How Much Do YouTube Ads Cost? A Guide For Beginners

Google owns YouTube. Therefore you advertise on YouTube using the Google AdWords network. As with any other type of Google AdWords campaign, the price of YouTube ads involves you bidding for ad placement. Therefore it is impossible to say how much YouTube ads cost definitively.

However, one thing is certain: YouTube is a favorite among marketers, as 78.8% of them deem it the most effective platform for video marketing. It’s likely due to this interest that YouTube accounts for 27.1% of the total global digital video ad spend. 

We have previously looked at YouTube ads from the YouTubers’ point of view in How To Make Money On YouTube. This post focuses on YouTube from an advertiser’s point of view. We begin by providing an estimated cost for YouTube ads, followed by a discussion on the different types of ads and the factors that can influence their pricing.

Why Would You Advertise on YouTube?

YouTube has a huge following – indeed it enjoys more than 2.5 billion logged-in monthly users. They watch YouTube on mobile devices for more than one hour a day on average. With the current popularity of Smart TVs, there has also been a rapid rise in watching YouTube on television sets.

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

With the power of Google AdWords behind it, it should be no surprise that YouTube is now a favorite medium for advertisers worldwide.

A study conducted by Influencer Marketing Hub shows that 44.7% of marketers have noticed improved ad performance following anti-ad blocker measures, while 43.3% have reported increased product visibility through YouTube’s Shopping Collections. This demonstrates the platform’s growing effectiveness for advertisers.

The only difficulty from a budgeting perspective is that there is no explicit price rate for YouTube ads cost. However, this is not any different from many other types of online advertising. The general rule online seems to be that you bid for advertising space and the highest bidder is typically accepted.

How Effective Are YouTube Ads?

YouTube advertising has become the hype among marketers that it is because of the platform's massive user base and the effectiveness of its ad campaigns. To start with, YouTube allows a lot of creative freedom that's often restricted to other platforms due to their norms and conventions.

As Ben Jones, a Global Director at Google, says,

"Effective YouTube ads can be many things, like an episodic docuseries, an undercover investigation, a user-narrated product review, or an interview with the CEO."

Such a broad spectrum of ad possibilities encourages creativity and makes YouTube ads stand out from the crowd.

On top of that, YouTube ads allow you to target your audience as closely as you want. You can target your ads by demographics, topics, customer match, affinity audience, and Similar Audiences. In fact, YouTube even has an option to target your ads based on life events people have been through. For example, you can specifically target your ad to someone who has recently had a child.

YouTube has also been around for much longer than other social media platforms, which means it has had more time to refine its features. That's why YouTube Analytics is so detailed and provides a wealth of information about your ad's performance. With insights such as average view duration, click-through rate, and traffic source, you can not only measure your ad's performance but also know what to change to improve it.

The high effectiveness of YouTube ads is also due to the presence of multiple formats. You can select the format that you think will work best for your ad, whether it's a skippable in-stream ad or a bumper ad. Plus, YouTube ads also show on Google video partners, giving you even more reach and potential for conversions.

Types of YouTube Ad Formats

YouTube offers a variety of ad formats. These include:

• In-feed video ads - These are the videos you see on YouTube search results, alongside related videos, and the ones that show on the YouTube mobile homepage.  They appear as a thumbnail image from your video with text and always invite you to click to watch the video. 
• Skippable video ads – The most common type of YouTube ad. These are the ads you see before during or after a video which a viewer can skip after 5 seconds.
• Non-skippable video ads – These are video ads that viewers must watch before they can view the main video. Non-skippable videos are typically 15-20 seconds in length, depending on regional standards.
• Bumper ads – These are non-skippable videos up to 6 seconds which a viewer must watch before seeing the main video.
• Masthead ads – These are video ads that show up at the top of YouTube’s desktop and mobile homepages, and can be seen by every viewer who visits the site during a 24-hour period. 
• Outstream ads and accompanying content – These video ads play on websites and mobile apps outside of YouTube, such as in-article or in-app placements. 

The in-stream ads are those that appear as part of videos, sponsored videos that appear in monetized organic content, i.e., the skippable and non-skippable video ads, and bumper ads. The in-feed video ads, are those ads that you use to help people discover your videos, by serving them alongside YouTube content that is most likely to be viewed by your target audience.

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

In-feed Video Ads

In-feed video ads can be less popular with advertisers because they do not encroach on the videos people watch. However, they can still generate positive results for your advertising campaign. As I referred to above, YouTube is the world’s second-largest search engine. This means these ads can act as an alternative to advertising on Google if you operate in a competitive niche.

If you promote a video here, you could end up paying a rate as low as 3 cents per view.

If you can determine the phrases in your niche that people regularly search for, you could create a video to match that phrase, promoting that video in a display ad. By doing that, your ads will appear as relevant to the searchers as other feature videos on YouTube.

The idea is to create videos that meet the needs of the searchers and then promote them with in-feed video ads.

Skippable Video Ads

You only pay for those skippable videos that viewers watch for 30 seconds or more (unless your ad is shorter than that). So, you do not have to worry about paying for all those people who skip through your video as soon as they can.

This keeps costs down, but of course, you will not gain any benefit unless some people watch your ad, click through and then buy your product.

This makes accurate targeting very important for your ads.

Bumper Ads

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

You pay for bumper ads by impressions. They are charged by CPM – cost per thousand impressions. Hence you pay for a bumper ad each time your ad receives 1,000 impressions.

Masthead Ads

YouTube masthead ads are large advertisements that appear at the top of the YouTube homepage. They are one of the most impactful and effective ad formats on YouTube, as they offer maximum visibility to a large audience.

You can buy two types of YouTube mastheads:

• Cost-per-thousand Impression (CPM) Masthead: In this type, you pay for every thousand impressions your ad receives. It offers a fixed and reserved impression volume for the duration of your campaign.
• Cost-per-Hour (CPH) Masthead: This type gives you 100% share-of-voice (SOV) of the YouTube homepage for a specific time period, which is the number of hours you reserve.

Since the rates for YouTube mastheads differ by market, you'll only be able to target a single country in each campaign. Your targeting criteria will further impact the CPM price. 

Outstream Ads and Accompanying Content

YouTube outstream ads with accompanying content are a comparatively newer ad format that helps advertisers reach their target audience on mobile. These ads play with their sound off. The viewer can tap on the ad to turn on the sound. 

These mobile-only ads appear on various Google video partners in different placements. For example, on the mobile web, they appear in banners, while in mobile apps, they appear in the feed, interstitials, banners, and native. 

The accompanying content with these ads also appears across mobile web, mobile apps, and websites. As for their cost, these ads are charged for by viewable cost-per-thousand-impressions (vCPM), which means that you pay when someone plays your ad video for at least 2 seconds. 

What Factors Influence The Cost of YouTube Ads?

Like ads on any other social media platform, YouTube ad costs are also not fixed. They depend on several factors, and understanding these factors can help you get the most out of your ad budget.

Let's look at some of these factors.

1. YouTube Ad Format

The format you select for your ad will impact its cost. Some ad types, such as bumper ads, are more expensive than others because they're unskippable. You have to pay for them on a per-1,000 impressions basis, which means you may pay around $10 to $20 for every thousand impressions.

On the other hand, non-skippable ads are comparatively less expensive because they are longer and allow users to skip after five seconds. These ads cost around $6 for 1,000 impressions.

Another expensive format is YouTube masthead ads. Since these appear on the top of the YouTube homepage, you can expect to pay a premium price for them.

However, if you're a small or mid-sized business on a budget, you can opt for in-feed video ads. These are charged on a cost-per-view basis. So, you only pay when someone watches your ad or clicks on the video thumbnail. On average, these ads cost $0.10 per view.

Outstream ads are also relatively cheaper since they are charged for viewable cost-per-thousand impressions (vCPM). A viewer has to watch the video for 2 seconds or more for you to be charged. These ads usually cost around $5 to $10 per thousand impressions.

2. Bidding Strategy and Competition

The key to the level of your YouTube ad costs is the need to bid on ad placement. You are not given any set price for advertising on YouTube

YouTube ads use a bidding system, where advertisers bid on ad placements based on their budget and target audience. Advertisers can choose between two bidding strategies: cost-per-click (CPC) or cost-per-view (CPV).

• CPC bidding means you only pay when someone clicks on your ad. It's the more expensive option of the two.
• In CPV bidding, you pay when someone views your ad for at least 30 seconds or until the end of the video, whichever comes first. CPV bidding is generally cheaper than CPC bidding since most viewers won't watch the entire ad.

You set yourself a daily budget of what you are prepared to pay for your YouTube advertising. Most businesses allow at least $10 per day for their YouTube advertising campaigns and then raise this once they have experimented with various options. You only pay when somebody engages with your ad in some way. Perhaps they watch your skippable ad for 30 seconds, or they click on a Call to Action on a display ad.

Make sure that you do your targeting before you set your bidding options. The bidding suggestions that YouTube makes change as you alter your targeting.

In most cases, you bid by CPV – cost per view. This means that you are willing to pay up to your bid figure for each view (of 30 seconds or longer).

You will also set a maximum figure you are willing to pay per day. This ensures that you do not receive any nasty surprises should you find that more people watch your ads than you anticipated.

You will be asked to bid a Max Cost Per View. YouTube will give you a typical range of bids – these will, of course, depend on how much you have limited your audience in your targeting.

If you click on “Customize Bids Per Format,” you can split your bids separately for “In-Display” or “In-stream”. If you are more interested in “In-stream” advertising, bid more for these statistics than you do for “In-Display.”

YouTube gives you a projection of your predicted views/day for in-search, in-display, and in-stream. If these numbers do not match your intentions, you need to go back to your bids and adjust accordingly.

It will give you a predicted average CPV.

3. Target Audience Demographics

Besides YouTube ad sizes and formats, the targeting options you choose will also impact your ad cost. YouTube offers various targeting options, including demographics, interest-based categories, and keywords.

For example, if you target a high-end niche such as insurance or finance, your ad may cost more due to the competitive bidding for those keywords. Similarly, if you target a specific demographic, such as Gen Z, your ad may cost more due to the high demand for that audience.

Some regions also impact ad pricing. For example, if you target audiences in Western Europe or the US, you'll have to pay more than advertisers targeting audiences in developing countries.

The point is that if you're targeting an audience or keywords that a lot of competitors are aiming for, your ads will cost more.

You will find a Targets tab for each of your video campaigns. It works similarly to how you would target different types of people when you buy AdWords in Google Search.

You use the Targets tab to narrow down the types of people to whom YouTube will serve your video ad.

To keep your YouTube ads cost down, but at the same time ensure that you receive enough clicks to make your campaign worthwhile, you will need to target only the correct people to see your ad.

The more targeting options you choose, the tighter your target will be. Two to three targeting options should be sufficient for most target groups.

Narrowing down your target audience also impacts the ad costs, as highly targeted audiences tend to have higher advertising costs compared to broader audiences. It's because there's a greater competition for ad space to reach a well-defined group. 

For example, targeting women aged between 18 and 34 may not be as costly as targeting mothers in this age range who live in the US. Since there are more demographics and interests to target within the second group, the competition for ad space increases, driving up the cost.

You also want to think in terms of keywords. What terms will your target audience likely use when they search for YouTube videos?

The more you monitor this, the less unnecessary expense you will have from people watching your videos but not being a likely person to go any further through the funnel.

At a high level, if you sell a product aimed at middle-aged men, you will want to avoid targeting video search terms most commonly used by teenage girls. If you are targeting elderly women, you would have no interest in your ad appearing on any of PewDiePie’s videos, for instance.

You will want to include both positive keywords to focus on, and negative keywords to avoid.

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

Your videos may be entertaining, but you do not want people watching them through who are never likely to buy your products.

4. Ad Campaign Duration

The longer your ad campaign runs, the more costly it will be. YouTube ads are typically charged on a daily basis, so running your ad for longer periods can quickly add up costs.

However, running your ads for a longer period may also lead to better results, as it gives your ad more time to reach the target audience and potentially convert more viewers into customers.

It's up to you to decide the duration of your ad campaign based on your budget and marketing goals. If your budget allows, run long ad campaigns during peak seasons. But if that's not feasible, running shorter campaigns during periods of high demand can also be effective.

5. Time of Year and Current Demand

The cost of YouTube ads also depends on the time of the year and the demand for ad space at the time. For example, if it is a holiday season or a popular event like the Super Bowl, the demand for ad space will be higher, which can drive up the cost of ads.

Different industries may have peak seasons or times of the year when they see increased demand for their products or services. For example, YouTube ads for the retail industry are higher during Black Friday. On the other hand, ads for services targeting students may see an increase in cost during the back-to-school season.

You can navigate these fluctuations by planning your ad campaigns carefully. Let's say you are a retail company planning to launch a new product in the summer.

To reduce ad costs, you can run ads during the off-season, such as in spring, when the demand for ad space is lower. It's still close to the summer months, but it's not the peak season yet. So, despite the ad costs being lower, you'll be able to generate sufficient hype for your product drop.

6. Campaign Objectives and Goals

Some ad campaign objectives, such as increasing brand awareness or driving website traffic, may not be directly tied to sales. These are relatively less expensive than campaigns aimed at generating sales or leads.

The kind of objectives you set for your YouTube ads should be based on your audience's behavior. Suppose your Gen Z audience likes watching DIY videos on YouTube. You can show them ads that are aimed at brand awareness since these people are not coming to YouTube with the intention of buying something.

However, if your target audience watches tech reviews and product demos, your campaign objective should be to drive sales or leads. Ads with these objectives may cost more, but they have a higher chance of converting viewers into buyers, which means your ad expenditure will pay off.

Our YouTube Advertising Guide provides more details. 

7. Length of the Ad

Typically, longer YouTube ads, especially skippable ones, are charged by cost-per-view. Someone has to watch them for at least 30 seconds for it to be counted as a view. So, if your ad is 45 seconds long and viewers leave at the 20-second mark, you won't be charged.

In contrast, shorter 6-second ads are non-skippable and are charged for cost per impression. So, you'll be charged even if someone views your ad for just 2 seconds.

Based on these payment models, you can expect to pay more for shorter ads since they guarantee a view, while longer ads may have a higher chance of being skipped. However, you have to consider the cost-effectiveness rather than just the cost when deciding on the length of your ad.

A shorter ad may have a higher cost per impression, but if it has a better click-through rate (CTR) and conversion rate, it could end up being more cost-effective. Longer ads are better if you have a story to tell or want to present a detailed message. The following table shows the cost-effectiveness of both ad lengths.

How Much Does YouTube Video Ad Creation Cost?

Businesses often find that video creation can comprise the highest proportion of YouTube video cost. This does, of course, depend on the level of sophistication and professionalism you are aiming for with your video ad.

If your video is low quality, then people will skip it at the 5-second point. A low-quality video does not reflect well on your brand, either.

It depends on the expectations of your target audience. Some firms can get away with a $5,000 home-made video. Others will look shabby unless they spend $100,000 and employ professional actors, crew, and production values.

The more creative you can be with your video ad, the less reason there is for the viewer to rush to the Skip Ad button.

Remember that YouTube is not the same as broadcast TV. A live TV viewer does not have a SkipAd button. While you may think you can save money by reusing your television ads, you are likely also to be foregoing income, with people choosing to bypass your ad.

The only exception is when you manage to create a cult ad. A few firms can upload their ads to YouTube as video creations, rather than paid advertisements. For instance, Air New Zealand has gained a reputation for their quirky safety videos. As such they do not to pay to advertise on YouTube. They have a thriving channel, where people search for their latest safety videos.

Of course, many of these videos are high-budget productions, including videos made by international film producer, Sir Peter Jackson, director, Taika Waititi, and some of the Hobbit and Lord of the Rings cast.

If you only have a small budget for video production (and don’t have famous friends to help you), you need to try a different approach to video production. You will probably have to learn to be comfortable in front of the camera.

YouTube does have tools to help you with your video production.

Initial Investment Required for YouTube Ads

The cost of running a YouTube ad isn't the only expense you have to account for. There are a few initial costs, too. Here are some of them.

• Professional Script Writing Services: Your ad video needs to have a convincing script that captures the attention of viewers and persuades them to take action. You'll have to hire a professional scriptwriter, whether it's a freelancer or a full-time professional. While you can use AI writing tools, the free options often lack creativity, and the advanced ones are usually paid.
• Video Filming Costs: You also have to keep the cost of filming in mind. Depending on the complexity and length of your ad, you may need to rent equipment or hire a videographer to shoot the video. You may also need actors and even a director. For editing, you'll have to use YouTube video ad makers that have paid plans for advanced features.
• Voiceover Artists: If you're not using your own voice for the ad, you'll have to hire a voiceover artist. Their fees vary depending on their experience and fame.
• Sound Design and Animation: You may decide not to use human actors in your ad but instead create an animated video. This brings in the cost of animation experts or software. Again, you may need a voiceover artist or a sound engineer to add the necessary audio elements.
• Music: Unless you're using royalty-free music or creating original compositions, you'll have to pay for the rights to use background music in your ad.
• Additional Costs: Some additional costs include costumes, props, location rentals, and transportation for the film crew. If you want to A/B test different versions of your ad, you'll have to allocate a budget for that, too. 

How to Optimize YouTube Ad Campaigns?

Ultimately, your concern should not so much be about how much your YouTube Ads cost, but about what level of return you can earn from your YouTube advertising cost. This means that you need to keep an eye on your campaigns and then adapt them at regular intervals, to optimize their performance.

The key to optimizing your YouTube campaign is reviewing your campaign statistics and understanding what they are telling you. The most important stats are the View Rate of your ads and the Click-through Rate. These stats show you whether people find your ads compelling and whether they are working as a campaign.

The most common problem is that your videos are not compelling enough. Although some firms give up at this point and write YouTube off as a marketing option, a better choice is to revamp your videos to make more compelling content.

Alternatively, you could select suitable influencers to work with, allowing them to create compelling content that highlights your product.

Sometimes your problem may be a lack of exposure. This may be because opposition companies have outbid you for the best advertising positions. You could experiment by bidding higher, and then observing how your ads perform with a higher exposure.

You will find that you will often obtain the best overall results by being willing to increase the amount you are prepared to pay for your YouTube advertising. Skimping on costs may harm your overall ROI and bottom line.

How Much Should I Budget For YouTube Ads?

When budgeting for YouTube ads, you should keep the following factors in mind:

• Ad format
• Industry
• Target audience
• Time of the year
• Campaign goals

For example, advertisers in the finance industry will have to budget more for their ads compared to advertisers in the food industry due to the high competition for finance-related keywords. Similarly, the cost of running a campaign close to the holiday season will be comparatively higher due to the increased demand for ad space.

Typically, you should budget based on the number of days you plan to run the campaign. Most experts advise you to start with $10 per day and then increase your budget after checking the analytics.

In the first few days, you're in the learning mode. You'll be able to gather data on the performance of your ads and make necessary adjustments.

So, after a week, you have to spend $70, which isn't a lot to sacrifice for the purpose of gathering valuable data. Instead, if you went all in with $100 a day, you would have spent $700 in just one week.

Your budget will also depend on the payment model: CPV or CPM. The average CPV is $0.010 - $0.030, and CPM is $2 - $10, depending on the target audience and industry. So, if you're selecting ad formats with the latter, such as bumper ads, you should budget accordingly.

It's best to divide your ad campaign into three stages:

• Testing Stage: During this stage, you can allocate $10 - $20 per day to test different ad formats, target audiences, and messaging. Suppose you want to test bumper ads with your target demographic of millennials in the US looking for auto insurance. Run bumper ads for this target audience and collect data for metrics related to your objective. For this example, let’s say it’s brand awareness. 
• Optimization Stage: Use the data to increase or decrease the budget for certain ad formats. Let's say the testing stage showed you good results for bumper ads. You've seen an increase in brand impressions and social media mentions, which means that these ads are meeting the desired objective of increasing brand awareness. You can increase the daily budget for this ad type to $20 - $30 per day.
• Scaling Stage: Now, you're set to launch your full campaign. Scale up the budget and invest more in the ad formats that worked well during the testing and optimization stages. The actual amount you spend will depend on your budget, but anywhere from $50 - $100 per day is a good starting point.

Note that these are just the costs for running the campaign. The additional costs that we've mentioned earlier, such as creating the actual ad content and hiring professionals for animation or video production, will need to be factored into your budget, too.

As a ballpark figure, you can keep around $1,000 - $2,000 for the entire process. However, this will differ based on how long or complex your ad is. For an ultra-professional ad, you might have to spend much more.

If you don't plan to do anything in-house and would rather source out YouTube ad campaigns to YouTube marketing agencies, your budget will depend on their pricing.  

What Tools Can Help You Optimize Your YouTube Ad Campaigns?

While you can take some manual steps to optimize your YouTube ad campaigns, using certain tools can further enhance your efforts. We live in a time where most people use a YouTube ad block tool or skip the ads altogether. So, you have to ensure that the people who do watch your ads actually convert into customers or take some sort of desired action.

The following YouTube marketing tools can help.

1. Google Ads

As the primary platform for creating and managing YouTube ads, Google Ads provides many features to optimize your campaigns. You can use it to change audience targeting and track ad performance for specific keywords. It also offers Smart Bidding, a feature that automates bid adjustments for maximum conversions.

2. vidIQ

vidIQ is a YouTube channel management tool that helps you find winning keywords for your YouTube ad campaigns. It gives scores to keywords to show you how well they perform and also provides related keywords to help you expand your reach.

3. SpyFu

SpyFu is a keyword research and competitor analysis tool that can help you find the most effective keywords to target in your YouTube ad campaigns based on the keywords that are driving results for your competitors. Plus, it also shows you ad variations your competitors use to give you a better idea of what works.

Make Every Penny Count With YouTube Ads

As we've mentioned, YouTube ads make up nearly 30% of the digital video ad spend worldwide. There's obviously a reason for the platform's significant share in the market. Besides a large user base, YouTube also offers a variety of ad formats to suit different advertising goals and budget sizes.

However, to keep your YouTube advertisement within budget and still drive results, it's important to consider the factors we've discussed above. Make sure you tailor the ads for your target audience and account for seasonality and ad type when planning campaigns. When budgeting, don't simply focus on the cost per view or click but also on the initial investment, including ad creation, copywriting, sound design, graphic design, and ad testing.

If it's too overwhelming, you can always partner with a YouTube marketing agency to help you plan and manage your campaigns. But if you want to take the in-house route, use this guide as a roadmap to keep your campaign within budget.

About the Author

Influencer Marketing Hub

Writer

The Influencer Marketing Hub Team brings together a diverse group of experts with a passion for influencer marketing, digital trends, and social media strategies. Each piece of content crafted by this team is researched and written to provide valuable insights, tips, and updates for our readers. Our authors are dedicated to delivering high-quality, informative, and engaging articles that help businesses and influencers thrive in this rapidly changing digital world.