In a way, asking how much online advertising costs is a lot like asking how much a house costs or how big a box is — it all depends. For a small business just starting out, $100 per month could be a reasonable figure, while another small business could have an annual budget of $1 million or more.

Starting an online advertising campaign is easy and can be ridiculously inexpensive. But like most things in business, doing it profitably takes time and attention. Take a look at your options, start small and once you see a path that will result in profit for your business, you can start increasing your budget and expanding on your advertising efforts.

Tip

The average small business spends about $10,000 per month on online advertising campaigns or about $120,000 annually.

Three Terms You Need to Know First

Every website owner and online advertising service is free to use any model and charge whatever they wish for ads. Some websites may charge a monthly or annual fee for ads, while services like Google Ads will charge you per advertisement click. To make sense of these differences and compare one offer to another, there are three terms you need to understand:

  • CPC (Cost-per-Click): Your ad runs for free and you're charged only when someone clicks it, regardless of what they do after clicking that ad.

  • CPM (Cost-per-Thousand): This is the cost of your ad per thousand views. It may take a day or a year for a web page to be opened 1,000 times.

  • CPA (Cost-per-Action): With this model, the advertiser pays only when someone clicks on the ad and then completes a required action, such as buying a product, going to a sales page or signing up for a newsletter. 

Different Platforms Have Different Costs

The cost of advertising can vary greatly from one platform to another. This usually depends on which platforms are most popular with advertisers. For years, Instagram and Snapchat were very inexpensive compared to Facebook ads. Before that, Facebook ads were inexpensive compared to Google Ads (or Google AdWords, as it was known then). A year from now, prices could be quite different than what they are in 2019 and there could be new platforms arising that we don't know about yet.

Google and Bing: The average cost per click using Google Ads and Bing Ads for their search engines is between $2 and $3, while the average cost for displaying ads on websites is about 50 cents per click. The most expensive ads are over $50 per click.

Facebook and Instagram: The average cost per click for a Facebook ad is $1.72, while the average cost per action is $18.68 and the average CPM is about $10. In 2019, the average CPM for an Instagram ad is about $5, but this has been rising.

Snapchat: Ads on Snapchat generally start at $3,000 per month with costs running up to $450,000 to $700,000 for a single day using Snapchat Sponsored Lenses. However, small businesses can purchase ads for as little as $5 per day using Snapchat's Geofilter, which lets you advertise only to people near your business. Hootsuite, for example, found it could advertise in a radius of one block from its office for $45 over two days.

Website Banner Ads: A banner ad can cost anywhere from $20 to $80 CPM, depending on the size of the ad, the website displaying the ad and its specific placement. You can also buy much smaller ads; however, banner ads are still the most popular because there's a greater chance they'll be noticed.

Advertising Costs and Business Sectors

Your local radio station or daily newspaper won't usually care too much what line of business you're in, so a lawyer should expect to pay the same rates as a furniture store. But this isn't the case with online ads. Online ads usually use an auction system, so advertisers who find the cost per ad is low compared to the revenue it generates will usually pay more to get the best spots.

The average cost of each advertisement with Google Ads can vary by several dollars, depending on your business sector. Here are some examples of the cost-per-click for ads using the Google Display Network and the cost for ads on Google Search:

  • Auto: $0.39 GDN, $1.43 Search
  • Business-to-Business (B2B): $0.37 GDN, $1.64 Search

  • Consumer Services: $0.69 GDN, $3.77 Search

  • Dating and Personals: $0.18

    GDN, $0.19 Search

  • Education: $1.74

    GDN,

    $0.40 Search

  • Employment Services: $1.66

    GDN,

    $4.20 Search

  • Finance and Insurance: $0.72

    GDN, $3.72 Search

  • Health and Medical: $0.37

    GDN,

    $3.17 Search

  • Home Goods: $0.70

    GDN,

    $3.19 Search

  • Industrial Services: $0.60

    GDN, $2 Search

  • Legal: $0.60

    GDN, $5.88 Search

  • Real Estate: $0.88

    GDN, $1.81

    Search

  • Technology: $0.20

    GDN,

    $1.7 Search

  • Travel and Hospitality: $0.24

    GDN, $1.55

    Search

Website Advertising: Online Banner Ad Costs

For some businesses, it makes more sense to advertise on specific websites rather than using a service like Google Ads, which will place your ad on any number of websites that have subscribed to their service. The most popular form of advertising directly on websites is to purchase a banner ad, which displays your advertisement prominently across the width of the page, usually near the top.

The CPM of an online banner ad costs from $20 to $80. However, if you want your ad on a major website, expect to make a significant investment. Yahoo, for example, requires that you purchase at least 100,000 impressions for your banner ad to appear on its home page, at a cost of about $450,000. Facebook charges about $100,000 per day to have a banner ad on its logout page, while YouTube charges as much as $400,000 per day for banner ads with video on its homepage.

To find the price on a website or blog you're interested in sponsoring, look at the blog advertising rate sheet, usually located in the site's Advertising or Contact page. As with any other advertisement, the cost of displaying your ad doesn't include banner ad design costs. Creating a professional video may cost you a few thousand dollars, while having a professional graphic designer make an ad could cost under $100.

Online Advertising Costs vs. Value

Start with a modest budget when you first begin using online ads and track the progress often. If there's an option to limit the number of ads posted in one day, use it. If you're not careful, you can blow through $1,000 worth of ads in just a few hours, which can be an expensive lesson if you didn't optimize your sales page yet.

Compared to other forms of advertising, online ads aren't always a steal or overly expensive. National television ads can range between $10 to $30 per thousand viewers, while radio's CPM is between $10 and $20. A 30-second ad for the Super Bowl on CBS in 2019 cost $5.25 million for an audience of about 98.2 million people. That's a CPM of about $56.21.

The value of online ads isn't usually the price. Rather, the value lies in their ability to target specific markets based on visitor demographics, such as age and geographic region. Having 1,000 views from people who are in your target market can be much more valuable for a small business than 1,000 views from all demographics.