Where Did the Money Go? The Anatomy of a Digital Ad Campaign Budget

For many companies, digital marketing is simply a line item expense in their marketing budget. And chances are, those companies are wasting their money.

To turn that expense into an investment with positive ROI, it’s important to take a moment to really understand what makes up a digital marketing budget. Where does the money go and how is it being spent? How does the money further your business goals? What are the opportunity costs of sub-optimal management?

After all, total digital campaign spend is simply the total expenditure each month. Simple, right? Except, it’s never that simple. This figure doesn’t tell you how much of your money is actually going toward actually driving traffic to your website. And it doesn’t explain the indirect costs, such as time spent reviewing reports, setting campaign strategy, or in some cases, actually managing the campaign. And what about hidden costs such as opportunity costs for selecting the wrong person for the task?

The Anatomy of a Digital Ad Campaign Budget

In reality, there are three primary components of a digital marketing campaign’s line item expense: 1. Setup, 2. Management, Optimization & Reporting, and 3. Ad Network Fees.

Let’s break these out in more detail, since the details matter tremendously:

1. Setup: If you are paying an external digital marketing partner to run your campaign, this is the fee you are paying them to get the account setup and launched. It includes selecting the myriad account settings, choosing a bidding strategy, building a list of target keywords, writing or developing ad creative, and more. If an internal team member is managing your campaign, this will likely represent an indirect – and therefore intangible – cost that is harder to quantify but no less material to your bottom line.

Management, Optimization and Reporting are often lumped together, but in reality they are three distinct functions:

2a. Management: This is the expense you incur to “keep the lights on” in the campaign. The work involves regularly checking for system outages, bad link warnings, billing issues, and general quality control. Again, if your internal team is managing this, it is an indirect cost that is harder to quantify but make no mistake, there is a cost involved.

2b. Optimization: This is the part that will make or break the effectiveness of your campaign. Enlisting the help of an internal or external digital marketing expert – versus an inexperienced one – for ongoing optimization makes 80% of the difference between making and losing money on digital marketing. This tasks calls for deep expertise and experience to get it right. Remember, digital campaigns are a big online auction – a competition – and you want a very strong player making all of these micro-decisions for you.

2c. Reporting: Communicating the campaign’s performance to yourself, your team, colleagues and management is an essential part of a campaign. Pulling raw data, organizing it in a meaningful way and adding commentary that is insightful and that provides strategic direction is time-consuming. Purely automated reports lack the ability to provide such direction and therefore should not be solely relied upon.

3. Ad network fees: This is the portion of your expenditure devoted toward actually driving traffic to your website from the ads. This payment may come in two main forms: you may pay the ad network directly via your own corporate card or other billing arrangement. Or, in other cases you may pay your agency, who then turns around and pays the network.

The Hidden Cost of Poor Management and Optimization

There is another potential cost here which does not appear in the fine print of ANY digital campaign: the opportunity cost of a poorly-managed or poorly-optimized campaign. Digital campaign management is a universe unto itself. And yet, companies who don’t understand this will put a marketing director or even a marketing coordinator in charge of a campaign, to add to that person’s long list of other duties. They do this because they believe they are wisely cutting out the Setup and Management, Optimization and Reporting costs outlined above. Of course, these indirect costs are STILL costs due to the time spent by a salaried employee. But even more importantly, poorly managing a campaign will cost your company untold thousands or millions in lost opportunities annually due to a campaign that manages to incur ad network fees but fails to produce results.

Hire an Expert, Make More Money

As you plan your digital campaign strategy or re-examine your expenses, consider ALL of the costs involved – both seen and unseen, direct and indirect. Then, make wise choices about how you spend your precious resources. By assigning a digital campaign internally to an inexperienced staff member, your costs are likely much, much higher than a simple line item expense may suggest.

So, do your due diligence to understand what makes up your current marketing budget, and don’t underestimate the importance of putting a true expert digital marketing team on the task of running your campaign. It just makes dollars and cents.

Contact MindEcology today for help with your digital ad campaigns.