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Digital Media Pricing

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Digital Marketing - Study Notes:

Digital costs

Cost per mille

This is also known as CPM, which is basically the cost to show one ad to 1000 viewers. So this is a pure measure of reach. If you have a display ad is that reaching 1000 people? That’s a core measure of reach. What it doesn’t tell you, however, is whether those people have looked at that, interacted with that, thought anything about that; it simply is a measure of pure reach.

Cost per click

This is the cost to show the ad to one viewer. Each time of an ad is clicked, money will be paid. So a banner ad, for example, that requires a click through that will be the point at which that cost is generated.

The positive of that is that it shows a degree of direct engagement because somebody has clicked on it. In other words, somebody has wanted to find out more about it. But again, the challenge is on what basis have they clicked on the ad? You can get accidental clicks; you can get bots in space that are clicking. So it’s not a fool-proof measure, but it does show a greater level of engagement of a single viewer clicking on an ad.

Cost per lead

This is very often used in financial services organizations, for example. It is the cost to generate sign up from a consumer who’s interested to learn more. So typically, people might sign up for a newsletter, or they might sign up for a callback, or they might sign up for an appointment with an advisor, or they might simply sign up to be sent more information via email. But you’ve captured the details of that customer and it’s a lead that can then be followed up on by a business.

So think about cost per thousand, cost per click, and cost to lead as people becoming progressively more interested in your proposition, in your service and more likely therefore potentially to want to ultimately buy it. But they are different methods by which media budgets can be allocated.

Cost per acquisition

You can think about media budgeting in terms of how many people you have acquired. How many new customers? How many users have I acquired? And in that instance, the advertiser only pays when an advert actually delivers an acquisition. So that’s all the way through the chain to somebody who’s actually bought.

So clearly what you’ll see is the costs going up from basic reach all the way through to acquisition. And it’s important as an organization to define what’s the most important measure for you. You may have a number of these measures that you think are relevant. Ultimately, what’s the key measure that’s important for you, and therefore how do you budget for that? You’ll clearly pay far more for cost per acquisition or even cost per lead than you’ll pay for cost per thousand. Because you’re getting more interested people who are more potentially become customers of your product or service.


Tenancy, in a way, is almost traditional media on digital media. It's a pricing model that’s based on having a defined position on a page for an agreed period of time. So, for example, a Yahoo! home page takeover would be a classic example. So you’re paying to have a particularly prominent position for your message in a particular place, for a particular period of time. It’s kind of offline media but within the digital world. And that can be very relevant, particularly if it’s a very high-profile event, particularly if it’s something where you can get significant reach, for example, a home page takeover. Tenancy can also be a way that you can think about allocating budget.

Budget limitations

The budget plan is always going to be affected by limitations and they can be obviously inventory limitations. If somebody else is doing a Yahoo! home page takeover, you can’t do one, for example.

There are also price constraints. Cost per click can dramatically increase in terms of cost if you’re in a particularly competitive sector. If you’re trying to do cost per click on low-cost holidays running up to the holiday season, then you’re going to find the cost is going to be significantly more expensive than it is perhaps other times of the year or in other sectors.

So price limitations can have an impact but also clearly inventory limitations can have an impact. Be aware of those as you think about setting your budgets, and which measures you think maybe the most appropriate.

When you consider media budgets, particularly in terms of online spend, it’s important to recognize what some of the core elements of those costs are.

Google Ads

With Google AdWords, there are a number of costs.

  • Writing successful ads: You’ve got the cost of writing a successful ad, so clearly that may be time from creative, that may be time from copyrighter or that may be time on graphic designer in order to ensure that you’ve got the most successful ad that you can get. And bear in mind that you may need to iterate. Just because you have one execution doesn’t mean that’s the only execution you’re going to want to stick with.
  • Bidding on keywords: Ensure that you’ve got the right keyword and that you’re bidding at the right level. That’s a key component of the cost in AdWords.
  • Personnel resources: Consider the actual number of people that need to be involved in order to deliver against this. In some cases, there may be people who are employed full time in other cases, there may be people that you’re acquiring via an agency.

Similarly, in digital display advertising, you’ve got various costs.

  • Developing creative ads: Quite often there’ll be a bigger graphic component in that. And therefore, again, the creative time involved the graphic design time involved.
  • Personnel resources: You’ve got the personnel resources again which may be internal or external.
  • Media costs: Think about the different elements that break down as you want to pursue each channel.

Selecting the right social channel

Another important factor to bear in mind here is that actually you’ve got different audiences in different channels. There are differences in terms of the penetration of different social media channels among different demographics. It’s really important kind of first principles of marketing let alone digital marketing. You must work out where your target audience are. Where are they? Where are they spending their time? What are they doing with the time the best spending there? Because that enables you to think about the relevance of the channel according to not only “Is my demographic actually there and in what numbers?” but also “What is my demographic using that channel for?”

The way that people are using things like Snapchat, Instagram, Tumblr, Twitter and Facebook are quite different. They may all go under the 'social' umbrella but they’re not all being used for the same thing. And the role, therefore, that you may want to have in social media in this instance may be very different depending on those channels. There may be no role for you in some of those channels, it’s much tougher in some of those channels to actually engage as a brand, as a product, as a service, and place.

On places like Facebook, it can become increasingly natural. On places like Twitter, again, but interestingly on other areas it can be much more challenging. So think about the relevance of your message, the presence of your audience when thinking about which channel you actually want to focus on. True in every channel, but particularly true in social.

Social media costs

What kind of cost do you need to think about when you’re developing a social media campaign?

Personnel resources

If you want to be tweeting out or putting regular posts on Facebook, there’s going to be a team of people that you’re going to need. Even more so if you’re beginning to use social media as a customer service channel. The lines can increasingly become blurred between when is social media a customer service channel and when is it a marketing outreach channel.

But if you have a social media team who are responding to inbound comments from customers, then that can significantly increase the level of personal resources that you need. People’s expectation of a response on social media if they’ve asked a question of a company is generally less than an hour. You can think about the level of implication that could have in terms of personnel resources. But even if you’re only using it for outbound, even if you’re not responding or having a conversation with somebody clearly the level and volume of what you’re generating is going to have personnel implications.

Personnel training

Having people working on social media is an extremely important part of any company’s strategy, in terms of the image that it’s projecting to its target customers and indeed to the outside world in more general. So there’s a real need to ensure that people have the right level of training not only to communicate the brand values and the company values, but to be able to strike that right balance, which can be a difficult balance to strike between having the right tonality in social media. Perhaps being a little bit reverent, perhaps being a little bit kind of spontaneous without stepping over the line of things that will potentially cause issues for the brand or issues for the company. And there are many examples, that we’ve seen in the past where people have stepped over that line because of lack of training. So don’t forget to invest in the training to ensure that people are responding appropriately and outputting appropriately on social media.

Content creation and curation

Just because it’s social media and not display advertising doesn’t mean that you’re not going to be developing things that have significant components of graphic design in them. Obviously, video production is a key element for social media now. And the demands of social media are such that the variety of what you are producing and the frequency with which you’re changing it are growing significantly versus many other channels. So the volume of that, and particularly maintaining that at high quality, can be a key challenge.


You need to plan for services like graphic design and video production that you may well not have in-house. And a lot of people, therefore, are buying in consultancy to help them with social media. Either from a strategy point of view, because social media is a multi-layered and complex space, or consultancy from a creative point of view, or design point of view in order to try and optimize what they’re delivering through that channel. And when you start grossing some of these numbers up, they can get pretty big. Once you start working out how many posts you want to put out, how many people you need to put them out, and how long it takes to put them out, you can quickly we end up at some fairly large numbers in terms of a cost for social media management and social media production.

Facebook and LinkedIn advertising

The following costs apply when advertising on Facebook and LinkedIn.

  • Developing creative ads: You need to develop creative ads and ensure that you’ve got the right level of creativity that’s appropriate for the channel.
  • Media costs: This could be for your own page or you’re promoting yourself into somebody else’s timeline. There are going to be media costs associated with that.
  • Personnel resources: This includes the number of people you need to produce, but also the training and development that you’ll need for those people.

Twitter advertising

In terms of Twitter, the key costs that are involved in Twitter advertising are not dissimilar:

  • Writing of successful ads
  • The media costs involved
  • Personnel resources involved to create it

There are three main ways in which you can promote your goods and services on Twitter:

  • Promoted accounts: You basically seek to encourage people to follow your Twitter account.
  • Promoted tweets: You will seek to put a particular tweet that you have put out into other people’s timelines. Now in both of those cases, you can choose to target and obviously it will be good to target. So you want to target via gender, via demographics, or by interests, for example. If you’re selling caravans for example, then you can promote your tweet to other people who are interested in caravans, or who are interested in traveling holidays. You can target both promoted accounts and promoted tweets.
  • Promoted trends: You can use promoted trends if you need a very wide reach very quickly. It guarantees you placement in Twitter’s trend section for a certain period of time. In each of these cases, you can decide what might be the most appropriate way for you to go depending upon the objectives you’ve got, the amount of reach you’ve got, and the level of targeting that you might require. But each case, bear in mind the importance of budgeting for the creative development, the media costs, and the personnel resources involved.
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John Garnett

John Garnett is Managing Director at Bee Dance Consulting. He specializes in advising and helping businesses with strategy, marketing, and innovation challenges.

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    Budget and Resourcing
    John Garnett
    Skills Expert

    This module dives deep into budgeting and resourcing digital campaigns to set them up for success. It begins by focusing on how to plan a digital marketing budget including the key budgetary factors to consider during planning. It covers how to maximize ROI for a given budget and best practices for recruiting and retaining key digital talent. It also covers topics on setting a budget, addressing campaign objectives and KPIs, timeframes, forecasting, organizational structure and systems, and supporting processes and software. Applying a budget is also covered, including specific topics on traditional media budgets, optimizing digital media budgets, digital media pricing, channel integration and attribution, and budgeting for creative.