Digital advertising is essential to our overall marketing strategy. As advertising platforms like Google Ads and Meta Business manager make their advertising platforms more sophisticated, and as more commerce moves online, it is more important than ever to refine your approach to digital advertising.

However, jumping into the digital advertising space without a plan is like jumping into a pool before you can swim. Carefully planning creative assets and messaging, and mastering A/B testing is core to your digital advertising success, but before you can even begin that, you’ll need to tackle the budget. How much money should I spend per advertising platform, and per campaign - how should it all be divided up?

The answers to these questions are unique to your organization, but this template, which is designed to be updated as your campaigns unfold, is a great place to start.

Download the Pogona Creative Digital Advertising Budget Template by requesting access>

Determining Your Overall Budget

People often under-fund their marketing operation hoping that their product or service will be so compelling that it will sell itself. This is hubris. Many excellent products and services fail because they don’t bother to notify the consumers that the product or service exists. The unwritten rule of marketing in Hollywood, on the other hand, is that you should spend as much on marketing as you do on production. Now, maybe for your business that’s overkill, but it is worth knowing.

So how much should you spend on marketing overall, and how much of that should be digital?

While it is a contested issue, most people agree that in a normal business environment, you should spend 6%-10% of your overall budget on marketing. Let’s say you have an overall budget of $1,000,000 - that means spending $750,000 on marketing is perfectly reasonable. After you fund critical infrastructure like a CRM, CMS, and a person (or staff) to manage your marketing activity, let’s say you have $400,000 left to fund your marketing activity. What allocation of these funds should be applied to digital advertising?

Depending on your business, it isn’t crazy to say that all of these remaining funds could be applied to digital advertising. Unlike television ads (including connected tv), radio ads, direct mail, out of home (billboards and the like), digital advertising is affordable and highly measurable. If you don’t have lots of marketing money to spend on big branding campaigns or low ROI tactics, it might make sense with a small budget like $400,000 to stick to digital advertising and inbound/content marketing exclusively (keeping in mind you’d also need to be doing the basics of website funnel optimization, SEO, and email marketing, which would already be funded via the “critical infrastructure” funding you already allocated).

Funding your Digital Ads: Test - Don’t Guess

What works for one company may not work for another. For this reason, it might make the most sense to provide an even allocation over the advertising platforms that make the most sense for you. For example, is your customer base (demographically) on LinkedIn, or TikTok? Let’s say that, after thinking about your demographics, you determine that you need to have an ad presence on Google and Meta (Facebook/Instagram/etc.). Start by allocating an even percentage of the budget to each, and begin to run tests within each ad platform. After one or two rounds of a/b testing, you’ll see which ads are doing well within each platform, and equally as important, which platform overall is giving you a greater ROI. 

After it is relatively obvious which platform is giving you better results, skew the budget in the direction of that ad platform, and proportional to the degree to which it is outperforming your other platforms. If the ROI on Google is 3 while the ROI on Meta is 2.5, shave off 15%-20% of the Meta budget and reallocate it to Google. If the ROI on Google is 3 but the ROI on Meta is only .5, determine if there is a reason for you to be running ads on a platform that is providing you with a negative ROI in the first place. If there is no reason, just reallocate 100% of the funds from Meta to Google. However, there are times when it is okay to let negative ROI ads run. For example, let’s say you are able to prove that your new customers are coming from Meta, and your repeat customers are coming from Google. You may calculate that the cost of acquiring a new customer, who is likely to purchase again, is worth taking the hit at the top of the funnel. 

Download the Pogona Creative Digital Advertising Budget Template by requesting access>