YouTube Advertising in 2023: How to Grow Your Business with YouTube Ads
Table of Contents
Funny story about YouTube: It started out as a dating site. The idea was to get single people to upload videos introducing themselves and their interests.
But—shocker—no one participated, not even after YouTube’s co-founders offered $20 to women on Craigslist. So they pivoted to focusing on video uploads in general instead.
YouTube quickly took off to become the video platform we know today. In fact, after Google, it’s the second-most-visited website in the world, with 13.3 billion visits per month.
Though it failed to gain any traction as a dating platform, YouTube’s popularity makes it a lucrative marketing channel for all kinds of companies. The key: creating effective video ads.
Below, we’ll cover whether advertising on YouTube is right for your business, what ad formats are possible, and how to create sharp YouTube ads.
Let’s dive in.
- Why advertise on YouTube?
- Should your company use YouTube ads?
- Types of YouTube ads
- YouTube’s targeting options
- 6 best practices for creating great video ads
- Measuring the results of your YouTube ad campaign
Why advertise on YouTube?
Millions of people visit YouTube daily. That makes it a powerful channel for getting in front of potential customers. Done right, good video ads leave a lasting impression—more so than other types of ads from Google.
Just take a look at this iconic ad from Squatty Potty.
It’s been watched more than 41 million times and received comments like “I don't think an advertisement can get any better than this.” No doubt more people know and remember Squatty Potty because of this entertaining video.
It’s a good example of how YouTube advertising can engage users by delighting, provoking, or entertaining them. Sometimes, these ads can even go viral.
But whether video advertising makes strategic sense for your company ultimately depends on your product, goals, and resources. From our experience, we’ve observed that YouTube ads tend to work best for:
- Generating brand awareness. Users can easily scroll past Facebook and Google search ads without giving them a second glance. But on YouTube, viewers have to sit through some or all of your video ads to get to the content they clicked on.
- Remarketing. Because of their engaging visual format, video ads quickly remind people about your product if they’re already familiar with it. (One important caveat, though: Google doesn’t allow remarketing campaigns from certain industries, like healthcare and bankruptcy. More details about its policy here.)
- Marketing aesthetic products. You don’t need to have a physical product to find success with YouTube ads. But videos lend themselves well to products that look nice or that can easily demonstrate their value on screen.
Should your company use YouTube ads?
You might already be sold on using YouTube ads to grow your business. If that’s the case—and you want to find out how to create great ads—jump here. Otherwise, keep reading.
From our experience, we see strong YouTube ad results among:
- Companies with a lot of resources. Compared to Facebook and Google search ads, YouTube advertising costs are usually cheaper, with an average of $0.10 to $0.30 per view or click. But putting together video ads tends to be more labor- and resource-intensive—after all, you’ll need to write a script, film, and edit in post-production.
- Companies that already produce video content. Businesses that produce non-ad video content have analytics data from their existing content, which they can use to optimize their ads. They’re more likely to have a sense of the types of content that work best for their brand.
- Familiar brands and products. People will pay more attention to your ads if they’ve seen your brand before and like it. Otherwise, they might tune it out or skip it.
That’s not to say businesses that fit this mold will automatically succeed with YouTube ads—just that they’re well positioned for testing them out.
When deciding whether YouTube ads make sense for your business’s marketing strategy, ask:
- Does your site receive a large amount of traffic? Video ads make a lot of sense for companies that want to remarket to past visitors.
- Is your product visually appealing? Products tend to do best when they have a simple interface or nice design, or when their value can be easily demonstrated.
- Do you have resources for video production? You need both time and money to create quality videos—not to mention a daily budget for actually running your ads.
- Do you create non-ad video content, like webinars and tutorials? YouTube ads are a great complement to other video content, especially if you already have some YouTube subscribers.
- Can you tell a great story about your product? The best video ads tell an interesting or emotional story.
While you don’t need to check all those boxes, answering “yes” to at least three may be a sign that YouTube ads could work for your business.
Types of YouTube ads
YouTube ads don’t come in just one shape or size—there’s quite a variety of formats.
It can get a little confusing since their names have changed over time, but generally speaking, these are the major types:
- In-stream: Video ads that play before, during, or after other videos on YouTube or video partners on the Google Display Network. Some, but not all, are skippable after five seconds.
- Bumper: YouTube’s shortest video ad format, with a maximum of six seconds. They play before videos, and viewers can’t skip them.
- In-feed video ads: Previously known as “video discovery ads,” these ads resemble organic YouTube content, except that they’re marked by a yellow “ad” tag.
- Masthead ads: These appear at the top of the YouTube homepage feed on all types of devices. You can’t get them through the Google Ads auction; they require reservations through a Google sales rep.
- Outstream: Mobile-only videos that appear on partner sites and apps off YouTube. They automatically play on mute, so users have to tap them for sound.
- Non-video ads: Display ads and in-video overlay ads, which show up across the Google Display Network (which includes YouTube).
Because of differences in their length and format, each type of YouTube ad has unique strengths and weaknesses. Since we’re focused on the types that appear specifically on YouTube, we’ll cover only in-stream, bumper, in-feed videos, and masthead ads in more detail below.
In-stream ads are the videos that play before, during, or after regular video content in the YouTube stream. There are two types:
- Skippable: Also known as “TrueView ads,” these are YouTube’s standard ad format. They run anywhere from 12 seconds to 6 minutes long, and viewers can skip them after 5 seconds. They’re low risk in that brands are only charged when viewers watch for at least 30 seconds (or the full duration if it’s shorter than 30 seconds), or if they interact with it. In other words, your budget is only spent on interested viewers.
- Non-skippable: Depending on regional standards, these run for as long as 15 or 20 seconds and can’t be skipped by viewers. Unlike their skippable counterparts, non-skippable video ads charge companies based on their target CPM—every thousand times their ad is shown. Since people can’t skip them, they’re great for brand awareness.
Sometimes in-stream ads come with a companion banner at the top right of the screen.
Even if users do skip the video, the banner ad remains.
Running at 6 seconds or less, bumper ads can’t be skipped and only appear before a YouTube video. They’re also just like non-skippable in-stream ads in that they’re paid for on a CPM basis.
Here’s an example from Krispy Kreme:
This format can work as a standalone ad campaign, but Google recommends pairing bumpers with longer in-stream ads. Together, they work great for remarketing. Bumper ads are also ideal for mobile devices, when users are watching content on the go.
The challenge with this type of video ad: its short time frame. You need to be especially creative to create straightforward and effective bumpers—there’s no time for fluff.
In-feed video ads
In-feed video ads are YouTube’s least intrusive ad format because they don’t interrupt users’ video-watching experience. Instead, they look like regular organic videos on YouTube—except they come with a little more text.
They feature an image thumbnail, a headline, and up to two lines of text. They’re also marked with a yellow “Ad” tag.
In-feed video ads appear:
- In YouTube search results
- Under recommended videos on a video’s watch page
- In YouTube’s home feed
These ads can lead to a video or landing page. Unlike in-stream ads, users must click on in-feed video ads—so they’re best for reaching people who want to interact with your business, like the most recent visitors to your site. You’re only charged when people click on them.
Think of mastheads as video billboards. They appear at the top of YouTube’s home feed for 24 hours and automatically play on mute.
Besides your video, this ad format also includes a static banner (typically the same banner as your YouTube channel) and up to two companion videos.
We’ll go into YouTube’s targeting options in more detail after this, but it’s worth noting that masthead ads don’t target users based on their search history. Because of this (and their prominent placement), they make the most sense for brand awareness and exposure.
Mastheads are really only worth it for brands with a big budget—think, a minimum spend of $300,000 to $400,000 per day. Smaller businesses are better off investing in skippable in-stream videos and in-feed video ads.
YouTube’s targeting options
Since Google owns YouTube, you’ll need a Google ads account to set up and launch a YouTube video ad campaign.
YouTube ads can target audiences in a variety of ways. Broadly, you can target based on:
- Audience: Who you want to reach. You can target users based on their demographics, interests, and even major life events like marriage and graduation. Audience targeting also works for reaching people who’ve previously interacted with your site or YouTube channel.
- Content: Where you want your ads to appear. You can set these placements on specific channels, videos, apps, and websites. In addition, you can target broad topics from YouTube’s pre-defined topic list as well as the keywords people are searching for. And since Google owns YouTube, you can target the keywords people search on both YouTube and Google.
How you set your ads’ targeting settings will depend on your campaign goal, whether that’s prospecting or remarketing.
A quick refresher:
- Prospecting ads are designed to reach new people who aren’t already familiar with your brand or product.
- Remarketing ads are created for people who are familiar with your company—they’ve visited your site before or performed another action (like added something to their cart) besides converting.
For remarketing ads, it makes sense to use audience targeting to reach people who are already familiar with your brand. You can target them based on whether they’ve subscribed to your YouTube channel, the pages they’ve viewed on your site, and so on.
Prospecting ads are a different story.
We recommend running multiple campaigns with different targeting settings to optimize how your prospecting ads perform. For example, you could have separate campaigns targeting:
- A specific buyer persona, using demographic and interest-based criteria.
- Keywords related to your product.
- People who have viewed your competitors’ videos.
- The topic(s) your product relates to. For instance, targeting the topic “Hair Care” gets your ad on videos related to hair braiding, styling, etc.
The point is to test different targeting strategies to find out which ones are more likely to encourage user engagement.
One last note about targeting on YouTube:
You can set content exclusions to prevent your ads from showing on sensitive or inappropriate videos, e.g., videos with profanity or violent content. YouTube even gives you the option to exclude your ads from certain types of content, like embedded YouTube videos and live-streaming videos.
Content exclusions are helpful for getting more ROI from your ads. After all, some types of content, like music videos and video game walkthroughs, simply don’t drive many conversions.
Overwhelmed? We've been running YouTube Ads for years. Let us run them for you.
6 best practices for creating great video ads
Looking at the YouTube Ads Leaderboard, you’ll see a lot of variation in the kinds of ads that viewers watch and engage with. Some are live action, while others are fully animated. Some show nondescript faces, whereas others feature celebrities, mascots, and other familiar characters.
Ultimately, there’s no secret formula or ingredient that can guarantee video marketing success.
That said, we’ve consistently seen top-performing YouTube ads follow some basic rules of thumb, which we also recommend to the companies we work with. Here they are.
1. Create videos specifically for YouTube
For starters, create your video ads with YouTube in mind. Don’t recycle your ads from other platforms.
We know many companies that repurpose their Facebook and Instagram video ads for YouTube—and see poor results.
Why? People browse social media and YouTube in different ways and with different expectations. For instance, they’re more likely to browse YouTube with the sound on and a strong intent to watch video content. People visiting Facebook, on the other hand, tend to be on the go, looking for quick updates from their friends rather than an unexpected video.
2. Tell a story
The most memorable video ads don’t shout at people to buy a product. Instead of simply listing product features or calling their brand the best, they often tell a story.
Stories leave a strong impression because they tap into emotion—they make us feel something.
This doesn’t mean your ad needs to flesh out some blockbuster narrative with brilliant dialogue and an unexpected plot twist. Take a look at these examples of simple but effective storytelling.
- “Strangers” from Airbnb: A family of three monsters enters a home, followed by a montage of peaceful, day-to-day scenes. It’s a story about finding relatability in people we don’t know, and it ends with a call to action (CTA) encouraging viewers to consider becoming Airbnb hosts.
- “The Term Paper” from Grammarly: This ad feels like a short film, complete with a movie title screen. We follow a stressed college student as she works on a complicated essay, with snapshots of Grammarly’s software in action along the way. In the end, she earns an A+—thanks to Grammarly.
- “Play New” from Nike: Unlike the previous two ads, this story doesn’t follow the trajectory of one particular character. Instead, we see a wide variety of people—each attempting and failing at a different sport. Guided by a motivational voiceover, this story’s all about inspiring viewers to try new things.
While they take different approaches to storytelling, each of these ads features some kind of emotional narrative. They don’t focus on selling. Instead, the story handles the pitch.
3. Get to the point right away
People don’t browse YouTube to watch ads. They’re there to watch organic video content that aligns with their interests.
So you need to provide value asap to engage viewers, especially in your skippable ads. Otherwise, people will skip them. Or worse, they might avoid buying from your company because your ads have left a terrible impression.
This ad from the online jeweler James Allen immediately dives into engagement rings with its opening shot and first line (“When a girl finally gets that ring...”).
Just one second in, the brand’s logo appears at the center of the screen, along with its product. No time is wasted getting to the point, and the rest of the video moves just as quickly.
Compare that to this ad from the healthcare company Forward.
We spend the first few seconds watching the speaker open a door and greet viewers, before he starts explaining what the company is. It’s a pretty slow start—in fact, users can click “Skip” without even finding out what the ad’s about.
4. Include captions
Captions help video ads in three important ways:
- They maximize accessibility. You can reach a wider audience, including deaf and hard-of-hearing users, as well as people watching YouTube in noisy places like public transit.
- They lead to greater engagement. Studies show that captions correlate with longer watch times.
- They improve your video ads’ SEO. The text files that get uploaded as captions provide semantic context about your video. So as long as your video ads are publicly listed, captions can help them get organic traffic.
You can add captions directly to your video, like Zillow does here.
Or you can add them in YouTube Studio (formerly known as Creator Studio), where brands and creators manage their channels’ videos. Here, you can upload your own captions or insert them manually. (Google can also auto-generate captions, but they’re not always accurate.)
No matter which method you choose, you should add captions. Despite only bringing benefits, they aren’t used nearly enough in video ads.
5. Structure your ads according to your campaign goal
Are you trying to reach new leads or remarket to people who are already familiar with your brand? Either way, your campaign goal should make a difference in how you structure your videos.
For prospecting ads, focus on pitching who you are and what you sell. Explain the problem and how your product solves it.
For example, here’s a prospecting video from Wix. It introduces viewers to Wix eCommerce, a website builder specifically for small businesses.
Remarketing videos should take a different approach. To encourage potential customers to convert, remind them of who you are and what you do best. The idea is to build on viewers’ existing knowledge. That could even mean showing a customer testimonial or case study.
Let’s look at another video ad from Wix—this time, a remarketing one.
It kicks off by announcing that Wix users aren’t afraid of going viral. Then it explains why, describing how Wix tested its ecommerce platform with a high-traffic simulation to see how a Wix site’s loading speed would be affected.
Without any background about Wix, someone watching this ad would probably be confused about what Wix’s product is. However, people who already know about Wix—including people who are considering it—learn more about its ecommerce platform. It’s a remarketing ad that builds on prior knowledge to convince viewers to convert.
6. End with a clear CTA
We mentioned earlier that effective video ads tell stories—they tend to grab attention and resonate with audiences. But apart from captivating viewers, your video ads should also drive them to action.
That means ending your video ads with an obvious call to action (CTA).
Check out this ad from Pillow Cube for a good example.
At the end of the video, we see Pillow Cube’s logo and signs asking viewers to "Donate" and "Support Our Cause." That’s because the video was originally used for Pillow Cube's Kickstarter campaign.
The CTA you push toward viewers should align with your campaign’s goal. That is, based on where they are in the marketing funnel, what’s their next logical step?
That will depend on what exactly you’re selling. A B2B software company might direct users to a free trial in its prospecting ads. Meanwhile, an ecommerce shop might send people to a product page from its remarketing ads.
Measuring the results of your YouTube ad campaign
As with any other growth channel, you’ll want to track the results of your YouTube video ads and figure out how to improve and optimize them. You can find important performance metrics in two spots:
- YouTube Studio Video Analytics: Since you need to upload your video ads to YouTube like any other video content, you can also view their analytics data in YouTube Studio. This tool helps YouTubers manage their channel and get basic insights about their videos, like views and watch time.
- Google Ads: For more in-depth reporting, Google Ads is the place to go. It shows metrics like view rate, average cost per view (CPV), watch time, click-through rate, and more—plus info about how much you spent and how much revenue you earned.
The challenge with all of these analytics, however, is they can’t always capture your ads’ true impact.
That’s because not every user will interact with your video ads. Some may skip your ad or refrain from clicking, but then Google it later on. Some might even convert into paying customers much later, but because they’re outside of your YouTube ads’ conversion window, they won’t register in Google’s reporting.
Because of this, we advise creating a short post-purchase survey for your customers. Ask, “How did you hear about us?” and include YouTube as an option.
It’s not a perfect solution, but it helps improve attribution somewhat. From our experience, more customers choose YouTube than what’s actually reported in Google Analytics. This may be because a video ad can leave a longer-lasting impression than a search or display ad, even if it’s not a customer’s final touchpoint.
Remember: People don’t watch YouTube for ads. They visit it for other video content. Your ads are simply an interruption before users can return to the content they originally sought out.
Because of this, any actions taken as a result of your ad usually come at a slower pace. In other words, the conversion path with YouTube isn’t always clear—so it’s unreasonable to expect an overnight boost in sales.
Still, video campaigns are powerful, especially from a branding standpoint. Done well, they can get people excited and talking about your company—and even looking forward to your next video ad.
Need help running your YouTube Ads? We've run ads for 100+ startups. Learn more about Ad Labs.
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