The goal of any ads strategy should be to get a positive return on your investment, which comes down to whether you’re getting more revenue out of the ad campaign than the cost you’re putting in. How can you determine what your ad spend should be to get the most return on your investment? To start answering that question, we’ll need to understand the bidding system used by the ad networks.
A bid is the maximum amount of money you’re willing to pay for the desired action on your ad. If it sounds like an auction, that’s because it is an auction. Ad networks have a limited amount of ad space, and to determine whether or not your ads are shown to your target audience, they run an auction to see how much each advertiser is willing to pay for ad space. Just like in an auction, the highest bidder wins.
Let’s say you bid $10 for a click on your ad, and the next highest bidder only pays $5 for a click. Each ad network will only make you pay the lowest amount possible to win the bid. In this example, you might be willing to pay $10, but in reality you’ll only have to pay $5.01 to win the bid. Winning this “auction,” in addition to the overall quality of your ads, will determine how your ads are displayed on the different ad networks.
How should you determine what your maximum bid will be? To do that, we’ll want to work backward from revenue generated to your final bid. Learn how in Hubspot’s free Ads Training course.