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Ep 26: Why LinkedIn Ads Are So Expensive?
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Show Transcript:
Q4 on LinkedIn Ads, what I affectionately call the yearly bloodbath. Winter is coming, prepare yourselves.
Welcome to the LinkedIn Ads Show. Here's your host, AJ Wilcox.
Hey there LinkedIn Ads fanatics. So Q4 of 2020 is coming up. And every year, it's an absolute bloodbath on LinkedIn Ads, I'm going to walk you through the market forces that cause it. And then what you can do about it, as an advertiser. We'll also take this opportunity to dive into the seasonality effects during the whole rest of the year. So strap in, and let's get to it. Highlighting a couple reviews here on the podcast. David Rosendahl on LinkedIn actually put this in a LinkedIn story. And I had to grab it as an example. He said, "Hey, I'm out on a bike ride listening to that podcast, I just took a screenshot of. If you're into LinkedIn ads, and you're looking to run them more effectively for yourself or your company, listen to this podcast. Man, it's a good one, a good show. The guy knows what he's talking about. And I highly recommend it. So go check it out." David, thanks so much for the kind review and shouting that out publicly. It means the world to me. A user by the name of Notdeeplyreligious, which I giggled about, left a review that said, "Easy to understand and generous with the info. I've watched my share of YouTube videos on LinkedIn Ads, and even took a Udemy course, listening to AJ has been by far the most helpful. He's clear and detailed, but not overwhelmingly. So it's obvious. He enjoys his craft, and feels it's his duty to impart valuable knowledge. I'm sure it helps attract clients, and why not, I appreciate a master who enthusiastically spreads the word, he certainly helped me". Notdeeplyreligious, I can tell that you go super into things, I'm so glad you've been diving into Udemy and YouTube to get info on LinkedIn Ads. And I'm so grateful to be a part of that knowledge seeking. So thanks for leaving such a great review. And to everyone else, I want to feature you here. So please do go and leave a review for the podcast. And with that being said, let's hit it.
2:16
Seasonality
So first, I think we need to define what seasonality is. And what this is, is over the course of the year, there are a whole bunch of different market forces that will change your advertising and really noticeable ways certain of these forces will change the costs. So it sometimes the year your cost might be higher, and others might be lower. You might also find that certain times of the year, your engagement rates go up and down, and maybe even your lead quality can shift. And all of this is an interplay between supply and demand. So we're going to be taking you back to Econ 101 right now. But for our purposes here, when we talk about supply, we're talking about the traffic on LinkedIn, the supply of people logging into the platform. And then when we talk about demand, we're talking about advertiser demand, meaning us as advertisers bidding for that traffic and trying to win. So the way it works is that when demand stays the same, which means that nothing has changed for advertisers, we're still the same number of us. And we're still bidding the same amounts. But then supply increases, like more people coming in logging into LinkedIn, then prices for everyone fall. And then conversely, if the number of people on LinkedIn stays the same, so we don't have new people coming and spending more time on there. That's our supply. But we have more advertisers coming onto the platform. That's our demand, that's going to cause costs to increase. And when I started bt linked about six years ago, I watched a period of about four years where prices stayed relatively the same, which was fantastic. I got to tell people for four years that the average cost per click on LinkedIn was between $6 to $9, depending on competition. And we did see a lot of new advertisers during that time, so of course, there was additional demand. But I think what balanced it out is the supply, the members on LinkedIn. People were coming to it in droves. They were finding more and more benefit in being on LinkedIn. So they would come in larger groups and then they would spend more time, which is creating additional ad inventory for everyone. And so even though advertisers were coming in finding a lot of success on the platform, then they weren't paying more because the users were really balancing that out. And then in late 2018, came the 35% price hike that we saw with the advent of objectives. If you want to learn more about that, listen to Episode 26. That goes all into why LinkedIn Ads are so expensive. And then add to that the release of automated bidding and the ridiculously high suggested bid ranges. And basically since then, we've seen costs really go on an upward trend. Costs on LinkedIn are higher than they've ever been, and are climbing quickly. And this is on a platform that everyone was already complaining, even when it was brand new, that it was too expensive to begin with. So you as advertisers, if you understand the market forces that are at play on the platform, you can take advantage of it and counter those forces to make sure that you're always getting the very best performance, no matter what time of year. The biggest part of seasonality that I have to bring up is what happens during the November and December timeframe in North America. We found that in North America, which makes up the majority of LinkedIn advertisers on the platform, that November and December are a total bloodbath. Starting from about Thanksgiving in the US all the way through the end of the year, there's a whole bunch of market forces that really make this not an optimal time to be advertising. What you'll notice is, number one, there's a bunch of big brands that are pushing really hard to blow all their budget because it's a use it or lose it budget. So they have till the end of the year, it also happens to be the end of a quarter, and the end of a month, which are all big times where marketers and sales folks are getting a lot of pressure. And what this does is it increases advertiser competition, which in our little econ graph here is the demand. And so we see costs per click rise, cost per click cost per impression, whatever it is you're measuring, competition goes up. And so prices go up. At the same time this is happening, we see people checking out to go on vacation. And what that does is it decreases our supply inventory. People aren't logging into the platform or spending as much time on it. And so since your inventory decreases, and people are bidding just as high, if not higher, that makes costs per click rise even more. So with these two forces, you'll see your costs per click going up significantly, and your traffic dropping. But then there are two really big nails in the coffin for me, that happened on the other side, once you land a lead, most of your customers budgets will be spent and spoken for through the whole rest of the year. So people really aren't considering new solutions. And of course, sometimes this works in your favor, because someone has a use it or lose it type of budget. And they have some leftover, and they're looking to make a purchase before the end of the year very quickly. So sometimes you can still get deals during this time. But for the most part, this is really depressed, it leads to people being less interested so your perceived lead quality goes down, your conversion rates go down. And then every sales team will tell you the same thing every year, all the leads that you generate in November and December will all say "Let's pick up the conversation after the first of the year". And of course, everyone has good intentions with it, but no one's going to remember what salesperson they were talking to a month and a half ago or six weeks ago so they tend to forget about your company and so your overall lead quality goes down. So during this period, you have costs that go up, and then lead quality that goes down. So if you're tracking what your cost per sales, qualified lead is or your ROI, it's looking real bad during this little period here. So because of all these market forces, it basically means that you'll likely see your costs go way up, sometimes 40 to 50%, just during these two months. But don't be discouraged, all is not lost. Right after the sponsor break, we'll dive into how you can take advantage of this for the best performance of the whole year. The LinkedIn Ads Show is proudly brought to you by B2Linked.com, the LinkedIn Ads experts.
8:37
If the performance of your LinkedIn Ads is important to you, B2Linnked is the agency you'll want to work with. We've spent over $130 million on LinkedIn Ads, and no one outperforms us on getting you the lowest cost per lead. We're official LinkedIn partners, and we don't have a sales team. So you'll deal with a LinkedIn Ads expert from day one, Fill out the contact form on any page of B2Linked.com to chat about your campaigns. Or Heck, send it via Pony Express. Our mission, no matter how you get in touch, is to make you look like the hero.
9:09
Best Time of the Year for LinkedIn Advertisers
All right, let's jump into the best time of the year for LinkedIn advertisers. So I'll throw this out. I am deeply religious. So I do say this as a joke, but January 2 every year is my Christmas. And that's because all of those market forces that made November and December just a terrible time to run LinkedIn Ads, that entire script flips when you jump into January. Now I say January 2, just to talk about after the first of the year. But in 2021. This year, it's going to be January 4, because the second is actually a Saturday and obviously, no one's going to be going to work. But here are the market forces that make January so amazing. It's the beginning of a new month, a new quarter and a new year. So there's going to be low demand from other advertisers meaning less competition and some of the cheapest clicks that you'll get the entire year. Then on the lead quality side, you have this low cost to get in with people, but now people are back from vacation. They have new budgets, fresh initiatives, they're thinking about making a big difference for the year. So they're going to come on LinkedIn and spend more time, they're gonna be a lot more interested in new and disruptive ideas and products and services. This will be the time of some of your highest conversion rates of the whole year. And then as soon as your sales team gets a hold of these leads, nothing is on their calendar yet, because it's brand new in the year, they haven't gotten slammed yet. So you'll see high lead quality and high conversion rates from like an MQL to an SQL kind of stage. Lots of people are thinking, hey, it's a new year new you. So they'll spend a lot of time on LinkedIn potentially looking at new roles, looking just to make a big difference in their life, along with their new year's resolutions. So January, in short, it's amazing. The lowest costs, highest conversion rates, highest lead quality. So my recommendation every year is to prepare everything in like early to mid December, so that you're all ready for a January 2 launch. And of course, you want to hit it really hard in January with really high performing creatives. So you might even run a little bit of a test in maybe late November or early December, just until you find some creative and an offer that you know is going to work, that way there's so little risk when you hit the go button on January 4. And of course, we have to mention what I call the summer lull, we see something similar to the November and December lull. But it's during the summer in the US. Presumably This is due to people taking vacations and mentally checking out, which is going to decrease your supply and if all advertiser demand stays constant, that's going to raise prices. And of course, us as advertisers, we are still advertising during that time, we may go out on vacations here and there. But the demand is going to stay pretty constant. But with that supply decrease, obviously that's going to bump your costs up a little bit. And then on the sales side with these mentally checked out people. And of course the example that you will probably see all the time, I need to loop Carla in here, but she's in the Bahamas this week. So let's push this to next. Those tend to lead to lower lead quality and depressed conversion rates from like an MQL to an SQL stage. In general, the way it looks on the platform is Q1 is going to be the best of the whole year, Q2 looks pretty good. It's kind of riding on the success of Q1, Q3 is pretty good other than just that summer lull. And then Q4 is great until Thanksgiving in the US happens.
12:45
What You Can Do
So let's talk about what you can do about this to combat these. Well, you can plan to slow down your spend in November and December to compensate. We have a ton of clients who either scale way back during those months, or even fully pause their accounts after Thanksgiving, and then push all of that budget to go hard at the beginning of January. For those of you who've been listening for a while this won't come as any shock. But you should not be using automated bidding, or bidding within the recommended bid range, unless you absolutely have to. Automated bidding starts making sense when your click through rates are like three times the benchmark average. And you should only be bidding up if you're not getting enough traffic. So if you have a really competitive audience, and lower bids aren't cutting it, then yeah, you'll probably start to creep into the recommended bid range. But the reason why I'm telling you to avoid these things is automated bidding is where LinkedIn basically sets its own price. It's kind of like give us your wallet, and then we'll take whatever out of it we think we need, which basically makes everyone bid really high. And as the majority of advertisers are bidding high, it pushes the price of the auction up for everyone else too. And then those unrealistically high suggested bid ranges, those are hurting everyone too because it pushes competition up way faster than it should. As new advertisers jump in and they're taking the platform suggestions because they don't know better yet.Advertisers who spend inefficiently, don't get a return on their investment, then they end up cutting their spend for next month. And then LinkedIn sees them as a turned advertiser, someone who came in, tried and quit. So having the majority of advertisers using the default automated bidding, or bidding within the suggested bid ranges, even on small budgets. This hurts everyone, LinkedIn included, and it makes us all pay more. Just this morning, I was looking at graphs of some clients that we've been running some very large accounts over the last four years. And we noticed that in 2017 and 2018, we saw costs really rise in November in December, and then in 2019, it stayed flat and even improved. And this is because we took our own advice. During that time, we bid all the way down to the minimums, we bid all the way down to the floor, and we pulled budget back. And we saved that budget for the beginning of Q1. This podcast is coming out in mid October. So I'm giving you some time to prep, make sure you let your boss know, you let the CEO know, you let the board know that you're going to try to go light over the next couple months, and then push hard at the beginning of January. And of course, 2020 and 2021 will likely be very affected by COVID. So it may be very different than in past years. I know with this year, the summer travel season in the US and pretty much everywhere else, there weren't nearly as many people traveling because there wasn't anywhere to go or anything to do that didn't involve being shoulder to shoulder with people. And so the summer lull was likely a little bit smoother than it normally would be. And I do think that COVID will likely affect the 2021 summer as well, unless a miracle happens and everyone's vaccinated and the world goes back to not crazy times. This year holidays in North America, we'll likely see the same depression. But maybe we'll see fewer people traveling and more people spending time on LinkedIn. So maybe the effect will be a little bit less. But we'll see. I'll start running these analyses in February. Thanks for sticking around. I've got the episode resources for you coming right up.
Thank you for listening to the LinkedIn Ads Show. Hungry for more? AJ Wilcox, take it away.
16:33
Resources
All right, I've got a few great resources for you. For more on LinkedIn pricing, definitely go back and listen to Episode 26. That one will give you the best look into pricing on LinkedIn that I've seen yet. If you're just now getting into LinkedIn Ads and could use a course, go and check out my course on the LinkedIn Learning platform called LinkedIn Advertising. It is incredibly detailed and incredibly inexpensive compared to if you were just to bring me in to train your team one on one. You will not be disappointed by the either $25 are free if you have a premium account on LinkedIn. If you liked what you heard today, make sure you hit the subscribe button on your podcast player right now. Don't worry, I'll wait. Yeah, just kidding. Make sure you rate and review the podcast as well. So leave a review and I'll be happy to shout that out. And then also with any suggestions you have for the show any topics you'd like covered or any questions you've got reach out to us at Podcast@B2Linked.com. And with that being said, we'll see you back here next week, cheering you on in your LinkedIn Ads initiatives.
