A First-Time Mobile Advertiser's Guide to Budgeting for Ad Spend

By Alex Walz | February 2nd, 2018

No one understands the value of hard-earned money better than an independent app developer. Perhaps that’s why even the thought of investing in paid advertising is met with resistance. But if you want to boost your downloads, then paid advertising is the way to go.

In just a matter of hours, you can promote your business to thousands of potential users and start driving qualified traffic to your app. Even the simplest of campaigns can drive enough awareness to catapult your listing on the app stores above those of your competitors.

Don’t believe us? Here are a few interesting facts:

  • The advertising budgets have doubled globally from $16 billion in 2014 to $31 billion in 2016.
  • 65% of marketers now have plans to increase their digital advertising budgets in the coming year after observing a high ROI.
  • When it comes to social media advertising, businesses invest majorly in Facebook (84%), Google (41%) and LinkedIn (18%). (Social Media Examiner, 2015)

And what’s at the heart of this surge in advertising? Mobile. Accounting for over 84% of Facebook’s ad revenues and 67% of Google’s revenues, mobile advertising is increasingly becoming the go-to marketing channel for publishers everywhere.

Unique to digital advertising is the ability to name your budget. You’re not dealing with a fixed cost or a monthly subscription; what you budget is entirely up to you—and your growth goals.

This is where Pay-Per-Click (PPC) enters the picture. As the name suggests, here the advertiser is charged every time his ad is clicked.

For instance: a daily budget of $20 might get you 8 clicks or app installs, depending on your campaign. Similarly, a daily budget of $40 may get you 16 clicks or installs. The larger your budget is, the greater will be the results. However, finding the right balance between ad spends and results can be a challenging task.

There is little surety around how much your paid ads will yield at the end of the day. In this article, we will discuss what it means to think of advertising as an investment, how to set a budget for your first ever paid ad campaign and how to ensure a high return on ad spend (ROAS).

Let’s begin!

Seeing Advertising as an Investment

As you think about the cost of advertising, consider the following:

Paid advertising is a risk, and as a business, you can’t expect to earn returns if you don’t put in money in the first place. In 2017, digital advertising spend reached over $209B globally, approximately 63% of which was directed toward mobile advertising. By 2020, digital ad spend is predicted to surpass $291B, with digital making up half of all advertising spends globally. This means that more and more businesses want to do paid advertising despite knowing that there are risks involved.

That is why the PPC model is the most feasible option here. The end result is tied to the performance of the ad, i.e. if no one engages with your ad, you are not charged for anything. Simple!

But if you are charged and the person who clicks doesn’t get converted, then that’s a risk every business will have to undertake.

Start Small with Your Initial Digital Advertising Budget

If this is your first rodeo, set a small advertising budget to minimize your potential risk. However, make sure you are able to collect benchmark data to study whether or not your campaign is working.

Set a timeline, say a week, and budget for a minimum of 10 daily clicks or installs. The initial data will give you an idea about how well your campaign is fairing. You can accordingly optimize your campaign for better results. (By optimization we mean, change the ad copy, graphic, keywords, placement, etc. to appeal to a larger audience.)

Whether you’re planning for mobile web advertising (social networks, search ads, display networks) or app-specific channels like the app stores, plan a few days into your timeline to give the networks plenty of time to approve and start promoting your ads. That is why the one-week (minimum) timeline suffices to ensure your campaign is fully up and running.

Please note: B2C campaigns may start showing results (and eat away at budgets) much faster, so optimize your campaign accordingly.

Setting a Budget for Clicks or Installs

If you don’t know where to begin, apply this simple formula:

Take the average cost of a click, and multiply it by your daily click target (say, 10 clicks) and campaign duration (say, 1 week or 7 days).

If you’re targeting Cost-Per-Install for a traditional app advertising campaign, budget for the average CPI , your budget may look more like this:

Average CPI x Daily Click Target x Campaign Duration in Days

For eg: $1.24 x 10 daily app installs x 7 days = $87/week

There’s No Ideal Advertising Budget? That’s Right!

Unfortunately (or perhaps, fortunately), there is no magic number for an “ideal budget”. As discussed, the number that works best for you may be too low or out of reach for another. Advertising is a dynamic game, and the results can be quite interesting—for both good and bad reasons.

If, however, you’re looking for some place to start, the US Small Business Association, investing 7-8% of your total revenues into marketing and advertising is essential.

As a general rule, small businesses with revenues less than $5 million should allocate 7-8 percent of their revenues to marketing. This budget should be split between:

  • brand development costs (which include channels like the website, blogs and sales collateral), and
  • Business promotion costs (which include campaigns, advertising, events, etc.)”

Over to You

Just because you have done the legwork — found the right keywords and placements, wrote a fantastic ad copy and app store landing page, designed appealing graphics and set the right target audience — that doesn’t mean your job is done and your campaign will be successful.

Running a campaign requires continuous efforts. For instance, if you feel setting a budget on the basis of 10 daily clicks is ambitious, it is best to set an amount for five clicks and not ten. Either way, paid advertising is a great, fast, and scalable way to grow awareness, clicks, and installs.

Have another strategy for budgeting your first digital ad campaign? Let us know in the comments below!

Alex Walz
Alex Andrade-Walz is a growth marketer at Spatially who has helped some of the biggest brands in mobile increase their downloads, boost retention, and turn customer feedback into actionable insights. He frequently writes, speaks, and tweets on all things marketing. Connect with him on Twitter @alexmwalz .

Alex walz