Budgeting for paid media in 2024 can feel like a juggling act, especially with leadership expecting clear results and ROI. With so many channels like paid search, social, and display ads in the mix, it’s easy to get overwhelmed. But here’s the good news: with a clear advertising budget and plan, you can align your paid media budget with your business goals and maximize the return on every dollar spent.
This guide will break down each step of building and managing your paid media budget. From understanding where to spend to tracking performance, you’ll have everything you need to make data-driven decisions that show real results.
Understanding Your Marketing Budget
What is a Marketing Budget?
A marketing budget is a financial plan that outlines the amount of money a company intends to spend on marketing activities. It is a crucial aspect of creating a marketing strategy, as it helps allocate resources effectively and achieve marketing goals. A well-managed marketing budget can help a company increase its value and achieve a competitive advantage in the market.
How to Determine Your Marketing Budget
Determining a marketing budget can be challenging, but several factors must be considered. These include the company’s overall business goals, industry benchmarks, target audience, and marketing objectives. A common rule of thumb is to allocate 5-25% of revenue towards marketing efforts. However, this percentage can vary depending on the company’s growth stage, industry, and marketing strategy.
1. Understand Total Marketing Budget Available
The first step is knowing how much budget you have to work with. A marketing budget outlines the financial resources allocated specifically for marketing activities within a company. Some leadership teams will give you a fixed budget, while others offer more flexibility based on performance. Make sure you’re clear on what’s available for paid media.
Next, decide how that budget is spread across different paid channels (like search, social, and display). Is there flexibility, or are certain channels already prioritized by leadership?
Actionable Tip: When discussing your budget with leadership, highlight how paid media fits into the overall marketing plan and its potential to drive ROI. Use past success stories to make your case for a bigger share of the budget.
2. Assessing Your Current Ad Spend
Tracking Your Ad Spend
Tracking ad spend is essential to understanding the effectiveness of your marketing efforts. It involves monitoring the amount of money spent on advertising campaigns and analyzing the return on investment (ROI). By tracking ad spend, companies can identify areas for improvement, optimize their marketing strategy, and make informed decisions about future advertising campaigns.
Companies can use a marketing budget template or a spreadsheet to track ad spending to record and analyze their advertising expenses. This can include costs such as media buying, ad creation, and agency fees. Companies can regularly review and analyze ad spend to ensure that their marketing efforts align with their business goals and generate a positive ROI.
3. Break Down Paid Media into Key Channels
Paid media isn’t just one thing—it includes multiple channels, each with its strengths. Here’s how to think about them:
- Paid Search (Google Ads, Bing Ads): Ideal for capturing high-intent leads or sales. This channel often delivers the best ROI.
- Paid Social (Facebook, Instagram, LinkedIn, TikTok): Great for building awareness and driving conversions. It offers flexibility for different stages of the funnel.
- Display Ads/Programmatic: Best for broad audience reach, brand awareness, and retargeting. These ads help you stay visible even after someone leaves your site.
- Video Ads (YouTube, TikTok): Perfect for engaging users with your video content and building brand awareness through visuals.
- Native Ads: Blended into content platforms like Taboola and Outbrain, native ads are great for promoting articles or non-disruptive ads.
Actionable Tip: Review your past data to determine which channels are performing best for your goals. Prioritize those channels in your budget, but don’t ignore the others completely—they might have untapped potential.
4. Determine Goals & Expected ROI for Each Channel
Each channel should have specific goals and measurable outcomes:
- Paid Search: This is typically conversion-focused, so prioritize leads or sales. Measure your success with metrics like CPA (cost per acquisition) and ROAS (return on ad spend) to evaluate the effectiveness of your ad campaign.
- Paid Social: Use it for both awareness and lead generation. Track engagement metrics (click-through rates, impressions) and conversions.
- Display Ads/Programmatic: Use these for awareness and retargeting. Measure success with click-through rates (CTR) and viewability.
- Video Ads: Focus on video engagement metrics like completion rates and audience interaction.
Actionable Tip: Set clear benchmarks for CPA and ROAS and adjust your budget as you see performance shift. Monitor underperforming channels, and don’t hesitate to reallocate funds to more successful ones. Also, take a look at our blog post about maximizing your Google Ads budget.
5. Establish a Channel Budget and Allocate for Testing
Once you’ve set goals for each advertising campaign, it’s time to allocate your budget across key paid media channels. Here’s a typical breakdown:
- Paid Search (40-50%): This gets the largest share because it usually delivers the best direct ROI from high-intent traffic.
- Paid Social (20-30%): Use this for both awareness and lead generation, especially for retargeting campaigns.
- Display Ads/Programmatic (10-15%): Allocate for broader reach and retargeting to keep your brand top of mind.
- Video Ads (10-15%): Focus on platforms like YouTube or TikTok, depending on your video content.
Setting aside 10-15% of your total budget for testing and experimentation is also important. This portion of your budget allows you to try new platforms, ad formats, or creative strategies without disrupting your core campaigns.
- New Platforms: Test emerging platforms like TikTok or Snapchat that could offer new opportunities.
- A/B Testing: Experiment with different ad creatives, headlines, and landing pages to find what works best.
Actionable Tip: Review test results regularly and adjust your budget to reflect what’s working. Flexibility is key—adjust your budget based on performance to optimize your spending and maximize ROI.
6. Estimate Costs for Each Channel
You now have your channels prioritized, so estimate the costs based on your goals:
- Paid Search (Google Ads): Estimate costs using your industry’s average CPC (cost-per-click). If your CPC is $2.50 and you expect 10,000 clicks/month, budget around $25,000 for search ads. Similarly, allocate a portion of your budget for social media marketing based on your audience and expected engagement.
- Paid Social: CPM (cost-per-thousand impressions) for social ads ranges from $5 to $15, depending on your audience. Adjust your spending based on how many impressions or clicks you want to generate.
- Display Ads: These often run on a CPM basis, usually between $1–$5, depending on the network.
Actionable Tip: Historical data is your best friend here—use it to make accurate cost estimates and keep refining as your campaigns evolve.
7. Create a Monthly Budget Breakdown
Rather than committing your entire budget upfront, create a monthly or quarterly budget that gives you room to adjust based on performance.
Example Monthly Breakdown:
- Paid Search: $15,000
- Paid Social: $8,000
- Display Ads: $3,500
- Video Ads: $3,500
Total: $30,000/month.
Actionable Tip: Keep an eye on monthly results and adjust allocations if you find certain channels outperforming others. Flexibility is key!
8. Monitor and Adjust Budget Based on Performance
Consistently track how each channel is performing and make adjustments as needed:
- KPIs: Track metrics like CPA, ROAS, and CTR to gauge the success of each platform.
- Conversion Attribution: Make sure you have proper attribution to understand which channels drive the most conversions.
Actionable Tip: Schedule regular reviews (monthly or quarterly) to see what’s working. If search ads are outperforming social ads, shift some of that social budget into search to maximize ROI.
9. Justify Budget to Leadership
Leadership will want to see the numbers behind your budget decisions. Show them the KPIs that demonstrate how paid media contributes to the company’s bottom line, whether it’s through lead generation or brand awareness.
Actionable Tip: Tie your paid media results to overall business goals. If leadership sees how your ad spend drives growth, they’ll be more likely to support your future requests for budget increases.
Conclusion
In summary, here are the key steps to align your paid media budget with your business goals in 2024:
- Understand Your Total Budget: Know how much you have and how it fits into the overall marketing plan.
- Assess Your Current Ad Spend: Track ad spending to monitor campaign effectiveness, analyze ROI, and identify areas for improvement. Use a marketing budget template or spreadsheet to track costs like media buying, ad creation, and agency fees.
- Break Down Paid Media Channels: Allocate the budget to paid search, social, display, and video ads based on past performance and business priorities.
- Set Clear Goals & KPIs: Establish benchmarks for ROI, like CPA and ROAS, for each channel.
- Establish a Channel Budget and Allocate for Testing: Divide your budget by allocating 40-50% to paid search (high-intent traffic), 20-30% to paid social (awareness and lead generation), 10-15% to display ads/programmatic (broader reach), and 10-15% to video ads. Set aside 10-15% of the budget for testing new platforms and ad creatives. Adjust spending based on performance.
- Estimate Costs: Use historical data and industry averages to forecast ad spend.
- Create a Monthly Breakdown: Manage spending over time, allowing for flexibility to shift based on performance.
- Monitor & Adjust: Regularly track KPIs and reallocate budget to top-performing channels.
- Justify Budget to Leadership: Show how paid media efforts directly contribute to business growth.
Need help creating a paid media strategy or fine-tuning your budget? we offer paid media audits to help you assess your current spend, identify opportunities, and ensure your campaigns are aligned with your business objectives. You can learn more and request an audit here. Let’s connect and see how we can make your paid media efforts even more effective!
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