Cost-Efficiency Showdown: Paid Search vs Paid Social for SMB Advertising

Ads are everywhere you turn. In the physical world, you can’t take a step without seeing an ad on a billboard, on the side of a bus, or on TV. Most are so ubiquitous that we barely notice them.

The internet is much the same. Unless you have a really good ad blocker, you’ll be inundated with ads on every page you visit. Be it a recipe page you’re looking up, a YouTube channel you’re following, a social media platform of your choice, or a search engine results page.

With well over half the world’s population using the internet, it’s clear why most people focus their advertising efforts online. However, the question then arises, where on the internet should you advertise?

You have two basic options, paid search and paid social. Both are powerful online advertising channels that offer SMBs a wealth of opportunities to reach their target audience and achieve their marketing goals. Still, budget constraints make it hard to cover every possible angle, forcing businesses to prioritize the channels that will give them the most bang for their buck.

To help you maximize your marketing ROI, we’ve interviewed 73 companies about their paid search and paid social advertising efforts. 70 of them identified either as SMBs or agencies/consultants working for SMBs, with the exact 50-50 split.

So let’s dive in:

• What is the Difference between Paid Search and Paid Social?
• Pros and Cons of Paid Search
• Pros and Cons of Paid Social
• Most Common Channels SMBs Use for Advertising
• Average Size of Monthly Paid Advertising Budget for SMBs
• Where Should SMBs Spend Their Paid Advertising Budget
• Paid Ads vs Paid Search: Most Cost-Effective Channels for SMBs
• Leverage Data to Make the Most of Your Paid Advertising Budget

What is the Difference between Paid Search and Paid Social?

The most significant difference between paid search and paid social advertising is user intent. Paid search advertising is highly effective in capturing the attention of users who are actively searching for a particular product or service. They’re usually closer to the bottom of the sales funnel and have a high intent to purchase, making them valuable targets for paid search advertising. In contrast, paid social advertising targets users who may not be actively searching for a product or service but may be interested in what the business has to offer.

Another big difference is the ad format itself. Paid search advertising is text-based, and ads appear above the organic search results. Paid social advertising, on the other hand, displays a variety of ad formats, including text, image, video, carousel, and sponsored content. The diversity of ad formats in paid social advertising allows businesses to tailor their content to the platform and the audience they are targeting.

In terms of targeting, both paid search and paid social advertising aim to provide businesses with an array of options to reach their target audiences. Paid search advertising allows businesses to target users based on specific search queries, location, language, and device type, while paid social advertising provides targeting options based on demographics, interests, behaviors, and other parameters.

Pros and Cons of Paid Search

While paid search advertising can be a great way for small businesses to generate quick results and drive traffic to their website, it’s important to weigh the pros and cons before investing in it. 

Pros:

• Targeted Advertising: Paid search allows businesses to target their ads to specific keywords and demographics, increasing the chances of reaching their ideal audience.
• Quick Results: Paid search campaigns can generate quick results as soon as the campaign is launched, providing businesses with a faster ROI compared to organic search.
• Measurable Results: Paid search provides businesses with the ability to track and analyze the results of their campaigns, allowing them to adjust their strategies and budget as needed.

Cons:

• Cost: Depending on the competition for keywords, paid search advertising can be costly, making it a less viable option for small businesses with limited advertising budgets.
• Steep learning curve: Paid search advertising requires a certain level of technical knowledge and expertise. Setting up and running campaigns effectively can be challenging for small business owners without a marketing background.
• Limited visibility: Paid search ads are only visible to users who are actively searching for specific keywords, meaning they have limited visibility compared to paid social ads that can be shown to users who may not be actively looking for a product or service.

Related: PPC Analysis: 4 Expert Tips for Conducting an Impactful PPC Analysis

Pros and Cons of Paid Social

While paid social has incredible potential, it’s not always suitable for every business. Here are some things you should consider when deciding if paid social is the right option for your small business.

Pros:

• Wider reach: Paid social ads have the potential to reach a larger audience than paid search ads, as they can be targeted based on user behavior and interests, not just specific keywords.
• More engaging: Paid social ads can be more engaging and visually appealing, making them a better option for brands looking to create brand awareness and generate leads.
• Cost-effective: Paid social ads can be less expensive than paid search ads, making them a more viable option for small businesses with limited budgets.

Cons:

• Limited targeting: While paid social ads have a wider reach, they may not be as targeted as paid search ads, which can result in lower conversion rates.
• Limited visibility: Paid social ads may not be as visible as paid search ads, as they are not shown to users who are actively searching for specific keywords.
• Less measurable: Paid social campaigns can be difficult to measure and track, which can make it difficult for businesses to adjust their strategies and budgets as needed.

Most Common Channels SMBs Use for Advertising

When it comes to paid advertising channels for SMBs, Google Ads is by far the most commonly used channel, with an overwhelming majority of 93% of our respondents saying they invest in it. This is unsurprising, considering that Google is the world’s largest search engine, and search advertising is an effective way to capture people actively looking for specific products or services.

After Google Ads, Facebook Ads is the second most popular channel, with 75% of small businesses we polled using it for paid advertising. Facebook Ads is a powerful tool for businesses because of its targeting capabilities, including demographics, interests, behaviors, and even geographical locations.

The third most commonly used channel is Instagram Ads, with 60% of our respondents investing in it. Instagram has become a popular social media platform in recent years, and its visual format is perfect for advertising products and services that can be showcased through imagery.

Other commonly used channels include display advertising, LinkedIn ads, and YouTube ads, with almost 40% of SMBs using these channels for paid advertising.

While Google Ads is the single most popular channel, paid social (Facebook, Instagram, LinkedIn, etc.) overwhelms it in aggregate. Of course, since paid social isn’t one channel, but many, the contest is a bit lopsided. Still, it’s clear that a significant number of our respondents use multiple channels for their paid advertising to reach different audiences and achieve different objectives. However, not all channels are equally effective or suitable for every SMB, and the choice will ultimately depend on the budget, goals, and other factors that are unique to every business.

Average Size of Monthly Paid Advertising Budget for SMBs

Here, we’ll take a closer look at the average size of monthly paid advertising budgets for SMBs, and examine the median values for Google Ads and Facebook Ads costs, as well as the median values for their cost-per-click (CPC) and cost-per-thousand-impressions (CPM) during January 2023. By understanding these numbers, SMBs can get a better sense of what they can expect to pay for paid advertising on these platforms and how to allocate their budget accordingly.

When it comes to the average monthly paid advertising budget for SMBs, we can see that only a small percentage (2.86%) of companies don’t engage in any paid advertising. The largest share of SMBs have budgets under $5,000 (44.29%), while 11.43% have budgets between $5,001 and $9,000, and 30% have budgets over $9,000.

Considering the current average investments in Google Ads and Facebook Ads, along with the fact that most companies invest in at least two channels, it’s safe to say that companies with a total ad budget under $5,000 may be falling below average. If their ads aren’t performing as expected, they should probably look into the budget allocation more closely.

Google Ads and Facebook Ads Spend Benchmarks

To get more info about the exact numbers, we looked into the Databox Benchmark Groups data about ad spend for Google and Facebook Ads, and here’s what we found out.

Google Ads Benchmarks for SMBs

According to our Google Ads benchmark group for SMBs, the sample of 2027 companies, the median value for Google Ads cost (sum of Cost-per-click (CPC) spend and Cost-per-thousand Impressions (CPM) spend for SMBs was $1,841.01 during February 2023.

In the same group, based on the sample of 1274 sources, we’ve extrapolated that the median value of the average CPC was $1.16. 

If you want to compare your Google Ads metrics such as impressions, clicks, average CPC, CTR, conversion rate, conversion value and more, join this Benchmark Group for free.

PRO TIP: Learn how to reduce Facebook Ads CPM to make the most of their advertising budgets and reach their target audience in a cost-effective way.

Facebook Ads Benchmarks for SMBs

When it comes to Facebook, based on our data from the Facebook Ads benchmark group for SMBs (sample of 1334 sources), the median value for the amount spent on Facebook Ads during February 2023 was $1,598.23.

From the same group (591 sources), we got the Median value of Average CPC of $0.32.

Finally, from the sample of 432 companies, we discovered that the median value of CPM was $5.52 in the given period. If you want to compare your FB Ads metrics such as impressions, clicks, CPM, CPC, and more, join our benchmark group for free.

Where Should SMBs Spend Their Paid Advertising Budget? 

Paid advertising is a crucial component of marketing for small and medium-sized businesses. When it comes to choosing the best channel to spend their paid advertising budget, there’s no one-size-fits-all solution for SMBs. Depending on their target audience, industry, and goals, different channels may work better than others. Here’s what some industry experts have to say about where SMBs should be spending their paid advertising budget:

Multiple Channels

Using a diverse media mix is a common recommendation for SMBs when spending their paid advertising budget. Kelly Hawthorne Smith of Twelve Three Media advises clients to invest in multiple channels to reach potential customers at different stages of the purchase funnel. However, she suggests that PPC campaigns be the primary focus for generating leads quickly, despite being more expensive than social or display campaigns. According to Hawthorne Smith, “PPC campaigns tend to be more expensive than social or display campaigns, but they are the most effective for generating leads.”

Shaun Martin from We Buy Houses In Denver believes in investing in a mix of digital channels because it is cost-efficient, allows businesses to target specific audiences, and measure results more accurately than traditional offline sources. This means they can reach potential customers at a fraction of the cost of other advertising methods, such as TV and radio. “Finally, digital channels allow us to experiment with different tactics and optimize our campaigns in real time, which helps generate a higher return on investment for our clients. In short, digital channels offer the most efficient way to reach our target customers and maximize their advertising budget,” Martin concludes.

SMBs may choose to vary their spending between different channels depending on their objectives. Joe Kevens of B2B SaaS Reviews suggests investing in Google Search or LinkedIn Ads depending on whether the primary objective is demand capture or demand generation. “We invest more in Google search if demand capture is the primary objective, and LinkedIn for demand generation.” This approach enables SMBs to reach their target audience most effectively while optimizing their advertising budget.

Google Ads

Google Ads is a popular choice for many businesses due to its precise targeting capabilities. “Google Ads provides us with the most consistent ROI for several reasons,” says Tom Golubovich, Head of Marketing & Media Relations of Ninja Transfers. “It allows us to precisely target and retarget our audience when they’re searching for related products, which means that we’re able to reach potential customers at the exact moment they’re looking for what we have to offer, increasing the likelihood of them making a purchase.”

Niles Koenigsberg, Digital Marketing Manager at Real FiG Advertising + Marketing, agrees that Google Ads is a cost-effective advertising method. “We mainly alternate between Paid Search and Display campaigns because display tends to have a lower cost per click, and paid search allows us to reach our target audience at the right time and place,” Koenigsberg explains.

Similarly, Charles Cridland, Chief Information Officer of YourParkingSpace, says that “the most significant part of the budget goes to paid search via Google Ads.” The platform offers a wide audience reach, which is essential to the top of the funnel, where it has to be wide, and it tends to be expensive. While “conversions don’t usually happen at the first encounter, search ads are the first touchpoint and feed our funnel with leads,” says Cridland.

Related: Google Ads Forecasting: How to Improve Your ROAS With Accurate Projections

Facebook Ads

Some SMBs prefer to invest in Facebook Ads, which offer a variety of targeting options for SMBs to get their products in front of specific demographics. According to Jessica Shee, iBoysoft invests most of its budget in Facebook, as their most serious customers find the company through the platform’s ads.

Moriarty’s Gem Art also invests in Facebook Ads, as it is a great way to promote their brick-and-mortar location. The platform allows them to really focus on their geographic area and specific demographics, according to Jeff Moriarty, the head of marketing. “Facebook Ads allow us to really focus in on our geographic area, as well as the demographics we want,” Moriarty adds.

While Tom Leach from Norsu Media Group primarily invests in Facebook Ads, the company is seeing great results from its TikTok campaign as well. The campaign generates around 40% of the company’s ad spend and has been producing fantastic results. With more and more businesses turning to TikTok as a viable advertising platform, SMBs may need to consider incorporating it into their media mix.

Related: Facebook Ads vs. Google Ads: Which Is Best for Your Business?

Instagram Ads

Many SMBs find Instagram to be an effective advertising platform due to its large and engaged user base, particularly among younger demographics. According to Paresh Sagar of Excellent Webworld, Instagram’s range of ad formats and targeting options allows for precise and cost-effective advertising. “The visually-driven nature of the platform also makes it well-suited for promoting products and services,” Sagar adds.

Rhys Charles from Mower On The Lawn confirms the importance of Instagram’s visually-driven nature, which aligns well with his company’s brand and products. Charles also points out that Instagram Ads offer a high level of targeting and personalization options, allowing SMBs to reach specific audiences they want to target. “We can experiment with different types of content to find what resonates with our audience,” Charles explains.

Instagram’s large user base and integration with Facebook’s ad platform are two significant factors that cannot be underestimated. According to Charles, Instagram’s significant potential reach for ads increases the chances of attracting new customers. Furthermore, Instagram’s integration with Facebook’s ad platform allows SMBs to reach a large audience and optimize their campaigns for better results.

Related: Instagram Ads Cost: How to Optimize Instagram Campaigns for Cost Efficiency

Paid Ads vs Paid Search: Most Cost-Effective Channels for SMBs

When it comes to determining the most cost-effective channel for SMBs, it’s important to consider the specific needs and goals of the business. As some of our respondents noted, the effectiveness of a given channel can vary widely depending on the industry and target audience.

One thing that does stand out is the trend toward social media. For example, Adam Garcia from The Stock Dork reports that “social definitely beats search, even in a niche as specialized as finance and investing.” Garcia believes that social media has become so diverse that there’s a channel for everybody, including forums. Daniel Petkevich from Fair Square Medicare agrees, stating that “paid social ads have given us good results, seeing as our clients spend more time on social media than on Google search.”

Beth Rivera from Best Financial Planners reports that LinkedIn is the best platform in the finance field because “most of the people seeking financial help or advice are on LinkedIn, so it helps to target a better audience.”

However, not everyone is convinced that social media is the way to go. For Vishal Dave from Meetanshi, Google and Bing Ads are the way to go because search ads are more cost-efficient for small businesses, as they’re ideal for businesses looking for quick wins (conversions) at the bottom of the funnel.

Erik Wright from New Horizon Home Buyers, a real estate company, points out that competition is a factor to consider when choosing a platform. For their niche, Facebook is more cost-effective than Google PPC, which is extremely competitive. 

According to Frank Olivo from Sagapixel, it also depends on whether the target audience is solution-aware or solution-unaware. For solution-aware audiences, such as people looking for a dentist, paid search on Google Ads is more effective, whereas for solution-unaware audiences, such as people who don’t know about a new-to-the-world radiofrequency skin treatment, paid social media is the way to go.

Leverage Data to Make the Most of Your Paid Advertising Budget

With a wide range of options available, it can be challenging for businesses to decide where to invest their paid advertising budget. Our polls and benchmark data suggest that it’s not so much of a choice of whether to invest in Paid Search vs Paid Social, but how much to invest in which channel. Google Ads, Facebook Ads, and Instagram Ads remain the most popular advertising channels for SMBs, each bringing unique strengths and benefits. While a healthy mix of channels is generally recommended to maximize the coverage of prospects, focusing on one or two channels is also a solid choice for companies with limited marketing budgets.

Choosing the right channel(s) to focus on depends on many factors and is unique to every business. However, regardless of the channels used, tracking and measuring the results is essential to optimize the paid advertising strategy and maximize ROI.

This is where Databox comes in.

As an all-in-one business analytics platform, Databox can help SMBs measure and analyze their advertising data in real-time. By using Databox, businesses can track their advertising campaigns’ performance across multiple channels, set goals and benchmarks, and get automated reports delivered to their team’s inbox.

Don’t waste your advertising budget blindly. Leverage the power of data and use Databox to track and optimize your campaigns, making data-driven decisions, and getting better results. Create your forever-free Databox account today and take your advertising efforts to the next level.