Why LinkedIn Ads are expensive and what to do about it?

Why LinkedIn Ads are expensive and what to do about it

Zoltán Kozma

Zoltán Kozma

LinkedIn Ads Specialist and Owner @ Kozma Digital

If you have ever run LinkedIn Ads campaigns before, the very first thing you might experienced is that it’s more expensive compared to other platforms like Google or Facebook.

Possibly you did wonder why exactly.

Maybe you just heard of it from your peers, so you might feel safe that you didn’t fall for it.

Well, don’t bury the idea yet.

After all, there’s a reason you’re here.

Actually, it is worth digging under the surface and getting a proper understanding.

Because the truth is, not all reasons are equally responsible for the higher prices and there are a few things you can do about it.

Let’s see.

1. The potential of high lead quality

 

That’s right.

One of the main reasons for the pricey clicks is the POTENTIAL of attracting high-quality leads.

But what does that even mean?

LinkedIn provides a unique targeting engine that no other social platform does. Meaning you can use 200+ targeting characteristics to reach your ideal buyers (and the buying committee) in the B2B setting.

However, it doesn’t necessarily mean that with a few clicks every lead coming from the channel will be top quality.

If you just rush into the LinkedIn Ads manager and launch the campaign ASAP, then you can get quickly uncomfortable about the results.

Yes, you can go really specific and reach C-level executives or senior professionals of a certain field of expertise.

But keep in mind, targeting higher seniority professionals will cost higher as the competition is much stronger in those auctions.

I believe what is more important here is that it enables you to take advantage if you nail the approach (audience, message, offer) and use the right tactics.

Here you can target the 95% of the market that aren’t ready to buy to build demand while also you can attract people who are aware of their problem and more engaged towards a solution.

That sounds pretty useful, right?

💡 Keep in mind that even you collect relevant leads through paid campaigns, you’ll still need to build relationships with these people. That’s how our brain is wired. So if you’re going after cold audiences, then don’t expect instantly a high buying intent from them while staying cost-efficient.

2. Companies are overbidding each other (unnecessarily)

 

LinkedIn encourages advertisers to raise the competition in every auction and this phenomenon is highly responsible for pushing the average costs up.

If you decide to take control over your campaign’s destiny (choosing Manual bidding), you’ll see that LinkedIn always gives you a “hint” about their recommendation.

This drastically increases the average bids in the auctions by default as advertisers fear that they’re missing out or they’ll see a poor performance. But it’s not their fault.

So what can you do about it?

Sounds bold, but just ignore that bid range.

I never paid 20 EUR for a click and you don’t have to either to see success.

LinkedIn Ads bidding platform

Another manifestation of this unnecessary overbidding is when marketers instantly increase their bids when their performance starts to decline.

Instead, focus on troubleshooting or updating the ads first to improve their ranking in the competition. (Sure, increasing confidently the bids have their place and time too).

Because if your CTR and overall interaction on your content are higher, then LinkedIn will allow you to pay lower on their platform while staying competitive.

3. The minimum bid floor

 

This refers back to the previous reason, but on default, LinkedIn uses a minimal bid floor feature that doesn’t allow any advertisers to bid under a specific value.

💡 You can easily discover what’s the minimum bid floor for each campaign if you just type “0” and click out of the type field. Then you’ll see what’s the value that your bid at least must meet. (Just like I did in the previous screenshot)

Well, this is something that you can’t do anything about it, you can’t bid under this value.

But you can bid at or near to them.

So you just need to play by their rules.

Maybe this is their effort to keep “smaller” companies out of the way and prevent them from flooding the platform.

I don’t know… maybe.

Trying to figure out why LinkedIn use the minimal bid floor

4. Using Automated Bidding

 

I have great news!

This is something that you can completely control.

If you check the default settings when creating a campaign, you’ll see that the basic bidding strategy will be the “Maximum Delivery (Automated)”.

Now, this is where you can get robbed easily because here you basically allow LinkedIn to take your money and spend as much as they want for a click.

The truth is, that their priorities look like this:

  1. Volume (reaching people)
  2. Efficiency

But I’m sure that as a marketer or business owner yours are:

  1. Efficiency
  2. Volume

This is so crucial that in case I would only have the ability to take care of 1 option during campaign creation, I would choose to change this to Manual bidding instantly.

Choosing the right bidding strategy is essential at LinkedIn Ads

(There are certain cases when you can turn Automated Bidding to your advantage but in 90% of situations it’s not something you want to use).

5. Ad formats matter

 

Every now and then I receive the question if are there any differences between the costs of the ad formats.

And while the answer is yes, there are a few things that I want to point out here.

LinkedIn Ad formats

In reality, multiple factors are determining the price you pay for your ads.

These are your bidding strategy, target audience, ad relevance score, and your campaign objective.

(You can find more technical details here if you’re interested.)

The available ad formats are determined by the objective you choose within a campaign. So primarily, your campaign objective will play the main role here.

Of course, few ad formats will act differently, meaning it’s worth understanding how they work and how LinkedIn charges costs.

So this knowledge can save you some budget, especially if you just want to dip your toe into LinkedIn Ads.

I included a few key insights below, but if you want to dig into the topic, then deep dive into LinkedIn’s official documentation.

For example, when you’re using carousel ads, be aware that if the different cards have separate destination URLs, then you’ll pay for each unique URL the person clicks.

That’s pretty though, right?

And don’t forget about videos either as they’re getting more popular over the last few years.

If you’re using the Video Ads Format but NOT within the Video Views campaign, then according to LinkedIn’s documentation, you’ll pay for basically everything.

They say “clicks anywhere on the media (headline, CTA, or video) open your creative’s destination URL and anchor the video to the top of the page”.

So while the ad formats won’t play the biggest role in why you pay premium costs to LinkedIn, understanding how they work absolutely helps you optimize your spending.

💡 I recommend starting with a Single Image Ad (Sponsored Content) as it’s a great way to dip your toe into LinkedIn Ads. It’s a good option to present your compelling content and it has relatively low risk as cost charging works simple. In addition, you can also easily support it with Text Ads because that is the cheapest ad format. This way you can balance Text Ad’s low visibility with the Single Image Ad.

6. Seasonality and timing

 

Not all seasons are equally competitive in advertising.

And understanding this is actually more important than it first seems.

Just think about it.

A lot of companies get into heavy advertising in December just to spend their yearly budget as they cannot (or do not want to) carry it over to the next year.

However, most decision-makers won’t get into a new B2B solution just at the end of the year. Their thoughts are all around the holiday seasons, family, and taking the time off. As it should be.

My point here is to use common sense to plan your yearly spending based on different real-life events.

Of course, you can still run some ads in December, but it may be wiser to spend less in the last month and allocate the majority of that budget to Q3 for example.

What’s better if you can take it over to the beginning of the next year because a lot of people feel more motivated in that period. So they’re more open to getting into new solutions. (a.k.a buying new tools).

You can also use the timing of the day to your advantage to optimize your spending.

LinkedIn Ads currently doesn’t have a time scheduling feature by default, so most companies are running their campaigns 24/7.

Meaning their ads are getting displayed at night as well when only the insomniacs are online.

This phenomenon is pushing up the costs too because these people might click on the ads, but probably they won’t convert at 2.00 AM (or they won’t be the best fit).

There are several paid 3rd party scheduling solutions for LinkedIn Ads but technically they can be managed manually as well. However, that’s a pretty radical solution that only a few undertake.

The golden mean here can be if you only run the ads within the office working hours. But from my experience, most companies just go with the 24/7.

7. Low friction vs high friction offer

 

“Are we asking too much with this offer?”

This is the question that we all need to ask before even launching the campaign.

Because doing this right can save a ton of money.

LinkedIn Ads are best at identifying and attracting your ideal B2B customers.

But most of the time it doesn’t do the job done alone (a.k.a closing the sale).

Meaning that if you aim to convert a cold audience to get signed up for a demo, a free trial, or even try to sell them directly, then your costs (CPC and CPL) will quickly climb up.

95% of the time this asks for too much commitment from the people who don’t know and trust your brand.

Instead of making direct sales offers, focus on delivering content that helps them understand a problem, solution, and overall your brand.

Other channels (e.g: organic social, email) can help you build the relationship further so you can get into their consideration set. And that’s key when they will show high buying intent.

💡 This doesn’t mean you shouldn’t experiment at all with higher friction offers like a free trial. However, don’t build your strategy on this concept, and don’t spend a huge part of your budget on them. LinkedIn is social, not a solution-focused search engine like Google. But keep in mind that one size does not fit all companies. Test and evaluate to plan your next move.

+1 Setting the daily budget too high

 

This might not connect directly to the “Linkedin rules” but it is absolutely something you can control.

So I think it’s worth talking about this.

Oftentimes companies can blow their budget by simply setting a too high daily budget.

This mostly happens when they decided how much they want to spend on their campaigns, but they only choose the Daily Budget option.

When things aren’t working out for the first time (which happens a lot in marketing), then it’s hurt to see that most of the planned budget has been spent on a poor tactic in just a few days.

There are different budget and schedule options in LinkedIn

And let’s be honest. Even burning a couple of hundred euros hits right in the feels.

So personally I like to go on with a 30-60 EUR range here.

💡 Set both a Daily and Lifetime budget for your campaigns so you can plan how you want to schedule your spending. This way you can easily avoid paying over your budget.

See the bigger picture

 

After we got through the mentioned reasons, you can see that there’s more to this topic than it might first seem.

But it doesn’t make sense without proper context, right?

Because at the end of the day, CPCs and CPLs are just vanity metrics.

That is why laying down the metrics and getting clear on how you measure success is key here.

So to tell if LinkedIn paid ads are an effective tool in your inventory, you need to dig deeper into the pipeline.

Sure, the ability to track sophistically isn’t equally available for everyone. Some companies have more advanced tech and can do more detailed analyses than others.

💡 The goal here is to try connecting back results to your LinkedIn Ads effort at the deepest pipeline stage as you can. Look at revenue, Sales Qualified Opportunities (SQO) but if those aren’t available to you, then take a step back and work your way towards from there.

On the surface, it might feel that Facebook or Google get you more leads at a lower cost, but that doesn’t necessarily mean that those actually turn into revenue “better”.

And I believe that based on our goals we have to apply this “critical thinking” to every marketing tactic and channel, even to LinkedIn Ads.

TL;DR

 

  • The quality of leads can be high thanks to the unique targeting features,  so you have to pay a premium price to reach B2B decision-makers.

  • Companies overbid each other because the platform encourages them to apply high bids. Ignore that recommendation.

  • LinkedIn’s minimal bid floor feature already set a “price bar” in every auction. You can’t bid under this value.

  • Using Maximum Delivery (Automated Bid) by default can easily blow your budget. Change that to Manual Bidding (CPC).

  • LinkedIn charges costs on the Ad formats differently so understanding how they work can help you optimize your spending.

  • Seasonality and timing of the day also affect the competition and the costs. Keep this in mind.

  • High friction offers will lead to higher CPCs and CPLs. Focus on delivering content that attracts your ideal B2B buyers so you can start building a relationship with them.

  • Setting a too high Daily Budget can burn money if it isn’t kept under control. Take care you’re using the right settings and you’re continuously monitoring your campaign.

I hope you found these insights useful. So let me end this with the mandatory self-promotion:

🌟 Seeking a solution to attract your ideal (future) B2B SaaS customers? If you’re ready to take your LinkedIn Ads to an advanced level then feel free to reach out.

You can also contact me on LinkedIn if you just have some unanswered questions. Don’t worry, no strings attached.