Jitendra Vaswani

Why is LinkedIn Advertising so Expensive? 2023: Tips to lower the costs!

LinkedIn advertising has a bad reputation for being costly. Indeed, the majority of our B2B clients ask us this question.

‘Why is LinkedIn advertising so pricey’. There are a variety of variables that contribute to LinkedIn’s high advertising prices.

Why is LinkedIn Advertising so Expensive? 2023

To begin with, it is not a standard media channel such as Google Ads or Bing. LinkedIn is an exclusive network for people who want to do business with one another.

Reciprocal relationships are extremely important in the LinkedIn ecosystem. This characteristic distinguishes it from other digital marketing mediums.

Furthermore, over 722 million professionals worldwide actively utilise LinkedIn. This makes it one of the world’s most valuable business networks.

Today, we’ll go over how LinkedIn advertising works. We’ll also talk about whether it’s worth the extra money.

What is LinkedIn advertising?

Why is LinkedIn Advertising so Expensive?-What is LinkedIn advertising?
Image Credits: Pixabay

LinkedIn advertising are no different than any other pay-for-performance channel. Businesses may use LinkedIn’s large audience and advanced targeting tools to increase brand exposure, engagement, and conversions.

It’s vital to note that we’re not discussing advertising on the LinkedIn website (although this is also possible).

We’re talking about building advertising that will appear in your target audience’s LinkedIn newsfeeds. This is where people meet to network and explore business opportunities.

How does LinkedIn advertising work?

LinkedIn’s premium ads are designed with various objectives in mind. The major goals for B2B companies are to increase awareness, engagement, and conversion rates.

Unlike Google Ads or Bing, the majority of your target audience is already on LinkedIn.

In reality, almost 70% of all professionals worldwide have a LinkedIn account. This high proportion of educated users provides for an excellent B2B audience.

Furthermore, most professionals utilise LinkedIn to get opportunities and interact with other experts in their field. Because they aren’t merely passing the time. They’ve come to conduct business.

However, there is a catch. LinkedIn is all about building mutually beneficial partnerships. This implies that getting in front of the correct audience might be tough for firms.

As a result, LinkedIn has created capabilities to assist you in effectively reaching your target audience. Depending on your aims, you can select from a variety of ad formats.

What is the average cost of LinkedIn advertising?

LinkedIn Revenue
Image Credit- Statista

Here are a few averages for you to consider. CPC, CPM, and CPS represent the three benchmarks of cost per click (CPC), cost per thousand impressions (CPM), and cost per sale (action or acquisition – CPS).

Here’s a look.

  • LinkedIn’s CPC averages £4.13 per click
  • LinkedIn has an average CPM cost of £25.04
  • A messaging ad campaign costs an average of £0.015 per CPS.

In comparison, the average Facebook CPC cost is £0.72. It costs £0.28 on Twitter. LinkedIn is, indeed, more expensive.

However, these standards do not accurately represent what you will pay when running LinkedIn advertisements.

Why? Because these are industry standards for all LinkedIn advertisers, regardless of ad effectiveness.

They provide more information regarding the typical cost of advertising on LinkedIn in general.

It is not the expense of a specific campaign or business objective ad. The real cost of a click may be more or cheaper based on a variety of factors.

For example, campaign objectives, budget, ad format, target country, and target audience.

Due to LinkedIn’s charging structure, LinkedIn advertising is so expensive

Leading traffic referrers to LinkedIn -May 2022
Image Credit- Statista

The cost of LinkedIn’s advertising campaigns is determined by six different factors:

1. Ad relevance

Ad relevance is a measure of how well a LinkedIn ad fulfils the needs of each unique user. The combination of numerous interaction metrics defines it.

The actual formula for this calculation is not available to the public. It basically means that people must click on your adverts in order for them to be considered relevant.

However, clicks are not the only metric. There is also the click-through rate (CTR) and the click-to-conversion rate (CTC). However, depending on the ad type, more may be involved. Here’s the twist.

The smaller the ad cost, the higher the relevancy score. ‘How does LinkedIn establish a relevancy score for a brand new campaign,’ we are frequently asked.

It’s an educated assumption, to be sure. However, the general assumption is that they investigate other initiatives in the account to determine if they are performing effectively.

LinkedIn leverages the success of a specific ad type, audience, or other campaigns in the advertiser’s account to calculate how much your campaign should cost.

If there are no ads to utilise as a model, they look to similar advertisers. This is how LinkedIn calculates the average cost of advertising on LinkedIn for a current campaign.

2. The target audience

The target audience
Image Credits: Pixabay

LinkedIn’s advertising platform is essentially an auction-based mechanism. One of the major parameters in the auction is the target audience.

Consider it similar to keywords in Google Ads. What is the intended audience’s size or niche?

Are you aiming for the top universities in your area? Or are you aiming for the entire planet? This will have an impact on the cost of advertisements.

Are you also targeting CEOs, CFOs, and other decision-makers? Is your advertising aimed at mid-level executives? The costs will be determined by this.

The higher the prices, the more enterprises targeting the same demographic there are. That is auction marketing 101.

3. The bidding strategy

Do you want to discover why LinkedIn advertising is so expensive? LinkedIn employs the’second-place auction’ bidding mechanism.

Google built this for Google advertisements. However, LinkedIn is now using this and will continue to do so for some time.

This is how the second-place auction works. Assume you have a maximum bid of £6 for a CPC campaign.

Your ad relevancy score is 6 out of 10. That exceeds the standard. However, we shall utilise it as an example. This brings your total to 36.

Your rival is fresh to LinkedIn. They do, however, have a lot of money. Or he hasn’t employed a capable PPC marketing team, such as Rockstar Marketing. As a result, he bids £9.

Your knees tremble. You believe you have no chance of winning this auction. But, LinkedIn suggests, let’s look at the relevancy score. He only received three points because his marketing team created a bad advertisement.

Unfortunately for him. That’s fantastic. This brings his overall score to 27. Now comes the hard part. LinkedIn multiplies his combined score by your relevancy score.

So the answer is 27/6, or 4.5. Technically, you will only pay £4.5 plus one penny for the advertisement. That concludes the second-place auction.

4. The ad objective

The prices of various advertising objectives vary. As a result, your decision will have an impact on your advertising expenditures.

For example, the average CPC for website conversions as a goal is £5.07. However, if the goal is changed to engagement, the price reduces to £1.87.

There are three primary goals. These are recognition, consideration, and conversion. Within each one, you can fine-tune the marketing objectives.

5. The region & country

LinkedIn bases company structures on four geographical zones. These regions, as well as the specific countries within the region, will have an impact on your advertising expenditures.

The CPC is higher in key markets such as the United States and the United Kingdom. In general, Asian countries have the lowest.

6. The industry

Certain industries are more competitive than others. This is true for all paid ad platforms. One of the most expensive sectors is technology. Education is more reasonably priced.

How to determine LinkedIn Ad costs

These figures provide a good indication of what to expect. However, as previously said, there are additional variables that may affect the final costs. This is why LinkedIn provides a forecasting tool.

This may be found in the LinkedIn campaign manager. A forecast does require some data. You must first identify the target market and audience. When you select a bid type, the average CPC/CPM for the campaign will be displayed.

Tips to lower cost:

What’s the best way to reduce LinkedIn advertising costs? You can maximize a campaign’s efficiency in many ways. PPC marketing teams can also reduce costs by using different bidding strategies.

You can do the following:

  1. Ensure that your marketing is laser-focused on the target audience and goal. If you’re looking for C-level executives, it’s pointless to advertise for mid-level executives. Your ad relevance score will be low, and LinkedIn guidelines specify that this will drastically increase prices.
  2. Make good use of your daily budget. Make sure your ad expenditure corresponds to the level of traffic and conversions you receive in a given day.
  3. If you’re just getting started, go with the CPC bid option. When you know your conversion volume and costs, you can always convert to CPM or optimise for conversions.
  4. The LinkedIn Sponsored InMail service may be a good option for you. Without paying a high CPC, it’s an excellent way to reach out to potential clients.
  5. What is the cost of LinkedIn advertising? Consider hiring a PPC marketing company with experience. They can reduce your costs by focusing on your requirements.

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Conclusion: Why is LinkedIn Advertising so Expensive? 2023

LinkedIn’s advertising prices, in our opinion, are a measure of how effective their platform is. It’s also a result of how much they invest in their algorithms to generate high-quality leads that convert.

Speak with us if you believe your LinkedIn efforts could be performing better. We have a team of paid advertising experts who can help you and make a difference.

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