose, the more closely you’ll target. For most target groups, two to three targeting options should be enough.

You want to think in terms of keywords. What terms might your target audience use when searching for YouTube videos?

The more you monitor this, the less unnecessary money will be spent on people who watch your videos but are unlikely to move further through the funnel.

At a high level, if you’re selling products aimed at middle-aged men, you’ll want to avoid targeting the most common video search terms used by teenage girls. For example, if you’re targeting older women, you won’t be interested in advertising in any of PewDiePie’s videos.

You need to include both positive keywords to focus on and negative keywords to avoid.

You should also look at other targeting demographics. If you only sell products in one country, you need to avoid advertising to the rest of the world. Likewise, you may want to limit your ads to countries where most people speak English.

Your videos may be interesting, but you don’t want people watching them who will never buy your product.

Create a video ad

Merchants often find that video creation accounts for the highest percentage of YouTube video costs. Of course, this depends on the complexity and expertise of your goals in video advertising.

If your video is of low quality then people will skip it at the 5 second mark. Low-quality videos also don’t reflect your brand well.

It depends on the expectations of your target audience. Some companies can get away with $5,000 for a homemade video. Others will look shabby unless they spend $100,000 and hire professional actors, crew and production values.

The more creative you can be with your video ads, the fewer reasons viewers will have to rush to the “skip ad” button.

Remember, YouTube is not the same as broadcast television. Live TV Viewer does not have a SkipAd button. While you may think you’re saving money by reusing TV ads, you may also be giving up revenue and people are choosing to bypass your ads.

The only exception is when you manage to create a cult ad. Some companies can upload their ads to YouTube as video creations rather than paid ads. Air New Zealand, for example, has become famous for its quirky safety videos. Therefore, they don’t pay to advertise on YouTube. They have a thriving channel where people can search for their latest safety videos.

Of course, many of these videos are high-budget productions, including ones from international filmmaker Sir Peter Jackson, director Taika Waititi, and some of the Hobbit and Lord of the Rings actors.

If you only have a small video production budget (and no famous friends to help you), you need to try different video production methods. You may have to learn to feel comfortable in front of the camera.

YouTube does have tools to help you with video production. They even have a program called “Field Director” to help businesses create professional videos. The project is currently under review and will be revised in early 2018.

Tender

The key to YouTube ad cost levels is the need to bid on ad placements. You will not offer any fixed price for advertising on YouTube

You set a daily budget for yourself to spend on YouTube ads. Most businesses allow at least $10 per day for their YouTube ad campaigns, then increase this after trying various options. You only pay when someone interacts with your ad in some way. Maybe they watch your skippable ad for 30 seconds, or click on a call-to-action on a display ad.

Before setting your bidding options, be sure to target. Bid recommendations for YouTube to change when you change your targeting criteria.

In most cases, you bid on a cost-per-view (cost-per-view) basis. This means the maximum bid amount you’re willing to pay per view (30 seconds or longer).

You will also set the maximum amount you are willing to pay each day. This ensures that you don’t get any nasty surprises if you find that more users are viewing your ad than expected.

You’ll be asked to bid on a maximum cost-per-view basis. YouTube will give you a range of typical bids, but of course these will depend on how restrictive your audience is in your targeting.

If you click “Customize bids by format,” you can split your bids separately for “Display” or “In-stream.” If you’re more interested in “In-stream ads,” bid for this statistic higher than for “Display ads.”

YouTube gives you predictions for forecasted views/day for in-search, in-impression, and in-stream videos. If these numbers don’t match your intentions, you’ll need to go back to bidding and adjust accordingly.

It will give you the predicted average CPV.

Optimize your YouTube campaigns

Ultimately, your focus should not be on how much your YouTube ads cost, but how much return you can get on your YouTube ad dollars. This means you need to keep a close eye on your campaign and make adjustments regularly to optimize its performance.

Neil Patel covers this in detail in How to Optimize a YouTube Ad Campaign. He showed how Gatorade makes $13.50 for every $1 spent on YouTube ads.

The key to optimizing your YouTube campaigns is to look at your campaign statistics and understand what they tell you. The most important statistics are your ad’s view rate and click-through rate. These statistics will show you whether users find your ads engaging and whether they are performing as a campaign.

The most common problem is that your video isn’t compelling enough. Although some companies give up at this point and use YouTube as a marketing option, a better option is to improve your videos to create more engaging content.

Alternatively, you can choose the right influencers to work with and have them create compelling content to highlight your products.

Sometimes your problem may be a lack of exposure. This may be because opposition companies have overtaken your best advertising position. You can try raising your bids and see how your ads perform with higher exposure.

You’ll find that if you’re willing to increase the amount of money you’re prepared to pay for YouTube ads, you’ll often get the best overall results. Skimping on costs can hurt your overall ROI and bottom line.