Video Marketing

Is YouTube advertising worth it for small businesses?

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You've heard this before—YouTube is the world's largest video platform with 2+ billion registered users visiting the site each month.

It's the second most popular website in the world, and it's entirely free for viewers. That means there's immense potential to reach massive audiences and create new leads if you're hoping to make the most of the platform.

However with millions of videos being uploaded every day, it's totally valid to worry about if your YouTube ad campaign will even make a ripple.

That's why we're exploring how YouTube advertising works, how to use targeting and if it's worthwhile for small businesses to invest in YouTube ad campaigns.

Youtube Ads page for content creators and online digital advertising

How does YouTube advertising work?

It's pretty simple. To launch a YouTube ad, you just need to create a YouTube channel, select the type of ad you want, and choose between the targeting options. 

We know. This sounds too simple. So, let's dig a little deeper!

Types of YouTube ads

Bumper ad

These ads last just six seconds and run before a video. Users cannot skip them. This format is commonly used for shopping ads by major retail companies.

Bumper ad on Youtube

From a small business perspective, think about if six seconds is enough time to introduce customers to your company? If your products or services are complex, we suggest you skip these.

Non-skippable in-stream ad

A non-skippable video ad can be around 15 seconds or longer. It plays before or during a YouTube video, and, as the name suggests, it can't be skipped.

Non-Skippable In-Stream Ad

Such ads can give small businesses enough time to showcase their products and raise brand awareness. 

On the flip side, these ads are also more likely to frustrate users.

In-stream ad (TrueView ad)

These ads last 12 seconds or longer and are played before or during a video. Users can skip the ad after five seconds.

This is one of the most popular ad format choices for businesses of all sizes. It gives enough time for your business to catch the users' attention while allowing disinterested viewers to skip away.  

In-stream Ad (TrueView Ad)

Small businesses can use these ads to generate leads and boost website traffic, with the hopes of increasing sales. It's worth noting that a skippable ad causes less frustration for viewers and makes them more likely to give your brand a chance.

Discovery ad

A search or video discovery ad is displayed on the YouTube search results page. You can pay to have your video listed first above organic results when users search for a specific keyword or phrase.

Discovery Ad

For small businesses that aim to provide good insight while simultaneously selling their services, this is a good choice. They clearly showcase how your product or service works while also gaining traffic and potential leads.

In-video banner ad

These ads appear during a video and last between 5 and 10 seconds. When a user clicks on the banner, it opens your website on a new page.

In-video Banner Ad

From a small business perspective, unless you can write really compelling copy or create a really eye-catching banner ad, the chances of users clicking through are low.

Masthead ad

One of the most expensive options for YouTube ads is masthead ads. They appear on top of the user's feed and absolutely will grab their attention!

This isn't just an advertisement for a product or feature; it’s an advertisement for your entire channel.

Masthead Ad

Willing to splurge? Only consider it for your small business if you have a budget where it's okay if Google bills you on a cost-per-day or cost-per-1,000-impressions basis. 

YouTube ad targeting factors

Here are the targeting options on YouTube that can help you fine-tune the audience you want to show your ad to.

  1. Demographics: Use the demographics of your target audience (such as age, gender, income, etc.) to show your ads to them.

  2. Life events: Showcase your products related to life events to the correct audience. For example, show ads for your travel agency to newly-wed couples.

  3. Interests: Your products are likely to align with certain interests. Showcase them by targeting those interested in your field.

  4. Re-target: Choose to show your ads to customers who have already watched your previous ads or videos.

  5. Keyword(s): Choose relevant keywords for your industry and show ads to users who search for those keywords or watch related videos.

  6. In-marketing: Choosing this option allows Google to show your ads to people it believes to be interested in related products who are ready to buy.

  7. Placements: Hand-pick which YouTube channels you want your ads to be displayed on.

So, how much would YouTube ads really cost your business?

On average, a YouTube ad can cost anywhere between US$0.10-$0.30 per view.

YouTube says most businesses start with a minimum of $10 a day for local ads.

The amount you pay largely varies based on the ad format you've chosen, along with the targeting options.

For example, you only have to pay for a TrueView ad when users watch the ad for 30 seconds or longer.

Other factors that affect your YouTube advertising costs are:

  • Content quality and production

  • Ad timing

  • Bidding

  • Ad messaging

Is YouTube advertising worth it for small businesses?

Given that YouTube ads could cost small businesses thousands of dollars a month, are they worth it?

The short answer? Yes. 

The long answer? The benefits of a solid YouTube ad campaign can totally make up for its expenses!

Benefits of YouTube advertising for small businesses

1. Increased reach

YouTube combines a mix of social media and a typical video platform.

This means it encourages user engagement and promotes easy sharing, displaying your ad for billions of people. The platform reaches more 18-49 year-olds compared to any other broadcast or cable network on mobile.

Moreover, YouTube's diverse range of content creators means businesses from any niche can successfully advertise on the platform. No matter what industry you’re in, there are likely YouTube creators in that niche actively creating videos. Placing your ads on these videos can propel traffic and help you gain new leads.

YouTube also lets you expand your marketing campaign's reach. Let's say you have a video podcast. You can automatically elevate your podcast marketing by posting snippets of episodes on YouTube and hooking in more listeners.

2. Highly-targeted

YouTube ads have a ton of targeting options so it's easy to create specifically targeted ads for your niche and turn them into potential customers.

3. Influence customer behavior

Watching YouTube ads has been shown to influence consumer behavior. A 2019 study revealed YouTube was the #1 platform that affected consumer behavior and the #1 purchase-driver on social media. It was the leading platform for consumers to discover and research new products.

YouTube ads are great for showing instead of telling (like demo videos) since videos can showcase a product or highlight the benefits of a service in 30-seconds or a little more. 

A user watching a 30-second ad can grasp everything they need to know about a product quickly, instead of reading a wall of text to understand the same thing.

4. Effective communication

No matter how simple or complex your product service is, YouTube ads can work for you. 

Your ads can be straightforward. Say your company provides Old Navy coupons. A 10-second ad with the discounts that customers can receive will encourage them to click through.

You can also create complex ads that deep dive into a specific aspect of your product. For example, if you want to make an ad for project management software. You can make a 30-second basic ad with the company name and features, or you can create a 10-minute detailed ad that explains a specific feature of that tool.

Here’s an example from Monday.com’s ad. It shows their platform in action:

monday.com’s ad

At the end of the day, YouTube ads put you in control and let you get your message out to your audience the way YOU want to!

5. Cost-effective

You no longer need a professional crew to shoot a YouTube ad. The platform even has a guide to help users shoot ads without splurging.

Unlike TV ads, YouTube ads run on a pay-per-click (PPC) model, which makes it a better option for small businesses since they only have to pay when a user engages with the ad (clicking on a banner or a CTA overlay). 

In the case of TrueView ads, you only have to pay for the ad when a user watches for at least 30 seconds.

6. Clear analytics

One of YouTube's most treasured features is the Analytics tab. Here, you get detailed analytics that can help you measure key performance indicators (KPIs), such as views, click rates, likes, and more.

Clarity on exactly how your ad is performing means you can address any issues head-on instead of guessing what's working and what isn't. You can tailor your ads to make the most impact on your target audience. In fact, here's how we recommend creators should use YouTube analytics to publish better videos.

7. Increase your business' value

This one is rarely talked about, but YouTube ads, along with other digital assets, will increase the value of your business.

A higher business valuation is important since it makes it easier to manage your company, negotiate during mergers/acquisitions, or even sell your business in the future.

YouTube advertising best practices

Like most forms of digital marketing, you can't just jump into YouTube ads and video marketing. Here are five best practices to keep in mind:

1. Understand your audience

This tip might sound basic, but it's the most crucial. Your ads will not have an impact if you don't cater to your target audience or, at the least, those interested in your industry. 

Identifying your target audience is the key to choosing ad type and targeting options.

If you're a B2B company, your messaging cannot be the same as Nike, Taco Bell, or any traditional B2C company. Your brand caters to a specific audience rather than the general public; your content needs to do so too.

For example, PandaDoc will benefit from having ads on YouTube since the platform allows it to showcase products, like its contract management software. But this will only be impactful if the company chooses videos in the same niche to place ads on. 

Your target audience also sets the tone, style, and content of your video ad. For PandaDoc, its audience likely consists of professionals. So, the ads must be casual yet professional, avoid intense visuals, and clearly show how this software is better than that of its competitors.

2. Show action

A YouTube user that is new to your brand won't sit through a boring video of text. B2C companies should show products in action, ideally, in real-life situations. B2B companies can do the same by showing a software's interface and a specific example in a business scenario. B2B videos can be animated as well.

3. Hook in viewers

Take a look at the YouTube ad leaderboard for 2020, and you’ll notice that most ads are designed to hook audiences in the first few seconds. 

The Nike ad uses loss and despair to then tell the story of overcoming them, the Geico ad uses a sense of forced happiness to kick things off, and the SuperBowl one uses playful nostalgia. 

All of these start so well that you want to watch the whole way through. 

You can use customer pain points, statistics or even success stories to hook the audience and reel them in. Once a user is intrigued enough to watch for longer, you have a chance to actually explain your product and its benefits.

Apple’s 2020 ad about working from home is an excellent example. It starts explosively, keeps you engaged throughout, and organically advertises its products. If this showed up as a TrueView ad, you’d likely watch the entire thing and then go look at their products.

WFH ad example on Youtube

4. Focus on mobile

More than 70% of YouTube watch time comes from mobile devices. All your ads should be made for mobile and then tuned for desktops. 

No one is going to watch an ad that looks distorted on their phone. You should keep the frame tight, use bright colors, and optimize for both portrait and landscape viewing modes.

5. Track and optimize

Advertising on YouTube requires a hands-on approach. Use analytics to your advantage and always optimize your YouTube ad campaigns for ROI.

While measuring video success, metrics like views shouldn’t be your primary measurement of success. YouTube users won’t just leave a video to go look at your site. If your ad impressed them, they’d probably visit your page after their original video is done or search for it later.

Ideally, a successful YouTube ad campaign shows in the form of increased organic search for your brand or advertised product and more organic traffic to those pages.

If an ad isn’t performing well, you don’t need to start from scratch. Instead, you can experiment with different video lengths, try other ad formats, and switch up your targeting options.

Clipchamp can help!

If you're looking for a free video editor to help create the perfect video advertising campaign for YouTube, Clipchamp can help!

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