LinkedIn ads cost can quickly add up without delivering the desired results. The reason for this varies but often comes down to a lack of research and LinkedIn setting high standard budgets. This is, of course, a waste and can be prevented. LinkedIn requires more research and a better approach to save on the initial LinkedIn ad costs.
Are you looking to advertise on LinkedIn but concerned about the potential costs? Understanding how LinkedIn determines ad costs and implementing a strategic approach can help you make the most of your budget.
In this article, we will explore ways to optimize your ad spending on LinkedIn by delving into the factors influencing ad costs and offering insights to enhance cost-efficiency.
LinkedIn ad costs are often considered expensive. Why is that?
Within LinkedIn, the costs are higher compared to other social media platforms for reaching the same number of people. So, on average, you pay more money on LinkedIn to reach 1000 people. You can’t get around this. However, this does not mean that your ROI (return on investment) will be lower.
For the vast majority of B2B companies, the targeting options and the target group are a goldmine. The combined data that LinkedIn has about its users in terms of work experience, skills, and interests you will not find on any other social media platform.
This allows you to reach exactly the people you want to reach, provided your targeting is correct. The costs are then relatively higher, but the value you get from this equals or is even higher than that of other social media.
This indirectly ensures that the competition between advertisers is higher because the best ads deliver the best results at the lowest costs, and bad ads entail higher costs.
How are LinkedIn ad costs calculated?
The way your ad costs are calculated depends on several factors. I will briefly discuss these factors and then explain LinkedIn’s system.
1. Ad Objective
The first way LinkedIn ads costs are calculated is based on the objective of your ad. Below, you can see all the different possibilities:
As most of you may already know, advertising for brand awareness is the cheapest, and conversions are the most expensive. For example, the steps a prospect has to take to fill out a lead form are bigger than brand awareness advertising. With a brand awareness campaign, the goal is to show your ads to the target audience. The intention is not necessarily to get the viewer to take action.
2. Target Audience
The next thing that affects the cost is the target audience you want to reach. Generally speaking, advertising to a smaller audience is more expensive due to more competition on a smaller scale.
The type of people you target in your audience can also affect the cost. This translates into the CPC (cost per click) and CPM (cost per mille) that you have to pay.
Example: in SaaS companies, you want to reach people who have to make a decision about implementing and purchasing such a product. You can imagine that the attention of these people is worth more than that of an administrative employee.
Based on the information from this competition among advertisers, LinkedIn will determine the final LinkedIn ads costs for their auction. This fluctuates constantly and is determined by a smart algorithm.
3. Ad Placement:
The placement of your ad within LinkedIn can affect the cost. Generally, ads placed in more prominent positions may cost more than those in less prominent areas of the platform.
4. Ad Relevance and Quality:
The relevance and quality of your ad to the target audience can impact costs. Higher-quality ads that are more relevant to the audience may receive better ad placements and lower costs.
5. Bid Amount:
The bid amount you set for your ad campaign can also impact costs. Higher bids may lead to better ad placements but can also increase the overall cost of advertising on LinkedIn.
Together, these factors contribute to the overall calculation of LinkedIn ad costs, and understanding them can help develop effective and cost-efficient advertising strategies.
The Auction for the Final LinkedIn Ads Cost
We now know that several factors influence LinkedIn ads costs. To determine the concrete costs, we go to the LinkedIn auction. For the auction, various criteria determine the final costs and whether your ad wins the auction.
The following aspects influence the auction results the most: the relevance score of your ad and the bid you place per ad.
What is the relevance score?
The relevance score of an advertisement is the score that the LinkedIn algorithm gives to an advertisement. Nobody knows exactly how this works, but LinkedIn has indicated indicators on which this is based.
The golden rule you must observe here is that the more interaction your advertisement stimulates, the higher your relevance score.
This score is determined during the advertising and can, therefore, also change. What is, therefore, important to look at are the CTR, the conversion rate, and the total interaction.
The better you become at creating advertisements, the better these statistics will be. This often includes good ad copy, professional and brand-consistent content, and an offer with value, such as a whitepaper.
To keep your relevance score as high as possible, it is important to always keep your ads at the same level or above the LinkedIn benchmarks. This will ensure that your LinkedIn ads costs are never unnecessarily high.
How to Improve LinkedIn Ads Relevance Score?
The LinkedIn Ads Relevance Score is a crucial metric that affects the performance and cost of advertising on the platform. Improving the relevance score can lead to increased visibility, higher engagement, and lower advertising costs.
To enhance the relevance score of your LinkedIn ads, consider the following checklist:
1. Audience Targeting:
Ensure that your ads are targeted to the most relevant audience. Use LinkedIn’s targeting options to reach the right professionals based on their job title, industry, skills, and more.
2. Compelling Ad Copy:
Craft compelling and relevant ad copy that resonates with your target audience. Highlight the value proposition and use clear, concise language to convey your message effectively.
3. High-Quality Visuals:
Incorporate high-quality images or videos that are visually appealing and align with your brand’s identity. Visual content can capture the audience’s attention and drive higher engagement.
4. Call-to-Action (CTA):
Include a clear and compelling call-to-action in your ad to prompt users to take the desired action, whether it’s visiting your website, downloading a resource, or signing up for an event.
5. Landing Page Relevance:
Ensure that the landing page linked to your ad is relevant to the ad’s messaging. Consistency between the ad and the landing page experience is crucial for driving conversions and improving relevance.
6. Monitoring Engagement:
Regularly monitor the performance of your ads, including click-through rate (CTR), conversion rate, and total interactions. Use these metrics to identify areas for improvement and optimize your ad campaigns.
By adhering to this checklist and continuously optimizing your LinkedIn ad campaigns, you can improve the relevance score, leading to more effective advertising and better return on investment.
The Bid
Next, the bid for the ads that you set is the last link for the calculation. The bid that you have to set depends, as discussed earlier, on the objective and the target group.
LinkedIn will give you an indication of the average CPC and CPM that other advertisers spend to reach this target group. However, LinkedIn often estimates the costs to be unreasonably high.
Your bid is your strategic move in the auction, and it’s crucial to set it at a level that balances competitiveness and cost-effectiveness.
LinkedIn gives you three options to determine this bid:
- maximum delivery,
- cost limit, and
- manual bidding.
For now, it is not important which of the three we use because the calculation is the same. If you want to know what they mean, check out this blog.
The bid that is placed will be multiplied by the relevance score to ultimately arrive at a winner. The price that the winner then pays, I will explain in a moment.
To get an idea of how the winner of the auction is chosen, I will give a short example with visual support below:
There are three bidders for this hypothetical auction.
Bidder 1 has a relevance score of 7/10 and places a bid of $6. The second bidder has a relevance score of 4.5/10 and places a bid of $11. Bidder 3 has a relevance score of 9/10 and places a bid of $4.50. If we then multiply these together, we get the following.
| Relevance Score | Bid | Total | |
| Bidder 1 | 7 | 6 | 42 |
| Bidder 2 | 4.5 | 11 | 49.5 |
| Bidder 3 | 9 | 4.5 | 40.5 |
This auction has shown that bidder 2 wins the auction and is allowed to show their advertisement to the target group.
How to Reduce the Cost of LinkedIn Ads with a Bidding Strategy?
Reducing your LinkedIn ads cost through a bidding strategy involves careful planning and execution. Here’s a checklist to help you optimize your bidding strategy:
1. Understand your objective and target audience:
Clearly define your advertising goals and identify your target audience to set the right bid for your ads.
2. Research and analyze average CPC and CPM:
Take note of the average costs per click (CPC) and cost per mille (CPM) that other advertisers are spending to reach your target audience.
3. Evaluate LinkedIn’s cost estimates:
While LinkedIn provides estimates, it’s essential to critically assess whether the projected costs align with your budget and expectations.
4. Choose the right bidding option:
LinkedIn offers three bidding options – maximum delivery, cost limit, and manual bidding. Select the most suitable option based on your campaign goals and budget.
5. Balance competitiveness and cost-effectiveness:
Set your bid at a level that balances competitiveness in the auction while ensuring cost-effectiveness for your advertising campaign.
6. Understand the relevance score’s impact:
The bid placed will be multiplied by the relevance score to determine the auction winner. Focus on improving your ad’s relevance to positively impact the bidding outcome.
7. Optimize your bidding based on performance:
Continuously monitor and analyze the performance of your ads. Adjust your bidding strategy based on the results to maximize cost-efficiency.
By following this checklist and staying informed about your ad performance, you can effectively reduce your LinkedIn ads cost through a strategic bidding approach.
Want to learn advanced LinkedIn bidding strategies from successful marketers? Explore these 6 strategies from the experts.
Final Calculation for the Cost of LinkedIn Ad
So, bidder number 2 won the auction with his combined score. His bid was set at $11. However, this $11 is not the amount the winner will have to pay. The winner pays the costs for number 2’s bid on the auction plus $0.01.
So, using this example, the winner ends up paying $6.01.
So you can see how a higher bid can put you in a better position, but of course, that also entails higher risks if there are other bidders with a high bid and a low relevance score, which ultimately means that you have to pay a lot per bid.
10 Ways to Manage and Reduce Your LinkedIn Ads Cost
Here are 10 ways to manage and reduce LinkedIn Ads costs:
1. Improve Relevance Score:
Focus on improving the relevance score of your ads by creating engaging and targeted content that resonates with your audience, leading to lower advertising costs.
2. Audience Targeting:
Ensure precise audience targeting using LinkedIn’s options based on job title, industry, and skills to reach the most relevant professionals, reducing unnecessary ad spend.
3. Compelling Ad Copy:
Craft compelling and relevant ad copy that effectively communicates your value proposition, leading to higher engagement and lower costs per click.
4. High-Quality Visuals:
Incorporate visually appealing images or videos that align with your brand identity, capturing attention and potentially lowering advertising costs through increased engagement.
5. Call-to-Action (CTA):
Include clear and compelling calls-to-action in your ads to prompt users to take the desired action, potentially leading to lower costs per conversion.
6. Landing Page Relevance:
Ensure consistency between ad messaging and landing page content to improve relevance and drive conversions, potentially reducing overall advertising costs.
7. Monitor Performance:
Regularly monitor ad performance, including click-through rate and conversion rate, to identify areas for improvement and optimize ad campaigns, potentially leading to cost savings.
8. Set Strategic Bids:
Strategically set bids based on the objective and target audience, balancing competitiveness and cost-effectiveness to manage ad costs effectively.
9. Leverage Bid Options:
Explore different bid options such as maximum delivery, cost limit, and manual bidding to find the most cost-effective bidding strategy for your campaigns.
10. Continuously Optimize:
Continuously optimize your LinkedIn ad campaigns based on performance data and industry benchmarks to improve relevance score, lower advertising costs, and maximize return on investment.
FAQ
The cost of a LinkedIn ad typically varies based on the type of ad, your targeting options, and your bidding strategy. On average, businesses can expect to pay anywhere from $2 to $7 per click for LinkedIn advertising.
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Conclusion
LinkedIn ads costs do not have to be expensive. By doing your research and setting up the campaign properly, you can still win the bids with a lower bid.
Ads perform better if they are made to stimulate interaction. This also ensures that you win the auction faster with a lower bid. This gives you the opportunity to stay far ahead of the direct competition.
At Prime FinTech, we specialize in creating campaigns that are as close as possible to your target group. Do you want to know whether your campaigns are performing well and whether you are using the right strategies? Then contact us without obligation.
We can then look together at how costs can be saved and what can possibly be improved in the strategy.
